LID #322 will help pay for paving several un-developed streets in the area of SE Campbell Drive, and SE 10th street; as well as installing water and sewer main in SE 10th.  The property owners in the LID will pay approximately 40% of the project costs, the US Economic Development Administration will pay for approximately half of the costs, and the City of Hermiston and Umatilla County will make up the remaining 10%.

The intention of this project is to help facilitate economic development, and specifically economic diversification, by ensuring that an adequate supply of "shovel ready" smaller-acreage industrial parcels is available for small businesses to locate or expand in Hermiston.  The existing supply of <5 acre parcels in the South Hermiston Industrial Park along Kelli Blvd and Campbell Drive, has been experiencing development of about one parcel every two or three years, and is now approximately 80% full.  By installing paving and utilities past several existing parcels, and extending them in to a 40 acre parcel owned by the Port of Umatilla, this project will result in approximately 16 new "shovel ready" parcels which are ready to accept a building.

The target market for the resulting parcels is very similar to what exists in that area around Kelli and Campbell already.  Those operations are small manufacturers, building trades (i.e. electricians, plumbers, etc.), warehousing, and other primary employers with less than 50 employees.  Although the large-scale industrial operations like Pioneer Seed, Lamb Weston, Wal-Mart DC, etc. are easy to identify, the vast majority of employment occurs in smaller businesses which ultimately provide products and services to those types of operations, and industries like the agriculture sector in general.  This project was designed so that the City can maintain several very large (100 acre+) industrial parcels south of Penny Avenue, while still allowing for this type of parcelization to accommodate the needs of smaller businesses in an efficient pattern.

City Staff began working with the Federal Economic Development Administration about grant funding for light industrial park development in this area in November, 2018.  In light of the closure of NORPAC's Hermiston Foods facility, the City was invited to further develop a proposal for funding.  City Staff worked with Anderson Perry & Associates to develop an Industrial Park Master Plan of improvements in the South Hermiston Industrial Park (SHIP), which came out to approximately $9 million.  Based on the maximum EDA Grant Award size, and the fact that all EDA grants require a 50% local match, staff worked to prioritize and scope-out the project in to phases.  City Staff held two workshops with property owners in the SHIP area in the Spring of 2019 to solicit their feedback about the most valuable investments to support that area.  That feedback helped refine the final project scope to what is proposed here, at an estimated cost of just under $3 million.

The City of Hermiston committed to contribute $250,000 toward the local match for the project, and Umatilla county committed to contribute $50,000; which left approximately $1.2M still needed for a local match.  The City Council then accepted a Feasibility Report for forming a Local Improvement District to act as match for the project, in July, 2020.  The Feasibility Report included exact estimates of the financial obligation of each benefiting property from the improvements, which included an approximately $700,000 obligation by the Port of Umatilla; leaving the remaining 18 parcels to make up the final $500,000.

All of the benefiting properties in the LID #322 area were invited to a public hearing about its formation in August, 2019.  If more than 60% of property owners (13 out of 20) opposed formation of the LID, then it could not be formed.  A total of five formal remonstrances were filed from Tax Lots 300, 500, 503, 504, and 505.  However, only two of the remonstrances (Tax Lots 300 & 505) were considered valid because the other three had previously signed Non-Remonstrance Agreements in exchange for not having to install these improvements themselves at the time that those properties developed.  The Public Hearing was closed, but City Council did not want to proceed with actually forming the LID until Federal EDA grant assistance was guaranteed.  Council did not want the property owners to have to cover nearly the full $3 million cost.  If grant funding were declined, Council's stated intention was to not pursue the LID further.  Council therefore chose to continue the process in 90 day increments until an award notification was made.

Once authorization to form the LID was assured, which guaranteed the ability to meet the local financial match for an EDA Grant, City Staff submitted a grant application for $1.46 million in Septemter, 2019.  City Staff coordinated with EDA in response to questions throughout the following 11 months, and was finally notified of a positive award in late August, 2020.

Council is now asked to complete the process that it had begun in 2019, and approve LID #322.  Once the LID is approved, construction is anticipated to move at the following schedule:

- October '20:  Survey Work of Site

- November '20:  Design Engineering Begins

- January '21:  Project advertised for bids

- February '21:  Bid Awarded

- March '21:  Construction Begins

- September '21:  Construction Complete

- November '21:  Project Closeout and Total Project Costs Reconciled

- December '21:  LID Assessments Levied per final project costs

Upon levying the final project costs on the benefiting properties, the property owners will be given the opportunity to pay their obligation over the course of 10 years.  The City of Hermiston will obtain construction financing to complete the project, with the ability to repay over 10 years.  Financing costs associated with that borrowing will be passed through directly to the property owners.

Total Project cost was originally estimated to be just under $3 million, in early 2019.  Due to nearly a year of review by Federal EDA, this project is not likely to bid until early 2021.  Assuming normal construction and economic conditions, two years between estimate and bidding is likely to see between 4% and 8% cost inflation.  This could result in an inflationary cost increase of between $120,000 and $240,000.  However, the cost estimate was relatively high-level in nature, and featured a relatively large contingency line item to cover unforeseen circumstances.  It is hoped that because this is a relatively simple project, taking place in "virgin" soil, any inflationary rise may be largely buffered by the large contingency.  Additionally, with the continued unpredictable impact of COVID-19 on economic activity, the construction bidding environment may be favorable enough to offset rises in material costs.

The City will secure construction financing to develop the project.  During construction, the City will be able to seek reimbursement for 50% of all costs through the EDA grant award.  Umatilla County will contribute $50,000 toward the project in Spring, 2021.  The City of Hermiston will contribute $250,000 toward the project by liquidating a defunct reserve account holding $208,000 associated with formation of a municipal gas utility from 2015, with the remainder coming from Transient Lodging Taxes earmarked for economic development.

Once all costs are finalized, the un-subsidized balance will be recouped through the benefiting properties as an assessment levied against the properties in amounts proportional to their benefit.  If final costs come in lower than originally estimated in the Engineering Feasibility Report, then the property owner's assessment will go down proportionally.  However, if final costs come in higher than the original estimate, the property owners will be required to cover those costs proportionally as well.

1. Approve Ordinance No 2310.

2. Reject Ordinance No 2310.

3. Amend Ordinance No 2310.