LexisNexis Academic. Copyright 2005 The Sunday Oregonian All Rights Reserved The Sunday Oregonian (Portland, Oregon)

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1 1 of 5 9/19/2006 5:35 PM LexisNexis Academic SECTION: Local News; Pg. A01 LENGTH: 1713 words Copyright 2005 The Sunday Oregonian All Rights Reserved The Sunday Oregonian (Portland, Oregon) December 4, 2005 Sunday Sunrise Edition HEADLINE: Ready for 100,000 more? Their target cities aren't BYLINE: LAURA OPPENHEIMER and ROBIN FRANZEN, The Oregonian BODY: SUMMARY: Infrastructure The $4 billion tab for growth east of Portland poses hard choices and regional consequences Rural communities on Portland's eastern fringes are bracing for the biggest suburban explosion in Oregon history --if we find a way to pay for it. That's a big if. We need $4 billion for streets, sewers and other trappings of daily life to build the next generation of suburbs: Happy Valley, Pleasant Valley, Damascus and Springwater. Plans call for a combined population of more than 100,000, meaning the area could eclipse Beaverton or Hillsboro within two decades. But don't expect to move there on the cheap. If taxpayers regionwide don't foot the bill for developing this area, then builders probably will. And that could mean pricing starter homes as high as $400,000 so developers can recoup their investment in streets and urban services. Even if you stay put in Portland or an established suburb, you'll see the effects. Delaying new communities drives up housing costs across the region, and encourages development to squeeze into existing nooks and crannies. Absorbing an anticipated 1 million new residents by 2030 will only get more expensive. Land available for urban expansions is increasingly difficult to serve, especially if we want to create cities from scratch. Councilors at Metro, the regional government, are kicking around solutions. They may impose a surcharge on building permits or tax landowners who hit the jackpot by being added to the urban growth boundary.

2 2 of 5 9/19/2006 5:35 PM Either way, the stakes are high: Failure could derail the region's approach to planning growth. "Up to this point, it's all been about bringing in land," said Metro Councilor Brian Newman. "All of us are realizing now, it doesn't matter how much land you bring in if you don't do anything with it." Slow start for new suburbs Pleasant Valley, a 1,500-acre area southwest of Gresham, was part of the wakeup call. Metro in 1998 earmarked the pocket of hobby farms for urban development --one of the largest and earliest areas singled out. Once annexed into Gresham, it is slated to absorb 5,000 new homes and 5,000 new jobs. Seven years later, not a single home has gone up. Instead, city officials and developers are struggling to finance an estimated $145 million in water, sewer and road costs. They have no blueprint and no dedicated funding source, making them what some consider regional growth "guinea pigs." Oregon typically pays for the staples of new communities through a combination of property taxes, utility fees and developers' charges. Back in the '90s, the Portland region jutted outward in fragments. Public agencies extended a sewer line here, built a new school there. Costs packed less of a wallop at any one place and time. Now, the region is attempting to convert rural land into cities and suffering the sticker shock that comes with sweeping reinvention of the landscape. "It may have sounded pretty easy way back when," says Bruce Hoyt, Gresham's development engineering manager. "But now I'm in the middle of ungodly number crunching. That's what I spend all my time on." Even planning was a monumental challenge. Long before Metro was talking about surcharges, cash-strapped Gresham scrounged for grants and took out loans for Pleasant Valley and Springwater, a future 1,500-acre industrial-office hub mixed with housing. That's why, of about 35 areas designated for urbanization around Portland, only a few have been fully planned. It's also why most everyone now agrees: If growth is going to happen, it's going to happen largely on builders' pocketbooks. In Pleasant Valley, they can expect to pay Gresham about $20,000 per home, Oregon's second-highest development fee. But some builders are sitting on Pleasant Valley's sidelines. Several years ago, Gresham-area veteran Tom Skaar let his agreement to purchase land there expire. He was unwilling to wait on property that didn't seem likely to sprout homes anytime soon. A revised timeline shows Pleasant Valley's first houses rising in late 2008, probably with low-end price tags of $300,000 to $400,000. Not everyone will be able to afford them, even if Gresham succeeds in attracting high-wage employers. Skaar says providing affordable housing with staggering land and infrastructure costs is difficult. "We are virtually at the point of being out of lots, and people are still moving here, and they want to buy houses," he says. He predicts first-time buyers "will be shut out of the market for a long time."

3 3 of 5 9/19/2006 5:35 PM High aspirations, costs Full-fledged suburbia is further off in Metro's 2002 urban growth boundary additions, including Springwater and the new city of Damascus. This invisible line is meant to protect rural land outside while providing room inside for two decades' worth of growth. But for now, commercial farms rub shoulders with several-acre plots owned by families and retirees. Many sought out Mount Hood views and a slower pace of life. In exchange, they put up with the minor inconveniences of a small country town. A sign in the Bi-Mart restroom, for example, warns that too much toilet paper will clog the septic system. And serious clothes shopping requires a trip to Oregon City or Gresham. But Damascus is slated to become one of Portland's larger suburbs, growing from 9,400 residents today to roughly 67,000 when it fills out. Ground zero for the transformation is Damascus City Hall, a rented storefront in a strip mall along Oregon 212. A paper sign taped to the window announces the city's existence. Flat-screen computers sit at empty desks with brass keys dangling from the filing cabinets. People are shocked to learn how dramatically the community will grow, says Steve Rhodes, a retired Tualatin and Clackamas County administrator temporarily overseeing Damascus. A blueprint calls for setting aside one-third of Damascus as parks or wildlife corridors. Development will be focused in intense clusters near shops and schools, preserving a rural atmosphere elsewhere. And a new downtown will rise on vacant land, rather than cramming into the existing string of restaurants and shops. Rough estimates peg the cost of roads, sewers, schools and other necessities at $3.5 billion --1,600 times what the city brings in annually in property taxes. "It will be 10 or 15 years before we know if we're successful," Rhodes says. "You can lay out your plans, but it will take time. People tend to look at the map and almost view it as, 'Tomorrow, it's going to be there.' " Around the region, this new take on suburbia is met with a mix of awe and skepticism. "It is just stunning," says Jonathan Schlueter, director of the Westside Economic Alliance. "But none of it exists today." Real estate a question mark Uncertainty about when this new frontier will materialize has left everyone --landowners, real estate agents, builders, home buyers --feeling jerked around. Wendy Burns, a Damascus real estate agent, sees the resulting friction. Sellers want to charge what the property will be worth when the area matures; buyers want a price break for tying up resources until infrastructure arrives. "You have no idea, it could be five years, or it could be 15 to 20," says Burns, who moved her real estate business from Clackamas to Damascus three years ago with partner Chris Olson. With bankers wary of lending, major land sales have been scarce. Some buyers arrange to settle tabs when the

4 4 of 5 9/19/2006 5:35 PM infrastructure is in place. Others, like Carey Sheldon, make large down payments. Sheldon recently moved to Happy Valley and bought two parcels in Damascus, including one where he runs his development business. He considers them savvy investments, despite the conundrum about how to pay for growth. "They'll have to figure it out somehow," Sheldon says. "I'm waiting." So are home buyers, who watch prices escalate across the region and wonder if they'll be able to afford Portland's new frontier. Oregonians may have to redefine affordable housing, says Jim McCauley, vice president for government affairs for the Home Builders Association of Metropolitan Portland. "It's not 7,000- to 10,000-square-foot lots anymore," he says. "It's condos and townhouses." Searching for solutions Gresham officials say they sounded the alarm years ago, when they started planning without any financial support. Today, with new residents bearing down on Oregon --and the Metro Council already discussing another round of growth decisions --the issue suddenly has developed legs. This fall, councilors began studying a possible surcharge on building permits to pay for planning across the region. A task force expects to make recommendations this month. Metro also is considering a tax on land added to the boundary. The money would be used partly to pay for roads, sewers and other infrastructure. Metro might ask voters to weigh in next year. Meanwhile, Gresham officials plan to request a rebate on millions of dollars they've borrowed for planning. "I've been singing that song for a long time," Mayor Chuck Becker says, "especially once Springwater was added." Even the homebuilders association, which typically resists more fees and taxes, is willing to explore the concepts to get things moving. "We are willing to step up to the plate with something that makes sense," McCauley says. "We just have to make sure the money is going to the right places, not just into some black box." And state government --a distant observer so far to the Portland-area crunch --may take a more active role. Next year, the Land Conservation and Development Commission plans a forum on paying for growth and has made the issue a priority. Oregonians are trying to figure out who's responsible for making suburbs materialize, says Metro's chief operating officer, Michael Jordan. But he says the whole state has a stake in the outcome. "Ultimately," Jordan says, "it gets to, 'What kind of community do you want to live in?' " Laura Oppenheimer: ; loppenheimer@news.oregonian.com Robin Franzen: ; robinfranzen@news.oregonian.com

5 5 of 5 9/19/2006 5:35 PM ILLUSTRATION: Sue O'Halloran, Gresham-based real estate broker Ernie Platt - Damascus resident, and director of governmental affairs for the Home Builders Association of Metropolitan Portland Map by Eric Baker/The Oregonian/POPULATION OF PORTLAND'S NEW SUBURBS/Source: Cities of Gresham, Damascus and Happy Valley LOAD-DATE: December 5, 2005