Econorthwest Released a Study
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DATE: April 2nd, 2021 TO: Seth Henderson, Summit Development Group FROM: Chris Blakney, James Kim and Erik Bagwell, ECONorthwest SUBJECT: ROSSMAN LAND DEVELOPMENT ASSESSMENT Executive Summary The Rossman Landfill site, a former landfill that the State Department of Environmental Quality (DEQ) classifies as a brownfield, has been undeveloped since the 1970s when the landfill closed. Contaminates such as methane gas and leachate, a liquid pollutant, have been identified as potential risks to the community that emit from the landfill site. Summit Development Group (SDG) has put together a proposal and designed a mixed-use General Development Plan that includes a mitigation and clean-up plan for the site as approved by the DEQ. Development atop a former landfill however comes with high mitigation and infrastructure costs that are absent in typical, greenfield development projects. To make commercial and residential development financially viable on this site, public investment is required. This report provides an analysis of several factors and aspects of the proposed development that are important considerations for the Oregon City Urban Renewal Board, City officials and community members. These include: • Mitigation and infrastructure measures needed and proposed to make the site safe for development; • Market assessment of Oregon City and the project’s market area; • Financial feasibility assessment of the proposed development program; and • Public benefits (i.e. jobs and tax revenues estimates). Our research and analysis for proposed SDG development project resulted in the following findings: • Infrastructure and mitigation work. Several measures are in place that are consistent with other local development projects constructed atop former landfills. These needed measures are to ensure that the high concentration of contaminates found on the site are mitigated and that ground is stabilized to accommodate development. The development and operations budget of the proposed SDG program includes engineering and structural support work, off-gas mitigation and monitoring, and ground water contamination prevention. • Population and economic growth. Over the last 10 years Oregon City was the 11th fastest growing city in Oregon by population, growing 14.5 percent since 2010.1 Such growth has led to increased demand for housing and retail services. The population is projected to grow an additional 5.5 percent over the next five years, adding approximately 15,000 new residents to the area (5,000 new households).2 Median household incomes are also 1 U.S. Census Bureau, Quick Facts: Oregon City, Oregon 2 ESRI Retail Market Potential Report {01104546;1}ECONorthwest | Portland | Seattle | Los Angeles | Eugene | Boise | econw.com 1 projected to rise grow 7.6 percent by 2025. The proposed SDG development is well positioned to meet the growing demand for housing and retail services. • Financial analysis. The SDG development project with only private financing is not financially viable in today’s market conditions, or the cost to realize is less than the value of the assets at completion. The infrastructure and mitigation costs are substantial, and the current relationship between rents and development costs are such that there is insufficient capital remaining for a developer to cover the full cost of infrastructure improvements required for mitigating the former landfill. To ensure feasibility, the project requires public investment to support the necessary infrastructure and mitigation measures. • Market implications for development. Fluctuations in the market have a profound impact on development feasibility. While the current market conditions might be favorable and the outlook may appear positive, any upward movement on capitalization rates (i.e. the financial rate of return on the project) could add additional project risk. The residual land values of the development program are negative at the today’s most favorable capitalization rates. Therefore, without public investment, this project’s feasibility depends on market conditions substantially improving. • Benefits of public investment in brownfield redevelopment. The public benefits of brownfield redevelopment have been broadly studied. These benefits extend from public health and safety, climate impacts and economic development, to property tax revenue growth and tax base expansion. These are just some of the benefits of redeveloping brownfield sites: • Land utilization. Land is a finite resource that is increasingly scarce. By definition brownfields are sites that are blighted and not maximizing their potential productive use. Brownfield redevelopment returns underutilized land to a higher and better use. • Property Value and Tax Base Increase. Brownfields do not maximize on-site tax benefit potential and in many cases have a depressing effect on neighboring property values. Brownfield redevelopment reverses this effect. • Leverage of Public Investment. In addition to private investment proposed for this site, public subsidy in brownfield redevelopment has been shown to leverage considerable other public investment. A 2015 study by the US Environmental Protection Agency found that every federal public dollar spent in brownfield subsidy leveraged $20.13 in additional public investment from state and local sources3. • Land Efficiency and Vehicle Miles. Due to historical development trends, many brownfields have greater location efficiency, such as the Rossman Landfill site, meaning they have better access to existing markets and infrastructure relative to 3 U.S. Environmental Protection Agency. Overview of EPA’s Brownfield Program. 2020. Retrieved February 26, 2021. https://www.epa.gov/brownfields/overview-epas-brownfields-program ECONorthwest 2 greenfield sites. The EPA has found that brownfield redevelopment results in a 25 to 33 percent decrease in residential vehicle miles traveled (VMT) compared to greenfield development4. • Economic impacts. Construction and operations of the proposed SDG development will support a variety of jobs and employment opportunities. We estimate that construction of the project could support approximately 3,061 direct, indirect and induced jobs over the construction period. Once operational, we estimate that businesses occupying space in and around the new development could support approximately 988 direct, indirect and induced jobs. It is likely that some portion of these workers will reside or already reside in Oregon City, which will contribute to the local economy and tax base. • Property tax revenues. The Rossman Landfill site currently contributes $0 in property tax revenues to the community but may produce undesired costs through air, soil and ground water contamination. Public investment to clean up the site will mitigate these risks while at the same time supply an additional stream of annual tax revenues. We estimate that the SDG project alone, not considering any increase in value and associated property taxes to additional parcels nearby, will provide $3.3 million in annual property tax revenues to the community that otherwise would not exist without public investment. • Attracting other investment. This development project has the potential to be a catalyst for other investment in Oregon City. While the specific details stemming from investment, development and their tax revenues cannot be quantified at this time, public investments in housing and quality of life have been shown to pay dividends over time to communities as they become more attractive places to live, work and play. Rehabilitating a Former Landfill The proposed site for the mixed-use downtown community is atop a former landfill. The Rossman Landfill collected about 60 percent of non-hazardous municipal waste in the Portland- Metro region from the 1960s to the 1980s. In 1976, Oregon DEQ detected contamination of shallow groundwater as well as odor and gas problems. Waste collection subsequently terminated in 1983. Developing on landfills requires mitigation Landfill gas (LFG) is a natural byproduct of decomposing organic material. It is predominantly composed of carbon dioxide and methane which are difficult to detect because they are 4 U.S. Environmental Protection Agency. Environmental Benefits of Brownfield Redevelopment—A Nationwide Assessment. May 2020. ECONorthwest 3 colorless and odorless. LFG emissions continue after 20 years in small quantities and may remain for over 50 years.5 Off gassing of LFG can result in health and environmental challenges: § Human exposure to high concentrations of LFG can lead to asphyxiation hazards. This is most likely in enclosed spaces. § As methane is combustible, accumulation of LFG can lead to explosion and fire hazards. § The land can sink or settle as the waste decomposes. The observed effects may not be uniform across a site. § Waste decomposition can also produce leachate, a liquid that can contaminate the groundwater. Leachate releases were first identified on the site in 19766. Proper Engineering and Management will Reduce Health and Safety Risks Modern landfills are well-engineered and managed with monitoring systems to limit groundwater contamination and buildup of LFG. Stringent requirements for landfill development and monitoring are established under the Resource Conservation and Recovery Act of 1976 (RCRA), regulated by the U.S. Environmental Protection Agency (EPA), and codified under 40 CFR Part 258. In Oregon, the Department of Environmental Quality (DEQ) regulates landfills. DEQ has published Solid Waste Landfill