MINUTES FOR THE SPECIAL MEETING
ASHLAND CITY COUNCIL
Tuesday, August 30, 2005 - 7:00 p.m.
Civic Center Council Chambers, 1175 E. Main Street

CALL TO ORDER
Mayor Morrison called the meeting to order at 7:00 p.m. in the Civic Center Council Chambers.

ROLL CALL
Councilors Hartzell, Amarotico, Hardesty, Jackson, Silbiger and Chapman were present.

DISCUSSION REGARDING LITHIA WAY PARKING LOT AFFORDABLE HOUSING
The City Council is to evaluate the development proposals received in response to the Request for Proposals for affordable housing at the site of the Lithia Way Parking Lot, and determine whether the proposals received have merit, and if so make an award selection in favor of the proposal that best meets the objectives as outlined in the RFP.

Housing Program Specialist Brandon Goldman noted three of the four applicants were available to answer Council's questions. He also noted that Darcy Strahan, Regional Advisor to the Director for the Oregon Housing and Community Service Department was available to answer any questions that the Council may have. Mr. Goldman stated that the Housing Commission had prepared an outline of the history of the RFP and presented this to the Council. He noted that the purpose of this meeting was for the Council to obtain further information and clarification from the applicants and Staff so that they can come to a decision.

City Attorney Mike Franell explained that the Legal Department initially approached this as if it were a Public Improvement Contract because it would be an improvement happening on public land with the potential of City ownership. But, after further evaluation, it was determined that this did not fall within the parameters of a Public Improvement Contract because the City would not be requiring that they obtain ownership of the structures once the affordability period is complete.

Mr. Franell stated that this project should be approached as a sale or lease of a real property right. If it is approached in this manner, the public bidding requirements do no apply and the Council is freed up to consider whatever factors they feel are necessary in order to enter into an agreement.

Mr. Franell stated that because this is a disposition of some real property interest, it will fall under the provisions of ORS 271.310, which sets restrictions on the sale, transfer, lease, or donation of public lands. However, the restrictions listed in the first section of the statute do not necessarily apply. There are two exceptions that the Council might not have to consider in this statute. These are: 1) If the City is entering into an agreement with another political subdivision for the property involved, then the rest of the restrictions in the statute don't apply; and 2) If the Council finds that the public interest may be furthered by the proposal that they are considering, the Council does not have any of the restrictions that are in the statute. However, if the Council does not make this finding, then they would be subject to determining what the fair market value of the real property interest is and obtain fair market value for that interest.

Mr. Franell clarified that if the property contained a commercial component, as long as it accomplishes the affordable housing goal that the Council has established, it would not be impacted. He stated that it would be prudent on the part of the City, if there is a commercial value that is not used, to subsidize the location for Affordable Housing on this location, and to obtain some consideration for that commercial value.

Mr. Franell gave further clarification on the Request for Proposal (RFP) process in regards to real property and Public Improvement. He again stated that it was the opinion of the Legal Department that the City is not held to the RFP process as he had just explained.

It was noted by Council that the Performa's and management of this property would be important.

Mr. Goldman clarified that the Ashland Community Land Trust (ACLT) would be subject to property taxes.

Council noted the following to be considered when making a decision:

Council continued with comments and discussion on considerations noted above. Jackson stated that she continues to see housing as desirable on private development and does not want sell the property in order to keep the parking and then build at another location. She noted that the downtown standards aims for commercial to be on the ground floor and residential above. And, that the Housing Authority proposal retains parking and stays above the basement which is necessary if it fulfills the technicality of 65% in a permitted use. She feels that the Housing Authority has the experience to both design livable units and to maintain them over the long-term. She stressed that this is all about acquiring affordable housing.

Mr. Goldman explained that going above 60 units per acre would require a zone change in order to allow a higher density in that zone. Currently, density bonuses are available for affordable housing within the sections of R-1 and R-2 zoning ordinance, but are not noted in the commercial zones. Because of this, density bonuses are not allowed within the downtown core in order to increase the amount of affordable housing. He clarified that you would need to look at average of an acre under one ownership as part of one proposal. In this case, the property owned by the City is limited to the existing parking lot.

Allan Sandler clarified for the Council that if City owns the property, there is no property tax to the developer if leased. He also noted that insurance on mixed use may be prohibitive to do this project.

Mr. Goldman clarified that the Housing Authority, given its government status, is not required to pay property tax, where private non-profits are required.

Paul Kendrick representing Kendrick Enterprise came forward to answer questions from the Council. He admitted that insurance can be difficult, but that it is available. He commented on the possibility of sharing parking spaces with the property he owns adjacent to the real property being considered. He does not see a commercial/residential project as a problem and stated that any applicant would need to follow the downtown guidelines. He stated that this project is designed specifically related to what the City wants and that the project would need to go through the planning process and meet the city standards like any other development.

It was noted that the Council should understand that what they are now considering is a Request for Qualifications (RFQ) rather than a RFP.

Jackson explained that she is interested in the two recommendations that were presented to the Council by the City Administrator and is not interested in starting over or having a zone change done in order to attain housing. She would like to work with the recommendations from the Housing Commission. It was clarified that the Housing Commission brought their recommendations forward based on a RFP, and that the basis of the RFP could not be changed.

Mr. Franell clarified for Council that they are free to consider broader issues than what the Housing Commission used to make their recommendation and that all four proposals could be considered. He suggested that the Council have a discussion on how they intend to move forward on making a decision.

Councilor Amarotico commented that an additional issue that is important was the aesthetic component.

Darcy Strahan, representing Oregon Housing and Community Services stated that when the City issued an RFP, the City made assumptions that they would be willing to donate the opportunity for the development of affordable housing. By doing this, the City should evaluate the proposals that best meet that goal. If the Council's goal was to provide affordable housing by donating city property, then that is the value.

Ms. Strahan noted that Home Funds in a mixed use project can be used, but could not be used to pay for the commercial portion. She explained that Home Funds could be used for residential as long as the income mix is correct and that the project qualifies. She stated that funding is awarded twice a year and that whoever is awarded the project would be the applicant, not the City. She explained that there is competition for these funds amongst several counties.

Alice Hardesty/575 Dogwood Way/Spoke as a representative of the Housing Commission and shared some of the reasons why the Commission had selected Housing Authority's proposal. She stated that they were responsive to the RFP, their proposal allowed for more square footage than the other proposals, units were larger and were appropriate for a work-force housing, the affordability factors were more favorable, and they had good management experience in affordable housing programs and the best prognosis for obtaining funding. She explained that the Housing Commission made this recommendation with a condition that they do not reduce the number of parking spaces. She stated that there was some support from the Commission for going with another RFP which would be more specific, but the Commission decided that they didn't want to wait any longer for this process to begin.

Ms. Hardesty noted that the Commission did have conditions if negotiating with Kendrick, but they were told by the Legal Department that they could not do this. Because of this they felt somewhat frustrated that the rules have now changed. She explained that if Kendrick had been recommended, the Commission would have wanted sub-surface parking and rents consistent with the Home Program. The Commission also voiced concern with identifying and committing funds from the commercial space to be used toward the affordable housing component. In addition, they were unable to determine from the Kendrick proposal whether the commercial and housing components would be reverted back to the City and who would manage the program. She stated that the Housing Commission felt that there were too many unanswered questions in the Kendrick proposal.

Councilor Jackson/Hartzell m/s to accept the Housing Commission recommendation for the Jackson County Housing Authority to build affordable housing.

DISCUSSION:
Councilor Chapman stated that he could not support any of the proposals if no changes could be made. He felt that there was one proposal that was close, but some changes would need to be made. Mr. Goldman clarified that each of the proposals has a different scenario for ownership and conversion of assets. The Kendrick proposal would need to go through a condominium subdivision so that the sub-terrarium parking lot would be owned by the City with a maintenance agreement that would be part of the lease negotiations. The commercial component would be owned by another entity and the housing component by another entity. In regards to the reversion of assets, the Kendrick proposal proposes that both the commercial and residential component would come back in their entirety to city ownership at the conclusion of 40 years at no cost. Jackson County Housing Authority indicated that the reversion at the end of their affordability would be tied to how much debt was remaining in the building and to have that compensated prior to the City getting the project. The Sandler proposal indicated that they would sell it back to the City at the conclusion of the affordability period for the cost of construction with no interest over the period that they maintained ownership. The LDC Design Group proposal indicated that the commercial component and the market rate units would be forever private and not come back to the City. The affordable housing component would come back to the city at no cost, in anywhere from 15 to 30+ years.

City Administrator Gino Grimaldi clarified that the Council could place conditions, which the Staff could then use to negotiate with the selected proposal. Staff would then report back to the Council for final approval.

Councilor Jackson stated that she would be willing to amend her motion to add conditions. Hartzell commented that there seems to be interest in commercial on the ground floor, parking below ground, affordable housing, and management competency. It was noted that the Council could possibly break this project down into pieces and build on everyone's excellence in order to shape what they want.

Mr. Franell clarified that it would be better for the Council to outline what they want and then put together a team that would negotiate with the partners, rather than trying to do the negotiations in this setting.

Comment was made that a possible amendment could be to suggest that the first floor should be commercial, but this might require a redesign of the structure. Statement was made that if the goal of this project was to obtain housing, then they should make an apartment building and put the parking underground as to maximize the number of units that could be built.

Roll Call Vote: Councilor Silbiger and Jackson, YES. Councilor Chapman, Hartzell, Amarotico and Hardesty, NO. Motion fails 4-2.

Councilor Hartzell listed the following components that the Council should discuss that would provide direction to Staff:

Mr. Grimaldi questioned if they would also like to discuss the possibility of coordinating with the project on the neighboring property. Additional comment was made noting the desirability for the project to be pedestrian friendly in terms of orientation to the alley.

Comment was made that the Kendrick proposal was close enough to what the Council is considering that it would be a good idea to talk with them directly.

Councilor Chapman/Jackson m/s to accept the Kendrick Proposal with the conditions from the Planning Department and the conditions that were presented by the City Administrator.

DISCUSSION:
The conditions of the City Administrator were noted and include: 1) for Staff to negotiate with Kendrick to obtain appropriate monetary return to the City for the use of a portion of the airspace for commercial activity, and 2) that a time limit be placed on securing funding for the affordable housing portion.

Motion was withdrawn by Councilor Chapman and Jackson.

Suggestion was made to bring forward the different organizations to find out if they would be willing to work together on this project.

Betty McRoberts/Housing Authority/Noted that Bruce Abeloe has done several buildings in the valley and expressed her support of his work. She clarified that they were not overly concerned with the facade of the structure at this point because they knew this would be addressed during the site review process. Ms. McRoberts stated that although they are capable of developing a commercial component, this is not their mission. She also clarified that a commercial element was not incorporated into the RFP because they did not interpret the RFP in that way. She commented on the need for them to know what the Council is wanting.

Ms. McRoberts stated that they submitted a fairly simple project that would accomplish the goal of providing housing downtown, and clarified that they would be willing to work with Kendrick in regards to the underground parking.

Paul Kendrick/Kendrick Enterprises/Commented on the RFP requirements, including that they be limited to 19 pages, and stated that they complied to this requirement but would have liked to have submitted more information. Mr. Kendrick voiced his concern with partnering with the Housing Authority. He stated that they would like to create a very high quality project that will last for a long time and stated that Ashland deserves a landmark and something that enhances the community. He explained that their building would be more expensive than what has been proposed by the Housing Authority and noted their desire to work with a local group. Mr. Kendrick explained that this would be a quality building that comes back to the City after 40 years. He also explained that ACLT would realize 2.5 million dollars in cash flow, and residual value to the City for that building combined with the commercial is 8 million dollars. In addition, it would have a cash flow of $500,000 per year. Mr. Kendrick presented additional financial information to the Council.

Allan Sandler/Sandler Films/Noted that in his proposal they would be able to further negotiate with the City what they were going to do. He stated that all three groups were capable of doing this project, but he is the only one with money ready right now to do this project. Mr. Sandler voiced his concern that they were not allowed to come back after they found out there was interest in including a commercial component. He commented on the importance of the management of the structure and voiced his willingness to work with the Housing Commission. He stated that he was willing to re-negotiate their proposal and requested the opportunity to submit a revised proposal now that the Council has identified what they are wanting. Mr. Sandler spoke of the benefits of including certain commercial businesses, such as a day care facility.

Shelly Austin/Ashland Community Land Trust/Commented on the competency of their board and explained that it is comprised of developers, realtors, planning commissioners, city staff, citizens, lease holders, and low income residents. She noted that all of their board members are residents of Ashland and explained why they voted to work with the Kendrick proposal. Ms. Austin spoke regarding ACLT's history and stated that they are well supported by donors. She explained that they have received a $30,000 grant from Oregon Housing and Community Services that is predicated on them being awarded this project. She also stated that there are many ways that this project would support and help ACLT to evolve. Ms. Austin commented on their experience with managing properties and stated that they understand that they would be required to pay property taxes and would not need to raise rents in order to do so.

Darcy Strahan/Oregon Housing & Community Services/Commented on the different requirements that need to be met when then are approached for funding. She stated that they play an active role in what a project ends up looking like and clarified that without knowing exactly what funding sources are be required from them, it is difficult to determine what their role will be. Ms. Strahan stated that two of the proposals require substantial State funding and clarified that they would have their own separate requirements for the project.

It was questioned if the Council should consider submitting a new RFP. Mr. Grimaldi stated that he would not recommend that they start over and noted that the respondents have put a lot of time and effort into this project. He suggested that if they are heading down the road of starting over, that they consider handing this back to the Housing Commission. The Council could further define what they are interested in and the Commission could sort out who would be the most qualified to proceed with the project.

Councilor Amarotico questioned why the Council would consider moving backwards when the Kendrick proposal meets all of the requirements and the Comprehensive Plan.

Comment was made regarding the lack of specifics with the RFP and the disappointment that some of the applicants have voiced as a result of the Council not clearly stating what they wanted. It was noted that the Housing Commission experienced frustration because they felt they were hampered by the restrictions of the RFP, and now that the Council understands more of what it wants, perhaps it would be beneficial to send it back to the Housing Commission.

Opposition was voiced to sending this back to the Housing Commission and statement was made that the Council should make this decision. Additional concern was expressed regarding forcing partnerships or re-opening the process.

Councilor Hartzell/Jackson m/s to extend meeting until 10:30 p.m. Voice Vote: all AYES. Motion passed.

Councilor Hartzell m/s to accept the proposal of Jackson County Housing Authority, to enter into negotiations with the City to build a project as structured for the housing, but with negotiations to put an underground parking lot and 65% commercial on the ground floor. Motion died due to lack of second.

Councilor Hartzell m/s to put the decision on this project onto the agenda for the September 20th regular Council meeting. Motion died due to lack of second.

Councilor Chapman/Amarotico m/s to accept the Kendrick Proposal with conditions from the Planning Department and the conditions that were presented by the City Administrator.

DISCUSSION:
Mr. Goldman clarified that the two conditions from the Planning Department are: 1) that the underground parking (Scenario A) be a condition of selection on the Kendrick Proposal, and 2) that the rent as proposed by Kendrick and ACLT be adjusted downward to correspond to the State Home Program.

Mr. Grimaldi clarified that the two conditions he has recommended are: 1) seek some type of return on the use of the air rights for the commercial space, and 2) place a time limit on the raising of funds for the affordable housing component.

Councilor Hartzell/Chapman m/s to amend motion to include that the percent AMI for the units be adjusted down into the 50-60% range. Voice Vote: Councilor Hartzell, YES. Councilor Amarotico, Hardesty, Jackson, Silbiger and Chapman, NO. Motion fails 1-5.

Comment was made that the incomes levels would already have to adjust to match the Home Program.

Councilor Chapman clarified that the intent of his motion was to pick the group that they wished to move forward with. Recommendation was made to adjust the language of the motion to clarify that they are accepting Kendrick as the lead respondent and want to engage them in a process of refining their proposal.

Mr. Franell suggested that the motion on the table be withdrawn; and instead of looking at this as a Request for Proposals, look at it as a Request for Qualifications and indicate that they have chosen Kendrick as the successful contractor and direct Staff to enter into negotiations with Kendrick based upon the premises of discussion from the Council tonight, and to bring back a more solidified proposal for agreement.

Motion was withdrawn by Councilor Chapman and Amarotico.

Councilor Jackson/Amarotico m/s to accept Kendrick as the lead proponent on this project and direct Staff to work with them to refine the proposal with respect to the parking issue, the rental adjustment , the idea of commercial return on the air rights and that there be discussion about an appropriate size for the units. Voice Vote: Councilor Chapman, Hardesty, Jackson, Hartzell, Silbiger and Amarotico, YES. Motion passed.

ADJOURNMENT
The meeting was adjourned at 10:20 p.m.

Barbara Christensen, City Recorder
John W. Morrison, Mayor