If you build it, will they come?
That’s the question Hermiston city councilors grappled with Monday night as they discussed whether to go after funding for two new roads leading to commercial and industrial land.
Ready-made access to property makes it more attractive to potential developers. But there is no guarantee that once a new road is built that the expense will pay off — something Pendleton knows well after spending $9.5 million to construct Barnhart Road in 2009.
A decade later, the promised new development there has yet to materialize.
“I think we need to be careful, because the ‘build it and they will come’ model hasn’t worked well in Eastern Oregon,” Hermiston city councilor John Kirwan said Monday.
The roads the council discussed Monday would be smaller than Barnhart Road and not be paid for by loans, however.
During a work session Monday, city staff presented a plan that would increase access to about 15 acres of undeveloped commercial property on the north side of Walmart. Currently the land has access off of Northeast Fourth Street, but staff are proposing a new road that would run east-west along the property, connecting Fourth Street to Highway 395 just north of Roger’s Toyota and giving potential businesses coveted access to Hermiston’s busiest traffic corridor.
“Our biggest challenge is 395 frontage,” assistant city manager Mark Morgan said of recruiting new retailers and restaurants to Hermiston. “They want direct visibility and frontage on 395.”
He said businesses often take into account traffic flow when deciding where to locate. One popular restaurant chain told the city it won’t locate anywhere where fewer than 25,000 vehicles pass per day, and Hermiston’s busiest intersection (Elm Avenue and Highway 395) only sees 22,000 trips per day.
The new intersection with Highway 395 would include a traffic signal. A possible second phase of the project would add a road across from the traffic signal running in a north-south direction, connecting Theater Lane to Harper Road in front of Home Depot.
The project could be paid for in two ways: a local improvement district or an urban renewal district.
With an LID, the city would come up with a formula to split the cost of the new road among the project’s neighbors and place a lien on the properties. If 60% of the property owners opposed, they could block formation of the district.
In an urban renewal district the city would freeze the tax rate in a certain zone, then skim off any extra revenue generated by increases in property value and funnel it into the road project. In a hypothetical example, a property might be worth $50,000 and pay $5,000 (10%) a year in property taxes. If a restaurant were built on the property and its value increased to $200,000, taxing districts such as the city and fire district would continue to receive $5,000 per year while the additional $15,000 would be diverted to the urban renewal district.
The money would take longer to accumulate than a local improvement district, and would depend on property values increasing. But property owners and developers looking at the property wouldn’t be charged extra for the improvements.
“The assumption is that if we form the (urban renewal) district and development occurs, we will say ‘You still have to pay property taxes, but those taxes are going directly to these improvements that you would otherwise have to pay for,” Morgan said.
While councilors were interested in the idea of new roads to boost the attractiveness of commercial land, they said they would need more information — including the cost of the project — before making any decisions.
“Right now I could go either way,” Kirwan said.
During its regular session, the city council set in motion a different local improvement district, located in the South Hermiston Industrial Park near Ranch & Home.
If the project is finalized, it would be Hermiston’s first LID since 2004.
The district would require neighboring properties along Campbell and Penney drives to pay to pave the remainder of Campbell Drive, install water and sewer mains in the area and create what would essentially be a new road — called Southeast 10th Street — connecting East Penney Avenue to Highway 395 across from Bellingers and creating access to a piece of industrial land owned by the Port of Umatilla.
“It’s important to note that the right of way for Southeast 10th exists, legally and on paper, but if you were to go out there, there’s nothing — not even a goat trail,” Morgan said.
He said at least 50% of the project could be paid for by a federal Economic Development Administration grant that the city is eligible for based on large layoffs at Hermiston Foods and Union Pacific in recent years. The city would be willing to put in 8% of the matching funds needed for the grant and Umatilla County would be willing to pay 2%, leaving the project’s neighbors to pay for about 40% of the project instead of what would normally be 100%.
The council voted Monday night to complete a feasibility study for the LID, assessing how much money would need to be raised and how much each property would pay. That study will be presented during the council’s July 8 meeting, after which the council can decide to abandon the idea or hold the necessary public hearings to pursue an LID. If 12 of the 20 neighboring property owners oppose the LID it won’t happen.
“It’s exciting when you can get a 60% match on your dollar,” mayor David Drotzmann said. “That makes it much more palatable.”