City looking at construction tax

When the Sisters City Council announced their intention to consider implementing a construction excise tax (CET) on new residential and commercial construction, there was swift reaction from builders and Realtors.

The proposal is in its chrysalis stage: no definite plans, policy, or procedures have yet been discussed. A preliminary nod to the Central Oregon Builders Association as a courtesy to let them know what might be considered rallied an immediate, albeit premature, defensive.

The Council, in an attempt to find creative ways to help meet the demand for local workforce housing, which has been one of their goals for three years running, raised the possibility of a CET to create a fund to help with lower-cost housing. What percentage tax it would be and how it would be used has not yet been formulated.

According to Mayor Chuck Ryan, "The Council agreed that affordable housing in support of economic diversification is one of our major goals. We approved our budget (2018-19) with CET tax included."

Hayden Homes regional director Geoff Lewis told the Council that if a one percent CET were adopted, Hayden might reconsider whether to purchase the land originally slated for the McKenzie Meadows Village development on McKinney Butte Drive near Sisters High School.

Lewis and April Pust of Hayden Homes were both contacted several times for comment on this story. Though they said they would provide comment to The Nugget, as of press time they had not done so.

Ryan has held several meetings with Dennis Murphy, president of Hayden Homes, to try to work out a compromise. In the MMV piece, one in every 10 homes is required to be "affordable," thus if they were to build the proposed 199 homes, 20 would be affordable. If a CET tax were in place, there would be an excise tax on every house, in addition to the 1-in-10 formula.

Hayden also has an in-house charity called First Story, which assists low-income homebuyers to purchase a home. In Sisters, there is one First Story house to date already completed by Hayden.

Ryan said he believes it would be "unhealthy to not try to reach an agreement" with Hayden.

"It would be ideal if we could reach an agreement with Hayden that is a win/win for all parties and then tackle the CET decision with proper process and time. Legally, I have not yet conferred with our attorneys on the potential form of any potential agreement, but the 10 percent affordable-housing requirement for McKenzie Meadows does count towards our big-picture goal, so the question remains, is that roughly equivalent to a one percent CET or not," he said.

The City currently has no proposal, plan, or policy in place regarding instituting a CET, and not all of the councilors are in favor of a CET.

Councilor David Asson told The Nugget, "I've heard little of the details mentioned and need far more understanding, and basically I am not in favor of another tax. I despise the term 'affordable housing.' It is too vague to properly describe what Sisters' priority should be. We need jobs, families and kids. Accomplish this. The rest will take care of itself far better than we can as a City. We don't have the budget to further subsidize housing. Our $300,000 cash investment (in the HousingWorks apartments) is enough to meet that responsibility."

Last Friday, work began on contacting other cities in Oregon that have a CET to get their input on how they did it and what the result has been. Another question to be answered is if any city with a CET has also imposed the 1-in-10 affordable-units formula.

Bill Willitts, a partner in the MMV property being considered by Hayden, agrees that "Affordable housing is an important need for our community and our state. How we achieve affordable housing needs to be fair and balanced. The CET is unfair to the planned unit developer that is already responsible to provide one in 10 affordable units." He went on to say, "Ultimately, the high cost of building in Sisters will either drive the production builders out or increase the cost of housing by thousands of dollars for the market-rate buyers."

At stake at this point in time is whether a carve-out exemption can be made to satisfy one building company immediately, before a decision is made on a long-term CET policy with potentially far-reaching consequences for the City, local builders and homebuyers.