Developer, City of Sisters negotiating on property

Ongoing negotiations are underway between the City of Sisters Community Development Department, Hayden Homes, and the City's legal team regarding potential development of the McKenzie Meadow Village (MMV) property.

Hayden Homes has proposed purchasing the property on McKinney Butte Road originally annexed into the city with plans for a residential development including single-family homes, senior apartments, cottages, an assisted-living facility, and a large community park. Due to multiple legal challenges, the entire development was delayed for years, and the owners now want to sell the property to Hayden.

Delays seem to be an ongoing condition with this particular piece of property. When the City Council began investigating the possible imposition of a construction excise tax (CET) on all new building in the city, Hayden Homes postponed purchase of the MMV property until several issues could be resolved. Part of the original MMV annexation agreement required that one in every 10 housing units be affordable and that requirement would transfer with the sale of the property.

Affordable housing is defined as housing in which low-income residents spend no more than 30 percent of their gross household incomes on housing-related expenses. Households are considered "cost-burdened" if they pay more than 30 percent of total household income on housing costs. Housing-related expenses are defined by the U.S. Department of Housing and Urban Development (HUD) as follows: mortgage principle and interest, taxes, property insurance, mortgage insurance, and essential utilities for homebuyers; for renters, expenses include rent and utilities.

A family is considered low-income if they earn 80 percent or less of the median family income for the area, as published each year by HUD.

Hayden requested that, because of the one in 10 requirement attached to the MMV property, they be exempt from any proposed CET on this project. Their plans call for construction of 198 homes, meaning 20 homes would be affordable, which would be built as First Story homes (Hayden's 501(c)(3) nonprofit). Those homes would be offered at market rate with a deed restriction.

First Story would offer a 30-year no-interest loan to each of the recipients, which would result in approximately $250,000 in interest over the lifetime of each loan not being collected.

Hayden contends that requiring both the CET and the one in 10 affordable houses results in double taxation on their project. With an average CET of $3,000 per each of the 178 other homes, Hayden would pay $534,000 in CET to the City. Until these issues are resolved, Hayden has delayed purchase of the property.

According to senior planner BreAnne McConkie, staff is working with Hayden and the City's legal counsel to find a possible resolution. Usually, these kinds of issues are handled with a development agreement that results in an ordinance approved by the City Council, or a modification of the original annexation agreement. Whatever is crafted would be reviewed by the Planning Commission and then sent to Council for a public hearing and vote on the ordinance.

There are lingering issues and unmet commitments by Hayden regarding required multi-family units in the current Hayden Village at Cold Springs development that must be resolved before any more certificates of occupancy will be issued on their later phases. The holds on those certificate of occupancies would not affect building in MMV and the City wants to be sure those commitments are

met.

In making their case for special consideration on MMV requirements, Hayden provided a list of contributions they say they have made to the Sisters community:

• Built 250 homes in Sisters since 2006 (23 percent of housing stock).

• $2,800,000 paid in permits and SDC fees to City of Sisters/Deschutes County. (Current permit is $9,300 to City of Sisters and $4,600 to Deschutes County).

• $1,808,000 paid in co-op real estate commissions (65 percent paid to Sisters brokers).

• $120,000 in contributions to: Sisters High School for visual arts supplies and athletics, Sisters Chamber of Commerce for Holiday Parade and Mardi Gras, Sisters Arts Alliance, Habitat for Humanity, Friends of the Children, Sisters Rodeo, Sisters Folk Festival, Sisters Christian Academy prayer breakfast, and Housing Works.