ECONOMIC TECHNICAL ADVISORY COMMITTEE MEETING RECORD
September 9, 2002 – 2:00 p.m.
Metro Regional Center, Council Annex
Committee Members Present: Chair Andy Cotugno, Robert Anderson, Dae Baek (for Office of Economic Analysis), Al Burns, Cindy Catto, Rob De Graff, Greg Jenks, Jerry Johnson, Tom Kelly, Gene Leverton, Jim Labbe (for Audubon Society of Portland), Patti McCoy, Terry Morlan, Noelwah Netusil, Kelly Ross, Dennis Yee
Also Present: Shannon Buono, Portland Planning Bureau; Chris Eaton, Angelo Eaton and Associates; Mary Gibson, Port of Portland; Roberta Jortner, Portland Bureau of Environmental Planning; Steve Kountz, Portland Planning Bureau; Mike Lehne, Real Estate Appraiser; Gary Odenthal, Portland Planning Bureau; Ken Paulsen, Stream Scheme
Metro Staff Present: Suzanne Myers Harold, Ken Helm, Justin Houck, Paul Ketcham, Carol Krigger, Jon Ostar, Mark Turpel, Gina Whitehill-Baziuk
Chair Andy Cotugno, Metro Planning Director, called the meeting to order at 2:08 p.m.
1. Member Self-Introductions
Those present introduced themselves.
2. Approval of Minutes: June 5, and July 29, 2002
Chair Cotugno asked for additions, deletions or revisions to the June 5, or July 29, 2002, meeting minutes.
Kelly Ross, Home Builders Association of Metropolitan Portland, said the comments at the bottom of page four of the July 29, 2002, minutes, were erroneously attributed to Mr. Tom Kelly. He himself made the comments.
Al Burns, Portland Planning Bureau, asked that additional comments be added to page page four of the July 29, 2002, minutes. At the meeting, he had said that the region really did not have a 2040 hierarchy; it had 2040 design types. As a convention, the region thought it had more hierarchy than it really did. It would be fine to make up a hierarchy for ranking economic analysis, but they should not begin with the presumption that a hierarchy is already in place. He recalled that Chair Cotugno had agreed and had mentioned that there was a hierarchy for the purpose of Metropolitan Transportation Improvement Program (MTIP) and the Regional Transportation Plan (RTP). Mr. Burns recommended that the heading “2040 Hierarchy” on page two be amended to read “2040 Design Types.”
The minutes were approved as amended.
3. Determining the Economic Value of Land
Mark Turpel, Manager, Metro Long-Range Planning, reviewed the document, “Determining the Economic Value of Lands within the Metro Region,” a copy of which is included in the meeting packet.
Justin Houck, Associate Regional Planner, reviewed four maps and explained how he created them: the Preliminary Concept Map for ESEE Economic Priority Categories, the ESEE Land Value Analysis map, the ESEE Employment Analysis: Spatial Distribution of Employment by Firm Locations and Number of Employees map, and the ESEE Employment Analysis: Spatial Distribution of Employment by “Traded” Firm Locations and Number of Employees map.
Greg Jenks, Clackamas County, asked the rationale for creating the map using land value only, rather than including improvements to the land.
Mr. Turpel said the idea of market value was to look at the value of the land and its rental/lease price. If the map reflected both the land and the building value, then vacant industrial land would be undervalued. He asked for committee members’ opinions.
Mr. Jenks said including building value would help show the location of high-value industries and investments.
Cindy Catto, Associated General Contractors, said a large part of the importance of employment land is its economic benefit to the region and its employees. Many of these components, such as employee salaries, are not land-based. She questioned whether the value of the land, even with improvements, could reflect the true value of what would happen on the land.
Mr. Burns said for the purpose analyzing conflicting use, it would be fair and legal to assume that development will occur as intensely as allowed by the zoning codes.
Ms. Catto said even assuming that vacant employment land develops as intensely as allowed, it does not distinguish between industries that pay employees $70,000 a year and ones that pay minimum wage.
Mr. Houck added a caveat that the map does not show the whole picture in terms of market value. It simply shows assessed value. The question is how to best reflect the market value?
Chair Cotugno said the challenge is to develop a calculation of market value that can be applied comprehensively across the region. There is no tailored market information available for each site.
Gene Leverton, Gene Leverton and Associates, agreed that land value analysis made sense for a first cut. As long as the map was not be used alone, the committee and staff could spot the deficiencies.
Mr. Burns agreed partially, but said part of ETAC’s purpose is value driven: having the right thing in the right spot. One problem with the land value analysis is that it will value commercial property higher than industrial property. Market value could be a tiebreaker, but he did not want to begin with the premise of analysis that commercial area is more important than industrial.
Terry Morlan, Northwest Power Planning Council, recommended creating an additional map showing payroll data. Such a map would get at the committee’s concern about average wages. Mr. Burns agreed.
Mr. Turpel said Mr. Houck is exploring the possibility of using MetroScope to forecast where employment growth is likely to occur, using either total employment or some sectors.
Mr. Jenks recommended adding investment to the land value map because looking at the investment to job ratio is one way to determine how primary an industry is. Land value in and of itself can be deceptive.
Mr. Yee said Mr. Jenks’s approach may be better than trying to define “traded sector.”
Ms. Catto asked if there is a way to overlay salary information? The market value divided by the number of jobs, multiplied by the payroll, may demonstrate both the value of jobs and the market value of the land.
Mr. Jenks noted that generally, higher investment will track with higher wage jobs.
Chair Cotugno said it is worth taking a look at both of those. They are really two different measures of economic value. He questioned how the map would be applied, however. Generally speaking, the resource areas that they are evaluating are vacant land. Under this proposal, they would map developed land and try to draw conclusions on its economic importance versus vacant land. Would this make a partially developed parcel appear more important than fully undeveloped resource land?
Mr. Yee suggested that ETAC take the market value (land and development) times the average payroll, then divide it by the market value plus the average payroll, then take the resulting number and multiply it by the average firm size. He wanted to work on the equation some more, but he thought it would give the committee an index that incorporated all the variables discussed.
Chair Cotugno said the question remained of how to extrapolate the developed importance to nearby vacant land. Would proximity to high value developed land indicate the value of resource land?
The committee discussed how to best demonstrate payroll on the map, and whether such information would be helpful in the ESEE analysis.
Chair Cotugno summarized the committee’s discussion: there may be various parts of the sector components that ETAC can treat as an adjuster (that is, give bonus points) and other classifications that are simply labeled “high.” First, ETAC needs to explicitly list the factors. Second, ETAC needs to explicitly state whether it is treating those factors as bonus points or making a de facto “high” classification.
Mr. Ross said he sensed that after all the indices are applied, the residentially zoned land will come out on the bottom of the economic value ladder. In terms of jobs, it may be hard to quantify the economic consequences. However, if the value of available, residentially zoned land is ignored, it will cause big problems elsewhere.
Mr. Burns said ETAC talked earlier about using this information to compare within categories, not between categories. The starting premise was the right thing in the right place.
Chair Cotugno said it does start with the hierarchy, and the hierarchy has regional centers, central cities and industrial areas in the first category, and inner and outer neighborhoods in the third category. At its last meeting, ETAC agreed that if land is limited from development, the urban growth boundary must be expanded to replace that capacity. If Metro restricts industrial land, it does no good to replace it with residential land. He reviewed a memo, dated August 27, 2002, regarding ESEE analysis. A copy of the memo is included in the meeting record.
Mr. Burns said it was his understanding that while they are free to add incentives, the rule requires that the analysis be based on the prohibitions and limitations of use.
Mr. Leverton said to his understanding, the first step is to agree on the economic value of land in a way that is legally defensible. This is an arduous, but worthy task. The next step is to determine the public’s interest in protecting the land. After these steps are completed it will be time to discuss strategies: whether to buy it, set the bar too high for development, etc.
Chair Cotugno agreed. One approach would be to take the resource evaluation that has been done, determine the economic evaluation, and map both of them. For any given place, they will then be able to compare its economic and environmental importance. After making the comparison, they can then conclude whether it is in the public’s best interest to prohibit, allow, or partially limit. In his opinion, this approach will set up a tug-of-war between interests. He preferred to define a low end and high end and evaluate the quality both on a site-specific and aggregate basis of an aggressive versus less-aggressive approach. He recommended also attaching scenarios of how that would be accomplished programmatically, using a mix of regulatory and non-regulatory approaches. This will result in a more educated debate about the degree of aggressiveness.
Ms. Catto cautioned against creating too many options in the ESEE analysis of where the intersections are. It may make the first cut decisions harder. The extreme cases on either side of the scale will be easy to determine. The problem will be handling the areas that fall in the middle. She recommended identifying the parcels in the middle and then wrestling with the options.
Jim Labbe, Audubon Society of Portland, said he likes that Mr. Cotugno’s approach can potentially address situations in which there will be a synergistic effect between the value of the use and the value of the resource, such as greenways. He questioned if a program would be legally sufficient if the goal is protection but the tool is acquisition from a willing seller.
Mr. Cotugno said Mr. Burns’s point was that the Goal 5 rule provides a framework for adopting regulations. It is not a rule for developing an acquisitions program. Metro has said from the beginning that the Goal 5 program will not be just about regulations; it will include acquisition, education, volunteers, stewardship, and incentives.
Mr. Burns said this is a very appealing and bad idea. It is unnecessary, out of sequence, and possibly not legal. He understood that a Goal 5 program is a map to prohibit, limit and allow conflicting uses. If this approach is used, they need to structure the analysis so that they can pull out the individual effects of allow, limit and prohibit decisions.
Jerry Johnson, Johnson Gardner, said Metro has spent a lot of time on the economic and environmental aspects of the ESEE analysis. He asked how the social and energy analysis will be incorporated in the final ratings.
Mr. Cotugno said there has not been as much staff work to develop the social and energy analysis. He asked ETAC if, and how, it would like to participate in such an analysis.
Mr. Morlan said the energy analysis is basically an economic question. The social analysis is a little different.
Ms. Catto asked staff to begin developing scenarios and definitions, which could be used after the committee has tentatively finished the ESEE analysis and before beginning the program.
Chair Cotugno agreed that a sequential approach makes sense: first determine how much restriction and then how to accomplish it.
Mike Lehne, Real Estate Appraiser, said some of proposed statistical analysis is flawed because each property is totally unique. He said the only way to analyze value is to compare properties with overlay zones to those without.
4. Peer Review Panel Update
Mr. Turpel said staff is exploring ways to establish a peer review panel. They have contacted a number of groups, including the Northwest Power Planning Council, the Environmental Economic Advisory Committee, the National Center for Environmental Economics and a professional organization. They hope to find a group soon to review Metro’s proposed methodology and the final product.
Ms. Catto said she thought Portland State University may have a peer review panel. Mr. Turpel said he would find out.
5. Effects of Environmental Zones
Roberta Jortner, Portland Bureau of Environmental Planning, said the City of Portland contracted with Reed College to evaluate the effects of Portland’s environmental overlay zones on the price of home sales. She gave an overview of the project, as outlined in the document, “Effects of Environmental Zones and Proximity to Natural Resources Amenities on Residential Property Values in Portland Oregon,” a copy of which is included in the meeting packet.
Noelwah Netusil, Reed College, distributed and reviewed a handout, “Effects of Environmental Zones and Proximity to Natural Resources Amenities on Residential Property Values in Portland Oregon.” A copy is included in the meeting record. She noted that the results are not lot-specific. Instead, the study identifies major factors. She said she plans to add data from the 2000 census.
Gary Odenthal, Portland Planning Bureau, described how he processed the data for the study.
The committee discussed specifics about the study’s methodology.
Mr. Ross said the study will not get at the comment often heard from property owners, that developers will discount their land due to environmental zones, because it only looks at built-home sales.
Mr. Burns noted that during his visit to Portland, Myron Orfield said he uses the number of school children on subsidized lunches as a surrogate for many social variables.
6. Schedule Next ETAC Meeting
The committee agreed to meet again in six weeks, to allow time for staff to complete its work. The next ETAC meeting will be on Monday, October 21, from 2:00 to 4:00 p.m.
There being no further business before the committee, Chair Cotugno adjourned the meeting at 4:30 p.m.
Respectfully submitted,
Suzanne M. Harold
Executive Office