ECONOMIC TECHNICAL ADVISORY COMMITTEE MEETING RECORD

June 16, 2003 – 2:00 p.m.

Metro Regional Center, Council Chamber/Annex

Committee Members Present: Robert Anderson, Al Burns, Cindy Catto, Brent Curtis, Rob DeGraff, Eric Hovee, Greg Jenks, Tom Kelly, Jim Labbe, Gene Leverton, Terry Morlan, Noelwah Netusil, Dennis Yee

Also Present: Cathy Carliss, David Crouse, Chris Eaton, Kelly Hossaini, Steve Kountz, Jane Leo, Terry Moore, E. Mullan, Ed Whitelaw

Metro Staff Present: Kim Bardes, Chris Deffebach, Justin Houk, Paul Ketcham, Gina Whitehill-Baziuk

Acting Chair Chris Deffebach, Metro Planning, called the meeting to order at 2:07 p.m.

1.  Member Self-Introductions

Those present introduced themselves.

2.  Approval of Minutes: February 3, 2003

Acting Chair Deffebach asked for additions, deletions or revisions to the February 3, 2003, meeting minutes.

3.  Progress Report on Metro ESEE Analysis and Next Steps

Acting Chair Deffebach reported on the progress of Metro’s ESEE analysis and next steps. The memo, Economic Consequences in ESEE Analysis for Fish and Wildlife Habitat Protection, she reviewed was part of the meeting packet and forms part of the record.

4.  Draft Outline of the Economic Consequences Analysis

Acting Chair Deffebach introduced Ed Whitelaw and Terry Moore from ECONorthwest.

Terry Moore gave an overview of the materials provided in the packet – Draft Outline of ECONorthwest’s Economic Analysis for Metro’s Goal 5 ESEE Study and also reviewed a handout containing snapshots of slides he had planned to present to the committee. These documents are attached and form part of the record. He said that the draft was due July 15^th. Then it would be reviewed by ETAC and then it would go to Metro Council. He said that the final report for August 29^th was not a final report about what areas they would select for preservation as opposed to development. That work would be subsequent to the report they were currently working on and would be complete until spring of 2004. Therefore, the goal for the end of August was to have the framework established on how that evaluation would occur along with some background data and mapping about what some of the trade-offs would be.

Robert Anderson asked if he was talking about land value not structural value.

Terry Moore said yes.

Ed Whitelaw and Terry Moore continued reviewing the slides on their handout.

Richard Andersen asked why they chose jobs as opposed to wages.

Terry Moore said they could still use wages, but 1) employment was used more often than wages mainly because it usually was employment that was forecasted and 2) they could not use both.

Cindy Catto said that if you used payroll it would be easier to track the tertiary effects. It would not just be about the payroll, but the buying power of the payroll that would be important to the land value. Whereas if you just have a job equal to a job, she felt that was not a relative scale of value.

Terry Moore said that the job types measured would be important. Many people believed there was a shortage of industrial land, and this was of concern to them because they felt that industrial jobs were better for the economy than non-industrial jobs. The link was that they felt that those jobs were part of the traded sector and therefore they were exporting and bringing in more money. He said that was a logical link, and that they were open to suggestions from ETAC on which to use.

Richard Andersen asked what job types would be measured if they used jobs.

Terry Moore said he had spoken with staff regarding this. He said that he was interested in doing an analysis on what jobs mattered in the region. He said he would like to connect the employment data and the SIC codes, create an IMPLAN model, extract the multipliers, and ascertain what type of multipliers SIC codes had, to determine a proxy measure of the regional value of those jobs.

Al Burns said that was good because it addressed the concern that not all jobs be counted equally.

Terry Moore said he thought they could create an index showing where the high multiplier jobs were located by using that method he just described. Once those were identified, a line could be drawn where anything on the SIC above a certain amount would be counted and below a certain amount wouldn’t.

Ed Whitelaw made a point about multipliers, static analysis, and input/output analysis, all being short-run concepts. He said that although those numbers were applicable over time, they also decline over time. He said that those numbers could be obsolete within fives years and that was a relevant concern. He said it was unknown if the industrial jobs today would be a good predictor of the industrial jobs needed for 20 or 30 years from now. He said they were interested in land, jobs, and capital and how they influenced the overall Metro regional economy. Whether jobs or payroll or SIC codes were used there would be a lot of interpretation when they looked at the long-term implications for which the study was directed.

Al Burns said he agreed, but he wanted to know, to the extent that they could know, what jobs were more valuable than others today.

Ed Whitelaw said that if the value was the payroll associated with a specific job, then that could be measured. He said that there were various factors that influence various tradeoffs.

Terry Moore said that the slides were a rough approximation of what the report would look like. He said the steps would involve reviewing the theory, laying out the maps, showing areas of conflict, resolving those areas of conflict, and describing the tradeoffs. The report, however, would be short of recommending land for preservation. He said that portion would happen later.

Greg Jenks asked about data sources, specifically valuation of buildings. He said he felt that this was important information. He said that a high ratio of investment to employment was indicative of primary industry.

Terry Moore asked if he meant investment in terms of improvements to building and equipment on the land itself.

Greg Jenks said yes.

Ed Whitelaw said that the quickest measure was the real value of improvements. He said that was typically how economists achieved a quick number for the private sector. Then they could add the public values by allocating among the different land uses.

Greg Jenks said he would like to see the private investment numbers.

Terry Moore asked the committee to help lay the basic theory from which to work off. The reason they were going with land prices was because land markets worked pretty well. Those land values should reflect the fact that somebody could observe that a particular parcel had services immediately adjacent, whereas another parcel could be located a mile from the nearest services. He suggested that land values might give a better picture of what they were trying to value.

Ed Whitelaw said that if they look at land values they would get a teepee effect on the map. Then when you add improvement values on top of that, the two of those will make the peaks even higher. However, the highs of the land values typically corresponded to the highs of the aggregate.

Greg Jenks said he was trying to get to investment to employment ratio.

Ed Whitelaw said that the high/high between land and improvement values was highly correlated, and if they wanted that ratio they should take the land value to employment. Those ratios would vary in the way they wanted. The level of the intercepts would differ, but the behavior over the geographic area would remain the same. That ratio could be calculated from the two tables currently part of the study. It was the variation that they had interest in. He said he felt that still captured what Greg Jenks was looking for.

Al Burns wanted to know how to identify which jobs were more important. He said that jobs that had very large plant and equipment investments would have larger value.

Ed Whitelaw said that the criteria that they used to measure the value of jobs would vary immensely depending on the geographic scope used and the time line involved.

Terry Morlan said that what he thought they were looking at was vacant land that could potentially be developed. Therefore, the decision would be made about whether to protect that land or develop it before knowing what industry would locate there. Therefore, an industry specific multiplier could not be applied. You might be able to make a distinction between industrial, commercial, or residential.

Eric Hovee said that using jobs as a measure would not reflect if there was a public policy. He expressed concern about how to use a jobs measure, and to a lesser extent, a land value measure. He said it might not reflect where jobs would be in 15 years.

Terry Moore said they tried to touch on that with the third measure. That was to take a 2040 design type and use that as a rough proxy for where the region was headed in the long run. It would not be site specific. He suggested that known or public investments should possibly get more value, as they were likely to increase in value in future years.

Eric Hovee said that if you were a developer looking at properties, you might come to a different conclusion of the relative development value of a site compared to a site already built.

Ed Whitelaw said they would need a footnote to identify what would enhance or subtract from the 2040 requirements.

Terry Moore said that every time they tried to take a broad-brush approach at the top level it did not work out. He said that this was because everyone wanted to drill down to more specific criteria. Then nobody was satisfied. He said the ideal would be to walk each site, which they could not do, therefore he wanted to build maps that were more general, and then they would review them and make changes to correct and improve things at that point.

Gene Leverton asked if they were trying to study what the current picture was to determine what to do with vacant areas.

Acting Chair Chris Deffebach said to compare the land that was designated significant resource inventory to the relative significance of the land for either allowing, limiting, or prohibiting development, based on the economic, energy, social, and environmental needs. They were doing this regionally and not site-specifically.

Ed Whitelaw said it was not an additional thousand acres, but rather it was the vacant important resources land.

Gene Leverton said he was trying to distinguish if the resource lands would affect redevelopment in the inner city and the industrial waterfront.

Acting Chair Chris Deffebach said that the resource lands were a mix of land that was currently developed, in parks and open space, and vacant land throughout the region. It was difficult to protect resource lands already developed, so the effects would be greatest on currently vacant land.

Gene Leverton said that someone had said that the conservation ecosystem value of a piece of property was not reflected in the market price. He said that was not true and that he was looking to buy property for a client in the Beaverton/Hillsboro area and there were a lot of wetlands out there, which tended to drive the price down. He also gave an example of a piece of property that had a stream running through it, which also brought the cost down.

Ed Whitelaw said that they frequently got an inverse relationship between the private market value and the ecosystems services or attributes of property. It was that inverse relationship in property value versus the ecosystem value that illustrated the conflict. It was also what they were trying to map or “tent.”

Gene Leverton said that there were some places that would be easy for all sides to contribute to lower prices because it was a wetland and it served an ecosystem value.

Ed Whitelaw said they would have an easier time dealing with high/low versus high/high.

Al Burns said they were doing the regional ESEE analysis and not a watershed or basis-by-basin analysis. That information would be useful as planners focused on the local level. He said they would need to evaluate the effects and consequences of environmental protections that have a tendency to move a development from one place in the region to another place in the region versus if it was moved out of the region altogether. He said a cost to consider was existing infrastructure that was not being used due to an environmental protection.

Gene Leverton said that correctly valuing urban infrastructure would be important.

Al Burns said there was a category of built, but redevelopable and infillable land that resource protection could interfere with. He said that the 2040 design types would be useful for sorting those out. There was also residential land that would be affected by environmental protection, some of it was vacant and it carried value.

Terry Moore said infrastructure was an important consideration. There should be a correlation between land value that was close to infrastructure and land value that wasn’t, and they should use land value to capture it. He said that ECONorthwest should work with Metro to attain details on infrastructure.

Al Burns said that transportation was easy, but if they were to do anything other than transportation it would be difficult.

Brent Curtis said that when they considered infrastructure they should also consider the age of the infrastructure, because if it was old enough, it would need to be replaced or it would not work properly or for very long.

Gene Leverton said that an example of infrastructure increasing value of land was the Tigard Triangle. That area had excellent road access; it was being redeveloped from homes to Home Depot type places. He said proximity to population and closeness to freeways was significant. In that area homes were bought up and offices put in their place.

Acting Chair Chris Deffebach said that infrastructure would show up in the assessed value of the land.

Justin Houk said that policies also captured where things had developed in the past, where there were town centers and corridors with peaks for jobs and land values were captured.

Al Burns said the centers were often areas of concentration of existing investment. It would only be cases were they were growing a new center from scratch on a farmland someplace that would be different.

Acting Chair Chris Deffebach asked the committee to wrap up questions and focus on the direction that they wanted to give the consultants by the end of the meeting.

Terry Moore said that they were talking about using relative indices and not absolute indices. Ultimately, the analysis would end up being site-specific, which ECONorthewest was not able to do for ETAC. He said that they could not know the site-specific conditions when doing a region-wide mapping, and he wanted to be certain that the committee understood those limitations.

Al Burns agreed that a general methodology for most places – provided by ECONorthwest – would be a good basis, and then they would have to look at a few places where they would be more site-specific.

5.  IEAB Comments on Proposed Methodology

Terry Morlan presented preliminary comments from the Independent Economic Analysis Board (IEAB). These materials are attached and form part of the record. He mentioned that the timeline had been compressed and this was a source of frustration for many.

Ed Whitelaw asked him if the risk analysis addressed mostly irreversibilities or asymmetries.

Terry Morlan said the main point raised was that they didn’t know what would be done with it.

Ed Whitelaw said that two things he saw on the risk was option value on the irreversibility issue and the other was asymmetry of risks.

Terry Morlan said that it would be good to see some examples of property ranking.

Noelwah Netusil suggested that Metro respond to the questions that IEAB would be providing and then get those responses out to ETAC.

Jim Labbe was concerned that conservation and natural resources be accounted for when assessing market value of property. He felt that that area had been overlooked in their discussion. He also wanted the value of keeping some areas undeveloped included in the valuation of development values.

Noelwah Netusil said that property markets don’t usually value ecosystems services but she said that she felt that property markets only partially captured ecosystems.

Terry Morlan said that the problem with ecosystem services was that they had not actually defined what they were talking about. He said that by defining it, it would help with the separation.

Ed Whitelaw said the challenge would be separating externalities from internalities. He specified those amenities that the property market did capture. Then do they decide that would be a high development value and develop it, or would they then be jeopardizing the amenity value. He said he considered that a separate issue from the public goodness that would be picked up broadly that single parcels don’t pick up.

Jim Labbe offered to send some articles to ECONorthwest and ETAC members. He said there were a lot of important resources in region that would be useful as they moved forward. He said that the Public Facilities Plan of Portland had numbers on operation maintenance and capital improvement costs which would give them a baseline of the most elemental watershed ecological function – drainage.

Acting Chair Chris Deffebach asked him to send them a list of those references.

Noelwah Netusil said she wanted to follow-up on assessed land value and see something pertaining to the impact of the ballot measures. She said she would be looking for information on the limitation on depreciation of assessed land value over time. She said it would also be valuable to look at different land classifications and how that assessment might vary.

Ed Whitelaw said the ECONorthwest would have to face a lot of those points and questions brought up at the meeting, but that it would be at a later date after the groundwork was laid.

Cindy Catto said she was uncomfortable with using previous ecological mapping hierarchy because it appeared to be double counting. She said they already had the environmental figures from when they did the riparian and wildlife mapping. She said that when they completed the whole ESEE analysis and give that value of ecosystem services to the economic side, then it would be double weighted in the analysis.

Acting Chair Chris Deffebach said she understood her concern and they would have to consider it when they integrated those parts of the ESEE process.

Ed Whitelaw said she was correct that there was a possibility for double counting – but they were aware of the possibility and therefore would not do it.

Terry Moore said to first look at the value in development, then the value for ecosystem services, and not to double count them but to overlay them to determine areas of conflict.

Cindy Catto said that there was an existing wildlife and riparian map. She said that what ever came out of the ESEE analysis was going to be compared to that map and if they were already comparing it against the other, then those environmental values would be double counted.

Al Burns said they could count ecosystem services and amenities and possibly social issues.

Acting Chair Chris Deffebach said there was an overlap in social issues and intrinsic value.

Al Burns said this was a good illustration of why it was valuable not to aggregate data. He said another problem with market value was that they were starting from standard regional zones. However, when 27 different jurisdictions were taken into account some of them had prior and robust environmental protections in place that the regional program would not add much to. Therefore, they would need to correct for areas that had prior limitations.

6.  ETAC Meeting Schedule and future direction

Acting Chair Deffebach asked if they had ETAC’s support for ECONorthwest to continue to develop the economic ranking using the three methods that were outlined in the packet materials. Then they would bring the results back to ETAC for consideration. She said that she understood that they wanted to know if land improvement value as well as land assessed value would need to be included, and whether land improvement value was already double counted in relation to jobs. She said that there were schedule concerns but that they were paying for the IEAB group to respond. There were a lot of caveats and limitations that made the work challenging. She asked the members if they supported ECONorthwest moving forward with the proposed work.

Terry Moore said they would deal with development and conservation value to map and review overlays. When they were done they would talk about tradeoffs with examples. He called that the basic method. He asked if the basic method was okay with ETAC and offered a report with maps for ETAC to review at a later date.

Gene Leverton said there was value in having some examples.

Acting Chair Chris Deffebach asked again about support – no one voiced objections. She then discussed the schedule. It was agreed that the next meeting would be on July 28^th, 2003.

Brent Curtis said he supported keeping the remainder of the schedule.

There being no further business before the committee, Acting Chair Deffebach adjourned the meeting at 4:02 p.m.

Respectfully submitted,

Kim Bardes

Council Office

ATTACHMENTS TO THE RECORD FOR JUNE 16, 2003

The following have been included as part of the official public record: