ECONOMIC TECHNICAL ADVISORY COMMITTEE MEETING RECORD

July 28, 2003 – 2:00 p.m.

Metro Regional Center, Council Chamber

Committee Members Present: Chair Andy Cotugno, Robert Anderson, Al Burns, Cindy Catto, Brent Curtis, Jim Labbe, Gene Leverton, Patti McCoy, Terry Morlan, Noelwah Netusil, Kelly Ross

Also Present: Valerie Counts, Kelly Hossaini, Ed MacMullan, Terry Moore, Ed Whitelaw, Carl Hosticka

Metro Staff Present: Kim Bardes, Chris Deffebach, Paul Garrahan, Justin Houk, Paul Ketcham, Carol Krigger, Kelli Larsen, Gina Whitehill-Baziuk

Andy Cotugno, Metro Planning Director and ETAC Chair, called the meeting to order at 2:05 p.m.

1.  Member Self-Introductions

Those present introduced themselves.

2.  Approval of Minutes: June16, 2003

There were not enough members present to approve the minutes. This was deferred to the next meeting.

3.  Metro’s ESEE Analysis and Response to IEAB and ETAC comments/ Economic Consequences Analysis and Literature Review

Chris Deffebach reviewed the ESEE Analysis timeline and the IEAB comments, which were part of the meeting packet and are attached and form part of the record. She said that they were incorporating several documents into the ESEE Analysis including the economic work currently underway. That combined document would be available for MPAC’s review in September. Public involvement was slated for September and October. By the end of October, the Metro Council would be able to consider some program options that the staff could further evaluate to identify information on a policy level that would be useful for allow, limit, or prohibit decisions, and an overall program direction for the region including regulatory and non-regulatory approaches to protection. Then in May, after another public outreach period, Metro Council would consider a program option that could be developed as a protection program and ready for Council consideration by the end of 2004. She invited the members to the next IEAB meeting on August 4^th.

Terry Morlan asked Chris Deffebach to give an example of “program approach.”

Chris Deffebach said it was reasonable to develop a set of regulations that was commiserate with the functional quality in the resources. For example, the staff was looking at the assumption that one way to move forward was to have a different regulatory focus over the highest and lowest valued resources. They would develop a program option that would test that focus of the higher and lower end and possibly create a scale that would rank the “allow, limit, or prohibit” factors from top to bottom. Another question centered on the effect the economic rate would have on natural resource protection. Is there recognition of the need to allow, for economic purposes, development in the highest priority economic areas? The intent was to develop an option that evaluated the conflict between high economic priorities and natural resource priorities. There were also social issues that needed consideration.

Al Burns expressed concern that they had compacted a lot of information into a much smaller package. He wondered if they had simplified the information enough to actually use or made it too simple and thrown away valid and useful information.

Chris Deffebach said that she expected the analysis to help with determining that question when they evaluate program options. She reminded the members that their comments would be used to finalize the report.

Al Burns asked if it would be the last chance for them to offer input.

Chris Deffebach said they would have a chance to review the first draft of the full document in September.

Jim Labbe asked if it was the last chance for comments for the public draft.

Chris Deffebach said they could hand in comments by the end of the week.

Terry Moore said they should have a little more time to talk about it. He began a slide presentation and copies of the slides are attached and form part of this record.

Andy Cotugno emphasized that they were developing program options (in reference to slide #6) and the next step was to evaluate those program options.

Terry Moore continued his presentation.

Brent Curtis asked where Terry Moore had obtained the employment information and how did it get sorted to its location.

Terry Moore said that they used employment security ES-202 data. This data had an SIC code, location, and an amount of employment, which were the three things ECONorthwest was concerned about. He asked Justin Houk to explain the density part of the employment figures.

Justin Houk said that they took the 202 data, which were point locations for employers, and they carried the number of employees (in some cases they adjusted that amount based on better information), then reallocated for multiple employers, from that point data he created a density statistical surface for the entire region. Then he fit that surface to some units created out of zoning polygons and 2040 design types so that data was fitted to those units. For the classifications – he eliminated the land that was not employment-carrying land.

Brent Curtis asked how Mr. Houk counted situations similar to the Fred Meyer’s headquarters, which was located off of Powell, but the employment was located out in the region in local jurisdiction stores.

Justin Houk said that the Metro Data Resource Center actually did the research and tried, wherever possible, to allocate employees across different areas based on known areas. For example, Intel reported the number of employees at each plant, rather than through a particular headquarters.

Chris Deffebach said it was important to remember that employment was spread over land that was currently vacant but could potentially hold employees.

Terry Morlan said to note that in the document the categories were not explained as to how the numbers were derived.

Terry Moore said it would be a good idea to include that information.

Chris Deffebach said they had expected that the committee would want to talk about the number of categories they would want included.

Terry Moore said that the committee could choose whether to set cut points now as a starting place or wait until Metro reached the program options evaluation stage to decide how to proceed.

Chris Deffebach said that staff would really like to hear how the committee members felt about the breakouts.

Ed Whitelaw said that interest seemed to be not only what they would be comparing, but also what the increments were within each of the indices.

Al Burns said the process provided the general layout of what would get them to good, better, or best economic land use, and then the Metro Council could use the indicators one way or another.

Gene Leverton asked what the low, medium, and high amounts where per square foot.

Terry Moore said that the low was at $2 per square foot, the next category was $3.50, then the category that he was using as the threshold was $4.70, then it went to $7.00 and all the way up to $13 per square foot.

Al Burns said that downtown Portland would be statistically significant followed by everything else.

Terry Moore said they were looking at assessment data and they were not looking at the sale of new lots.

Al Burns asked if public investments were picked up.

Justin Houk said not for this particular study.

Andy Cotugno said that the assessor’s data had a land value for the whole airport complex.

Patti McCoy said she was concerned that land values and employment densities were accurately utilized in the study.

Chris Deffebach said that Justin Houk believed that it had been captured. She said they had used several different ways of looking at economic ranking.

Terry Moore continued the slide presentation.

Terry Morlan asked Justin Houk to talk about impact areas.

Chris Deffebach said that she did not know if ETAC had had a discussion of impact areas, but Goal 5 administration required identification of areas that were not part of the resource upon which an activity that took place could potentially harm the resource. They had taken a recommendation from the technical advisory group on the definition of “impact” area. They were using that in the evaluation of the options. The actual definition of impact areas and the protection approach would be one of the decisions that the Council would need to make when they developed the overall Goal 5 program.

Patti McCoy said that the map had undergone several iterations over the years and she was wondering if the impact area was going to become one huge buffer area that kept expanding.

Paul Ketcham said that there were advantages to going through the Goal 5 process, but that part of the disadvantages was that issues like impact areas didn’t come up in the inventory phase – it was an ESEE step. The impact areas definition came in the second step. One of the initial steps of the ESEE analysis was to identify areas of landscape that would have had resources if the land hadn’t been developed. The inventory stage only identified resource areas and therefore they did not have information on impact areas at this step.

Patti McCoy wanted to know what did not get looked at before, but was now a factor in adding 20% of land to the impact area.

Andy Cotugno said that it was not adding more resource land to the map but rather this was territory adjacent to the resource lands that could impact the resource land. The question was what to do with that territory. They were not suggesting, however, that they were adding resource lands to the map. It was part of the analysis and did, unfortunately, add an element of confusion.

Chris Deffebach said it was adjacent to the resource lands and it needed to be analyzed and Council was scheduled to consider whether they wanted to change the definition.

Noelwah Netusil said that when she looked at the maps of the wildlife habitat and riparian corridors she saw a lot of overlap between the two. When she looked at the categories on Table 5 it seemed that each parcel was in one category but it could not be in two.

Chris Deffebach said that the habitat lived in both the wildlife and the riparian but they were not overlapping even though the function occurred in both locations.

Paul Ketcham said riparian class 1, 2, 3 would be renamed riparian wildlife classes. He said that the riparian areas had very high wildlife too. The ideal was to represent discreet units of the landscape that would not overlap.

Terry Moore continued his slide presentation starting with slide 27 and the corresponding maps.

Jim Labbe expressed concern that there was some high value employment land tucked into areas that were very environmentally constrained. That would create a situation where they would be extrapolating two types of land that were not comparable in value.

Andy Cotugno said that they had just looked at all the class 1 riparian. Some of that class 1 riparian was not just high in value resource, but it was also difficult to develop that land. Land with a slope greater than 25% was expensive to develop therefore a natural resource feature was different than a natural resource feature that was on flatlands. There was land out there that was class 1 resource land but was also very difficult to develop.

Jim Labbe said that when it was adjacent to high value employment or land value it could over-rate the development value.

Al Burns said that land characteristics such as land located in earthquake areas, or where the slopes are very steep, would decrease the value.

Justin Houk said that they took out some lands that had constraints.

Chris Deffebach said they were not trying to identify parcels but rather to determine the level of allow, limit, or prohibit effects.

Al Burns said it was very depictable at the regional scale. He said if they were working with a 30-degree slope, that land would not be as valuable as flat land. It was very expensive to build as residential and it was unsuitable for commercial or industrial purposes.

Jim Labbe said that they had the data sources to answer the question with slope data. He said it could be addressed on a regional scale. He felt this issue and the flood plain issue should be considered when assessing the development value of land.

Terry Moore said that the data was available to do more analysis. No matter how fine it was cut, however, ultimately it would end up being a site-by-site battle about development and resource values. The process allowed them to determine what areas to look at and what areas not to look at. In the end, people would still want to look at it site-by-site.

Jim Labbe said the that if they were going for land value, then slope data region wide would be just as site specific as land value data.

Terry Morlan said that the summary report was not showing much in the way of the 2040 design types industrial land values. He acknowledged that they showed on the maps, but he felt it was important to include those figures in the summary.

Chris Deffebach said they had noticed that and a few other things that they wanted to capture for the summary. The next iteration would include those items.

Al Burns said that one of the complicating factors was that they had 2040 design types where the current zoning allowed the desired feature and others that don’t. Where it was currently allowed was captured in market value because the market responded to what was allowed. Where they thought it ought to be allowed in the future but they hadn’t made the zoning changes the land wasn’t picking up the market value.

Jim Labbe said the contribution of the resource areas to land value was the extent to which their values were actually capitalized within property values. He thought that might be impossible to map. He said it needed to be an important qualifier in the use of assessing development value of the land.

Al Burns said he felt that they had good information that market values captured amenity values as well. It showed up in the sales prices of those particular parcels. He cautioned them against double counting amenity value.

Patti McCoy said it did add value to a property if the land contiguous to it was already developed. What they had not been able to determine was the impact of situations where the protection of the resources detracted from the value of adjacent land. There were properties that were not being bought up because they were in areas where they might be designated protected resources and then the owner or potential buyer would not be able to develop, and would end up losing money. These potential buyers were waiting to see what would come out of the City of Portland and Metro pertaining to the mapping.

Terry Moore said there were properties where the zoning had changed the land use from one thing to another, mainly because they had lost the depth at which they would be able to do warehousing and distribution. It then became more appropriate for some other use. He continued the slide presentation.

Ed Whitelaw picked up the presentation starting with page 25 of the report in correlation to slide number 35.

Al Burns said that they should count the different conflicting uses displaced within the region to outside the region, because that was a loss.

Terry Morlan said that by limiting development on a particular parcel they limited total development within the UGB because it couldn’t be shifted somewhere else in that regional context. Looking at a regional perspective, when they limited development in one place that limited the development for the whole region.

Ed Whitelaw said that was the tension between the static and dynamic analysis. He said that Mr. Morlan was correct if one assumed there was no substitution. It had to do with how they handled short run and static versus long run and dynamic.

Terry Morlan said that unless they expanded the UGB there would not be a substitution.

Al Burns said that the other substitution was if they took a place where development was currently allowed and allowed a higher level of development in the same place.

Jim Labbe said that that would use land more efficiently.

Cindy Catto said that they could not build two-story warehouses because trucks don’t go to the second floor.

Ed Whitelaw said that if there was a prohibit decision for a resource and one assumed that there was no substitution within the region, then Mr. Morlan was correct. If, however, one assumed that that use on that parcel was the best use they could find in the region, but that the second choice was a half mile away, then that substitution could occur and the regional analysis, assuming short run and static conditions, would have missed or overestimated the total impact or economic consequences if they assumed it was a 100% loss. He said that he did not know an easy way to deal with that formulaically. He said he agreed with Ms. Catto that they would lose the use at that particular parcel, though they may pick it up elsewhere. He did not think, however, that regionally it would be a 100% loss.

Terry Morlan said that on an individual parcel, assuming that nothing else changed, which was the regional perspective, then they had limited regional total.

Al Burns said that for people who had been working on the Goal 5 program as a whole realized that when they adopted the program they had some “take outs” that they would make up either by expanding the UGB or by providing more mixed use land within the UGB. If they wanted to look at the economic effects then they needed to look at whether or not the potential makeup areas were as good as the areas that were just lost.

Terry Morlan said that those kind of changes were currently in the dynamic discussion.

Ed Whitelaw said they either make it up within the given boundary or they expand the boundary. Therefore, if they were stuck with short run and static, then they lose it.

Chris Deffebach asked if they should assume that they were in a dynamic environment, not a static environment.

Al Burns said yes and that they would then make it up one way or another: either by a boundary expansion or by allowing more development within the boundary. He wondered if there was a way to know whether or not those new areas/opportunities were as good as what they were losing from economic perspective. He guessed that there was no way to know.

Brent Curtis said not at that level of analysis.

Carl Hosticka said that to limit development on one piece of property there was an exponential impact of increasing the value of other pieces of property through scarcity or increase demand of supply. He wanted to know if that had been part of the static analysis.

Ed Whitelaw said not in the static analysis but in the dynamic analysis. How much it increased the alternative values depended entirely on the degree of changes in the boundary or within the given boundary. It would depend on that degree of substitutability. He continued the slide presentation.

Jim Labbe asked if using natural inventory as a type of proxy for the values of ecosystems services was in progress.

Ed Whitelaw asked if meant were they still assuming some kind of positive relationship between the rankings of the resources for the riparian wildlife stuff and the economic values associated with them.

Jim Labbe said yes.

Ed Whitelaw said the answer was yes and that they would continue with that assumption.

Terry Moore said that they were assuming that there was a correlation, other things being equal, if they were on type 1 riparian habitat there was more ecosystems service/value than there would be on a type 3. They would take the resource mapping to the level of identifying type 1, 2, and 3 but that was as far as they intended to go.

Ed Whitelaw said they thought it was a better conclusion to say yes there was a positive relationship and then to say there was either zero correlation or an inverse correlation.

Terry Morlan said he thought they were on the right track.

Al Burns asked about the asymmetry comment pertaining to ecosystems values that had value within them, but they don’t talk about existing disservices such as the coyote that ate the fat cat.

Chris Deffebach said they covered that in the social issues paper about the nuisance effects of resources, and they don’t put an economic value on the loss of the cat.

Al Burns said the intrinsic value and the equity issues perhaps belonged in the social portion of the ESEE analysis.

Ed Whitelaw continued with the slides presentation talking about impacts which starts with slide no. 39.

Cindy Catto said that there were references in the document to cost of flood management and water quality management, which she thought was already regulated by Task 3. She wondered why they were showing up in a Goal 5 analysis. She was concerned about duplication of effort.

Andy Cotugno said that Title 3 regulations were adopted for purposes of dealing with water quality, but that did not mean they had completely fixed the water quality problems. They should evaluate to the degree which included those areas already protected – economic and otherwise. The analysis should provide some degree assessment of how much more they wanted to control effects over and above the current regulations.

Ed Whitelaw said that the contribution at the margin issue was something they should talk about at more length outside of a full committee meeting. He asked Ms. Netusil to assist him with that discussion as he was not sure how to deal with that particular issue. He said it should be addressed in the context of short run and long and static versus dynamic. He urged them to consider that as the scarcity of resources increased would the value at the margin would change. He continued the slide presentation.

Terry Morlan said that pertaining to the three categories of equity, value, and impact: impact sounded a lot like jobs, whereas value sounded like land value, and the concepts that the 2040 raised was not included.

Ed Whitelaw finished the slide presentation.

Chris Deffebach asked for comments and direction from the members and suggested that the next meeting should be in September.

Al Burns asked what they should do if someone had a serious concern in September about the methodology. It hadn’t coalesced into a methodology yet and that was ETAC’s charge – to pass on a methodology as a whole. He was concerned that if they had a September meeting and it went public in October there might not be time fulfill their mission.

Andy Cotugno said that they were maintaining an aggressive schedule but it was being done in phases. The purpose of a September public outreach process was to acquaint the public with the basics. The public would not delve into the detail that they had covered in ETAC. He said that the September deadline would be to wrap up the general assessment and not the site-specific detail assessment. The next phase would be to map a series of alternatives and evaluate them in more detail on the more site-specific basis.

Al Burns asked if the method was a regional analysis or was the method supposed to be scaleable.

Terry Moore said that the implicit expectation was to attain a solid methodology. It was looking like that would not be possible, which was disappointing. The report did a good job of listing the items that they needed to discuss and focus on, but it did not lend well to figuring all the combinations of possibilities of things they would run into on the site-specific portion. So, if ECONorthwest was recruited to build a model, then he agreed that they were not there yet, and he wasn’t certain that they could get there any time soon.

Gene Leverton said he thought it would be helpful to have all the ranges taken out of the maps creating fewer breaks, and then list the assumptions. He said a color copy of the map would be more useful.

Chris Deffebach said that she thought there were two things the report needed in order to move on: 1) resist the temptation to move into more and more detail, and 2) they needed to be able to share the story with the public. They also needed the analysis to point to the choices they needed to make as a region. They could continue to cut the levels, but for analysis purposes they should focus on defining them. To identify the program options they would need to develop another methodology for evaluation of the program.

Al Burns said that he thought the program for evaluating the program options was the ESEE analysis. In order to do a fair evaluation everything was run through the same method so that everything was evaluated in the same way. He was concerned when Terry Moore said they might not be able to do that.

Ed Whitelaw said that he assumed that the maps would be illustrative and not definitive. ECONorthwest would never produce a map that was definitive. The method for addressing the issues and the exact intervals had no formula that would substitute for the decision that the Council would make.

Chris Deffebach said that for analysis purposes it would be convenient to have the low, medium, and high decision to settle down to an agreed amount or range. She said that currently the differences between classifications were unclear. Using the designation of 1, 2, and 3 implied an order of magnitude and they had never talked about what order they did have.

Gene Leverton said he agreed with Ed Whitelaw that it should be illustrative of the consequences and to have it simplified enough that anyone could understand. It would not answer every scientific question.

Andy Cotugno said it was important to get rooted in what was happening out there and not in some break points on a set of data. It was applying that set of break points on the data to market place break points for land value and density. He said that ECONorthwest’s August deadline and Metro’s August deadline could be combined with the other ESEE and they could fix on some of those ranges. Then ECONorthwest could describe them in their report, thus setting a more recognizable measure.

Terry Moore said he thought they could do that. He wondered if they would need a set of backup maps that demonstrated different break points and illustrated changes in movement.

Noelwah Netusil said that was a sensitivity analysis.

Gene Leverton said that was always valuable, especially if they kept it simple in order to illustrate the point.

Al Burns said that there were outputs that some of them cared about more than others such as property values, and jobs or wages.

Ed Whitelaw said that the intervals for 2040 and for resources were set and the only places they could perform any kind of sensitivity analysis would be with property values and employment.

Terry Moore said no they could not tell the impact on value without doing a site-specific analysis.

Brent Curtis said it was now important to accept the limitations a critical analysis would provide. There were programs that would occur at the local level that would delve deeper into the specifics and allow a tolerance of adjustments to the regional programs. He said they were trying to make the ESEE more than what it was intended to be. It was intended to give the general public an understanding of what general consequences could be.

Al Burns said that two things were happening at the same time, needing an aggressive schedule for completion, and actually borrowing on two major work components that were over and above what was required by Goal 5 rule.

Chris Deffebach said it sounded like staff needed to clarify the break points.

Ed Whitelaw said that meant they should make it simple but not too simple.

Andy Cotugno said that the reason people were interested in the sensitivity analysis was that if they were to set some breakpoints, and if they had set them slightly high, and then they had a big change in the territory covered, then it would mean that they had used the wrong breakpoint. The purposes of the sensitivity analysis in the appendix would validate the breakpoints they chose to utilize. However, breakpoints weren’t tied to area covered but rather to use and land values based on the market.

Terry Moore said they could do that in an index.

Chris Deffebach announced that the next meeting was set for September 22^nd.

Carl Hosticka requested that the minutes show the conclusion that there were limits on how site specific they could become on a regional level. The limitations and the utility of the analysis, and therefore policy judgments, would be as useful, or more useful, as knowing where the breakpoints were. The real question became: at what level of detail can a conclusion be reached about natural resources protection versus economic impact tradeoffs?

There being no further business before the committee, Chair Cotugno adjourned the meeting at 4:10 p.m.

Respectfully submitted,

Kim Bardes

Council Office

ATTACHMENTS TO THE RECORD FOR JULY 28, 2003

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