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The objective for a well-publicized and distributed study conducted in 2012 by Metro and other stakeholders was to determine whether the region has adequate industrial land to meet projected population and growth demands. Results confirmed that the region is and will continue to be relatively short of industrial land for development.

The region’s 24 jurisdictions each have their own wants, needs and actual supply today, as well as a projected future supply once various infrastructure, annexations and other factors are considered. A number of jurisdictions are addressing this shortage and beginning to make plans to determine viable options for creating or redesigning land currently undeveloped or underdeveloped in the appropriate zones.

The Metro study reviewed only those parcels (combined, in some cases) 25 acres or larger within the urban growth boundary (UGB), and assumed the boundary would not significantly change within the projected time frame. Parcels with 25 acres or fewer were not considered. It’s my opinion that there should be a determination of smaller parcels – say five to 25 acres. Such a study would also show that the region is in short supply for this size range.

Therefore, what’s a reasonable solution (or partial solution) that could begin to meet this shortfall?

One idea that’s been discussed is to provide a limited tax and/or fee deferral program directly related to brownfield sites, or those properties that require contaminated soil to be cleaned up prior to development.

As an example, within the city of Portland, there is an estimated shortfall of about 600 acres of industrial land available to meet projected needs. Approximately 150 to 200 acres are currently considered brownfield sites, which for the most part remain undeveloped because the cleanup cost exceeds the value or far exceeds the net value after these costs. This means, for instance, that if land is worth $6 per square foot and the cleanup cost is $4 per square foot, the ultimate sale price would be about $2 per square foot. In many cases, estimated cleanup costs actually exceed $6 per square foot.

In many situations, owners of these properties, while responsible for the ultimate cleanup, elect to do nothing until the potential value increases enough to justify the up-front cost of cleanup. That time frame may be several years. Note that property owners don’t have to do anything today, so long as the contamination does not adversely affect the environment, adjacent properties or any adjacent body of water.

Another major factor that would come into play would be the development charges associated with new development. In today’s marketplace, when properties are developed, there are many “soft” costs – such as system development charges (SDCs), permitting fees and other taxes and/or fees – that oftentimes make the proposed project uncompetitive from an economically. Coupled with up-front environmental costs, this is why many brownfields, if not most, remain undeveloped.

The basic idea of this plan would be to defer a portion of the normal, beginning fees to a later date after the property is developed and occupied, with new jobs and jurisdictional revenues. Deferred fees may not be repaid for 10 to 15 years. The benefit to the community and current landowner would be that cleanup could occur earlier and the dormant properties could be redeveloped and become tax-generating entities. As the revenue stream materialized, the deferred fees and/or taxes would be due.

The alternative, in today’s system, would be that the land sits idle for those 10 to 15 years, with only the cleanup costs increasing over time. These would not necessarily be related directly to potential land value in the future.

Basically there’s very little incentive for owners to spend enormous, up-front cost when there isn’t enough benefit to justify those costs. The marketplace typically helps the investor decide whether it’s worth spending huge amounts of costs up front. A new incentive program as described would allow development earlier, thus helping to reduce the shortfall of available industrial land in the years ahead, while still not “breaking the bank” regarding initial cleanup costs.

A recent bus tour of part of the region, attended by individuals involved in industrial brokerage, development and related industries, highlighted a few industrial sites available for development. The group was well-intentioned, and several of the properties toured were also on the Metro study list. However, there were several properties within the region that were properly zoned, but not in demand for development in the foreseeable future. The reason is that the sites were too far from primary infrastructure (mostly transportation roads and sewer), and lacked an adequate population base to provide labor.

When industrial users view sites, there are basically two major functions to consider: logistics for distribution, and labor (and related infrastructure services) for manufacturing. In this region, the vast majority of users rely on a combination of the two.

Consequently, it’s important to not only have an adequate amount of industrial land, but also land that is competitive in price and services that will meet demand today and in the future. An adequate supply that doesn’t meet demand doesn’t mean much. Those companies looking to locate in the region or expand will look at other regions.

The concept of potentially deferred (not eliminated) fees/taxes would not be a simple procedure. It would require people representing several governmental bodies – such as state legislators, county commissioners and city elected officials – and a rather complex set of criteria to be equitably enacted. However, as is the case with most beneficial programs, the most important first steps are to explain the logic and work out the benefits and compare it to the status quo of doing nothing. The region and its economy could reap great benefits if such a concept were implemented.

Tom Dechenne is an associate vice president who specializes in industrial leasing and sales at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or [email protected].