Resorts in spotlight of Deschutes County planning

            As Deschutes County officials tackle redrafting the county’s 1979 comprehensive plan a critical question will be the definition and location of destination resorts.

            With development of the new “2010” comp plan underway, several recent county planning decisions have highlighted conflicts involving the issue of when a resort is a resort, and when it’s mostly a rural subdivision.

            There have been changes over the years to the 1979 plan but this would be the first major revision.

            Entwined in the discussion is the pivotal role of resorts in Central Oregon’s largely tourism based economy, and how to balance their location with existing agriculture, forest and open space lands.

             Oregon resort land use regulations now follow Goal 8 (Recreation) of the state’s 1970s growth management act. In 1984 new provisions allowed resorts on rural lands without being subject to a “goal exception” review. One provision requires a 160-acre minimum for destination resorts, which in effect means that most are built on land originally zoned for agriculture. Another key standard is no net loss of wildlife.

Counties now must  “map” potential resort locations, and since 2003 are permitted to review their resort maps once every 30 months. The mapping process, although independent of redrafting the county comp plan, nevertheless is intended to ultimately reflect its provisions.

For Deschutes County, it appears that map will be shrinking considerably from more than 112,448 acres to 18,815 acres. The reduction involves removal of acreage including subdivisions that the county acknowledges was “unsuitable” for resorts, but not specifically prohibited at that time by state regulations.

However, a notable exception is the Sisters golf subdivision, Aspen Lakes, that was recently mapped as a potential resort. It was a controversial decision that was appealed to the state’s Land Use Board of Appeal, which upheld it in favor of the Cyrus family of Sisters who want to expand Aspen Lakes as a resort.

Elsewhere in Central Oregon there is another twist to permitting resorts. In Jefferson County 2009 state legislation banned one proposed resort and reduced the size another in the Metolius Basin near Camp Sherman. It was the first time Oregon had designated an Area of Critical State Concern  to block development.

Another bill that would have banned new resorts in Deschutes County failed in that legislative session.

A spate of new resorts were underway in the last decade, along with others on the drawing board. The collapse of the real estate market lead some developers to test county and state requirements that at least 50 nightly rental units be completed before individual homesites could be sold.

The resort regulations also require a ratio of one nightly rental unit for each permanent residence.

County officials and conservation groups have voiced concern over recently proposed legislation that would effectively preempt state and county regulations pertaining to rural subdivisions and resorts.

But the flip side, say some observers, is the situation in the Metolius basin wherein legislation stopped resorts that had met the approval of Jefferson County officials, and therefore trumped the county land use process.

            In one example a proposed bill would apply specifically to 1,500 acres adjacent to the existing Aspen Lakes on which the Cyrus family wants to build a resort.  With LUBA’s favorable decision, the bill would likely be superfluous.

However, another legislative bill would apply to the effort of Sunriver Resort’s ownership group to build a subdivision, known initially as Pine Forest,  on more than 600 acres adjoining their Caldera Springs project. The land was purchased in late 2006 from the Forest Service for $7.25 million. The group also has significant ownership of Sunriver Resort and Crosswater, a private gated golf community on the Deschutes River south of Bend.

In exchange for approval of 925 homesites, with no requirement for nightly lodging, the Sunriver group has offered to contribute $3 million toward a waste treatment facility to mitigate existing nitrate problems from septic systems in the area.

As of early March there were five  “Goal 8” approved resorts in Deschutes County under the 1984 regulations, including Eagle Crest, Pronghorn, Tetherow, Caldera Springs and Thornburgh. Earlier approved resorts in the county are Sunriver, Black Butte Ranch and Inn of the 7^th Mountain, which are controlled by other state regulations.



The most recent Deschutes County map of land eligible for resorts.
(Click on map to expand, or click below link for a PDF version)

           Revised Deschutes County Resort Map

Bend water: where from and how much?

There’s an old saying in the West to the effect that “whisky is for drinking and water for fighting over.”

By the time Bend’s water issues are resolved it’s a good bet that all involved might be ready for a stiff drink.

What would be one of the most expensive public works projects in Bend history is making its way through government channels. City officials say let’s get started. But a few business, civic and conservation leaders believe the plan needs a longer look.

            The majority of Bend city councilors have already gone on record, after several engineering studies, to support rebuilding the city’s aging municipal water pipeline that draws from the Bridge and Tumalo Creeks watershed.

            Altogether the project, which would also involve building a new treatment plant, is estimated to cost $58 million, and perhaps another $15 million if the city pursues development of a hydroelectric facility along with it.

            However, the economic assumptions underlying the city’s preference for surface withdrawals and the opposing push for groundwater-wells are complex. In many instances unpredictable variables could sway the argument either way.

            But a fundamental issue in the process is which solution would provide the most effective long-term results for improving local streams and protecting fish and wildlife that depend on a healthy habitat.

            The city estimates that rebuilding the surface water piping system would save more than $100 to $180  million in 50 years when compared with conversion to an entirely groundwater, well-based system. The estimate by engineering firm, HDR, relies largely on assumptions of a 3.3 percent annual increase in power costs.

            City officials’ decision to move ahead with a new system came under pressure from the  federal  Environmental Protection Agency’s determination that Bend doesn’t  meet standards of the Clean Water Act. The problem, according to the EPA, is the potential for the city’s crumbling pipeline, built in the 1920s and 1950s, and treatment facility to be contaminated by sediments and such bacteria as cryptosporidium.

            Beginning in October of 2012 the EPA would require additional treatment of the Bend Water supply, although extensions of the requirement would be possible.  However, city officials and the council say it makes sense to begin rebuilding the pipeline concurrent with the federal Forest Service’s scheduled reconstruction of Skyliner’s Road into the watershed.     

            Bend officials also maintain that spending now on the surface withdrawal would insure adequate water to meet demand for future growth.

But wait a minute, say several business and conservation leaders, and at least one Bend councilor.  They favor a solution that would rely on groundwater withdrawal, or wells, to meet long range water demands as the city grows. Wells would require less upfront capital outlay and have lower operating costs even with the added energy cost of pumping, they argue.

            Whatever the relative project costs, one critical issue is the impact of either a groundwater or surface withdrawal approach on the city’s valuable historic water rights. An legal memorandum for the city  from a Portland law firm cautions that converting to a groundwater system could potentially endanger water rights.

          Under a current state-mandated “groundwater mitigation” rule for the Deschutes basin anyone withdrawing water from new groundwater wells must offset that use, such as placing a surface right into an instream leasing program. The leasing program would preserve the water right under the “use it or lose it” or "beneficial use" rule that requires a right be used at least once every five years. Theoretically the surface rights could be removed as needed from the leasing program if a well withdrawal for the equal amount of water is terminated.

            In the legal memorandum, the city’s counsel said the instream leasing program could expire, although other legal professionals say that is unlikely.

            One advocate of the groundwater approach, local attorney Bill Buchanan, says the city’s “surface water project is tiny; only the price is big.” To back up his assertion, Buchanan says Bend’s total water use in 2010 was 2 billion gallons.

            “Two municipal wells with 300 horsepower pumps could match that volume,” Buchanan writes in a draft “White Paper.”

            Buchanan estimates an enhanced well-based water system would initially cost $9 million, saving the city $49 million in upfront capital costs compared to the surface withdrawals. By his reasoning, he notes city studies show  the “reliable capacity” of its surface water rights at the summer peak is a range of 7.4 to 7.7 million gallons per day (mgd). He cites Bend’s master plan statistics  that 1 mgd of groundwater delivery costs $1.2 million annually, or by extrapolation, $9 million for summer peak production. 

            The surface withdrawal project would also cost $2.7 million annually in interest on bonds, Buchanan says, a figure he estimates is five times the energy costs of wells.

            However, the city counters that it used 11.2 mgd from Bridge Creek in 2010. If there is no surface withdrawal the city says it would need to develop a “reliable source” of 13.6 mgd and another well to increase capacity to 15.1 mgd well to address possible equipment problems. It would also require a $22 million piping system and $8.5 million for new storage capacity, according to the city.

            Buchanan also notes that reducing surface withdrawals will improve conditions in Tumalo Creek and farther downstream in the Middle Deschutes where summer demand from irrigation and other sources dramatically reduces stream flows.

            Conservation groups such as Central Oregon Land Watch have initially said they favor wells over the surface water project.

With steelhead, salmon and bull trout protection gaining regional attention, legal action to challenge surface withdrawals could potentially loom on the horizon especially when stream flows reach extremely low levels. And Bend’s water rights are “junior” to those of  the Tumalo Irrigation District, which would have priority for diversions in drought years.

Is that bouquet coming from the glass or the cow pasture?

            A debate is fermenting in Deschutes County—and elsewhere in Oregon—over the emergence of vineyards and wineries on land regulated under the state’s highly-restrictive exclusive farm use (EFU) zoning .

            The issue has evolved with the increasingly difficult economics of ranching and farming and the burgeoning popular thirst among consumers for the bottled fruit of the vine.

            In early March a Deschutes County hearing officer began a review of an  application for the Faith, Hope and Charity (original names of the Three Sisters peaks) winery on EFU land in the county.

            The Grossmann family in the Lower Bridge area of northern Deschutes County are proposing to make wine from grapes grown on a 15-acre section of their 164 acre EFU zoned property.

            The Deschutes County application comes at a time that several issues related to wineries on EFU land have gained prominence in the Oregon legislature. Although the characteristics of highly fertile farm land in Western Oregon differ substantially from those across the Cascades Crest, some of the issues are common to both regions.

            In particular, sections of state law related to special events held at wineries on EFU land and the type of food service permitted have come to the forefront in the discussion. Several bills addressing the issues are circulating through the halls in Salem.

            The Deschutes County Planning Commission’s staff report before the hearing officer on the Faith Hope and Charity application focused on several key points in state law, ORS 215.452 (later amended by Senate Bill 1055).

            The staff questioned whether by planting grapes on 15 acres of their property the Grossmann’s had met a requirement of the state law that a winery “…Owns an on-site vineyard of at least 15 acres…” if production will be less than 50,000 gallons annually.

            The issue as interpreted by the staff in its findings was not whether the vineyard existed but that “there is no history of grape production at this vineyard.”

            But at the March 8 hearing, the Crossmanns’ attorney maintained that many wineries across Oregon have sourced their grapes in early years from off-site locations until their estate vineyards are established.

            In public comments, Kerry Damon, ranch and vineyard manager at Ranch at the Canyons in Terrebonne, argued that building the winery was necessary for the “operational infrastructure” needed to process grapes before the first harvest.

            In the case of Faith, Hope and Charity some grapes would be acquired on a contract from Monkey Face Vineyards, the private vineyard of Ranch at the Canyons, an “agriculture preserve” residential community on the Crooked River across from Smith Rock State Park.

            Apart from the grape production issue, the staff report said the hearing officer should consider if  the application met the state law’s requirement regarding a “limited service restaurant”; whether retail sales would be “directly related” to promotion and sale of wine produced at the winery; and the location and screening of any above ground utilities.

            Although not addressed by the planning staff, the issue of special events at the winery was raised by several speakers at the hearing who said they were neighboring landowners.

            One adjacent neighbor complained of traffic into the winery for previously held weddings and another said noise and excessive drinking were a concern.

             A nearby rancher questioned if allowing wineries would effectively be “going down a slippery slope” by subverting the original intent of the 1970s legislation establishing EFU zoning.

            But, he also offered support for someone venturing to plant a vineyard in Central Oregon. 

            “I’m on both sides of the fence,” the rancher observed. “I hope it works out for them, and if it does I’ll plant bananas.”

            The Deschutes County planning staff report

             

           

           

Scenic forest between Bend & Sisters spurs conservation effort

       Anyone driving along Highway 20 midway from Bend to Sisters on a typically clear day experiences remarkable southwest views of the area's signature peaks—from Broken Top to the Three Sisters. As the highway straightens for several miles west of the Innes Market Road intersection heavily forested land, punctuated by buttes, slopes upward in ridges toward the rugged mountains.   
    To most casual observers the immediate, and perhaps logical, assumption is that most of this is public land—maybe part of the Deschutes National Forest. However, some 33,000 acres or more than 50 square miles of the scenic property is in private hands.
    But this large tract of private land between Bend and Sisters continues to be in the spotlight of negotiations involving the legislature in Salem, a major timberland holding company and a number of conservation groups.

    Fidelity National Timberland Co, an affiliate of Fidelity National Title Company led by chairman Bill Foley, in 2006 purchased the property from creditors of bankrupt Crown-Pacific timber company. Fidelity initially proposed developing several thousand acres of the tract into estate-size lots, a private golf course and other amenities.
    The proposal ignited opposition from traditional environmental organizations and many individuals to preserve what is now being called Skyline Forest. Fidelity attempted to mollify the opposition by opening a dialogue with the Deschutes Basin Land Trust to protect most of the acreage from development in exchange for reserving a portion for homes concentrated in one section on larger lots.
    The Land Trust has suggested an agreement with Fidelity, operating as Cascade Timberlands on the Skyline projecty, may be the best alternative to preserving much of the 33,000 acres and guiding sensitive development on the remaining acreage. Partition of the forest-zoned property is now restricted to a minimum parcel size of 240 acres under “conditional use” standards of the Deschutes County land use regulations, which in effect would mean fewer than 140 homes could be built.
    A bill passed in the 2009 Oregon legislature gave Fidelity the right to develop 282 homes on 1,200 contiguous acres in exchange for selling the remaining 31,800 acres for conservation through the Land Trust. But in 2011 Fidelity, citing the unfavorable economy, has returned to the legislature with a attempt to increase the number of homes, although it has not publicly revealed how many it seeks.
    The Land Trust is now facing deadlines for fundraising to match grants totaling about $4 million which could be applied for the conservation purchase. Uncertainty over the development plans has complicated the effort, Land Trust officials acknowledge.
    In provisions of the 2009 legislation Fidelity and the Land Trust have until 2014 complete a purchase agreement. Land Trust executive director Brad Chalfant said in early March that reports of an “impasse” in the negotiations, after Fidelity went back to the legislature, were misleading.
    “There’s never been any expectation that we would wake up one day and the whole property would be subdivided,” Chalfant says. The question, he says, will be what development scenario will work for Fidelity and how to reconcile the company’s financial objectives with the conservation effort.
    “My gut feeling tells me the parties are going to come to terms,” Chalfant adds.
    A critical player in the negotiation milieu is Central Oregon Land Watch, which has been involved in the effort to prevent or minimize development on the property since former owner Crown Pacific went into receivership. A Land Watch attorney has expressed opposition to revising the number of homes that would be allowed in Skyline.
    Altogether Fidelity acquired more than 250,000 acres once owned by Crown Pacific in Deschutes and Klamath counties. The company and the State of Oregon were near an agreement for the state to purchase 68,000 acres spanning the county lines for a state forest. Along with $15 million from the legislature to purchase 43,000 acres, The Conservation Fund, a Virginia group, was to purchase the other 25,000 acres and sell it back to the state over five years.
    Fidelity chairman Foley has already established a precedent for a conservation-oriented development with the 80,000 acre Rock Creek Cattle Co., part of an historic ranch enclave with a private 18-hole golf course near Deer Lodge, Montana.
    At Rock Creek, Foley has planned 200 exclusive homes while donating much of the sprawling ranch for open space and continued ranch operations. Foley reportedly has 40 investors in the Rock Creek project while maintaining 60 percent control.
    Foley has also become a significant factor in the western United States wine industry by acquiring through his Foley Wine Group more than a dozen producing vineyards and associated wineries in California, the Pacific Northwest and New Zealand. Among these are the well-known Firestone and Sebastiani labels.

Stocks or real estate? It depends...

            We’ve all heard and probably participated in  the discussion—at cocktail parties, family gatherings, college reunions and any number of other venues. Stocks or real estate?

            Most times when the subject arises there’s little more than anectodal or second hand information offered to present a case for either one.
            Perhaps the best answer is not “either or,” but some of both, although the question of how much to allocate to which, and when, remains a point of debate.

            In looking at both asset categories each has its inherent strengths and weaknesses.

Stocks are certainly more liquid, but suffer from greater volatility. Lose 20% of your portfolio in a day and you can either liquidate all or part of it, or maybe hang on in hopes of a rebound.

Real estate, specifically a home in this example, isn’t as liquid but usually provides insulation against rapid and dramatic losses. In the case of owner-occupied real estate there’s also the benefit of having enjoyment and use of a tangible asset, albeit with the expenses of taxes, maintenance and debt. But some of that is deductible, of course, and the sale of a primary home offers a shelter from a portion of capital gains that is not available with stocks.

There is no one size fits all solution. It depends on many variables—individual objectives, risk tolerance, time horizon and others.

Looking back over the past decade performance of the widely followed S&P 500 index provides one broad measure of how stocks peformed.

On January 3, 2001 – the first full day of trading for the year-- the S&P 500 Index closed at 1,283.2698.  On January 3, 2111 the Index finished the day at 1,271.8900.

If an investor had bought the broad S&P 500 Index with the intention of limiting individual stock risk the result after 10 years would have been a loss of 0.8867816%.  Not especially appealing to be standing still for a decade.

The more narrow Dow Jones Industrial Average index of 30 large capitalized stocks fared considerably better, gaining 9.621% over the 10 years since January of 2001.

By contrast—using Bend single family homes as the measure--the median price of a residence in Bend at the end of 2000 (or the start of 2001 to compare with stocks) was $168,950 and $191,000 at the end of 2010, or a 13.05% gain over the 10 years. Not bad if you’d found the “perfect” median priced home at an ideal time and not let go.
However, if you bought a median priced Bend home in 2006 by the end of 2010 you'd theoretically be able to sell it for about 45% of what you paid for it.
But no purchase, stocks or bonds, makes an ideal model. In the end it’s mostly matter of  timing and the an individual’s  investment window.

With the financial meltdown in late 2008 the S&P 500 dropped to a low of 735.0898 on February 29, 2009, more than 42% below its early 2001 level. But the index had climbed by a dramatic 96.93% to 1,332.32 by February 14, 2011. So if you’d jumped into stocks after the recent market collapse you’d be a big winner. But if you’d bought the index 10 years ago you’d be about where you began back  in early 2011, and even less so considering inflation.

So in the past few years an investment in a typical median priced Bend home would not be such a good choice when weighed against the stock market. But for the past 10 years it wouldn’t look so bad.

Looking at national perceptions, a survey by Fannie Mae, the federal housing agency, in mid 2010 indicated that 66% of consumers homes were a safe investment and only 16% felt that way about stocks. In 2003 a similar suirvey showed that 83% felt a home was a safe investment.