DATE: November 26, 2013
SUBJECT: Planned sale of city-owned, vacant land
FROM: Shel Cantor
At the October 18 City Council meeting, during the public comment session regarding the City of Astoria Property Sales Program, I and other citizens asked why our city is now selling off vacant land. In my presentation, I quoted numbers from the county tax assessor’s office that indicate land prices in Astoria are at their lowest level in eight years and are likely to increase in the near future. After the public comment session was closed, Mayor Van Dusen and City Councilors addressed this Why Now issue. We were not permitted to immediately respond to what we heard. I offer my rebuttal here.
I explain below that the responses from the Mayor and City Counselors Warr, Mellin, and LaMear were not substantive, and none justified any urgency for this Sales Program. In the absence of urgency, is this recently initiated, rapid sell off of a large fraction of the city’s vacant lots consistent with best-practices of financial management? — especially in today’s market conditions, and considering that you will flood the market and thereby further depress the prices of the land you are trying to sell off. Note: as of November 26, 2014, at the Clatsop Association of Realtors web site, there were 41 vacant properties listed for sale in all of Astoria; compared with the city’s 1300 properties, 37 of which you designated for just the first group of this sell off. Moreover, you are selling land presently serving as a contingency fund for the city. These assets would be sorely missed if, unlike today, a truly urgent need befalls our city in the future. It would be advisable to request a written, legal opinion from City Attorney Henningsgaard assessing your compliance with your fiduciary responsibilities and potential personal liability exposure on these counts.
Councilor Herzig stated during the meeting that after consideration of all arguments, he rescinded his support for this Sales Program. Later in the meeting, he was the lone vote against approval. I urge the rest of you to reconsider your approval. I recommend (further below) changes to this Sales Program that would be more beneficial for Astoria residents and would manage these city assets more responsibly. The changes would also inhibit handing over our city’s vacant land to developers, speculators, and those who wish to buy the land only to sell off its trees; which is what the Sales Program you approved will primarily do.
Responding to the Why Now issue, Mayor Van Dusen asked each member of the Council to explain why s/he had voted (in January 2014) to set a goal of selling off land.
Mayor Van Dusen began, stating his objective was to increase the number of residents of Astoria (via housing being built on vacant lots) to spread out the cost of utilities among more users, and thereby reduce utility rates. Regardless of how realistic it is to assume that “if you build it, they will come,” the Mayor’s objective would equally apply in past and future years. Therefore, it does not justify urgency.
Incidentally, there were 4980 housing units in Astoria as of 2010, according to the U.S. Census Bureau. How many new, occupied housing units would need to be added via this sell off in order to achieve a significant reduction in utility rates?
Councilor Warr stated his objective was to reduce city costs to maintain these properties. This objective would equally apply to past and future years, also. It, too, does not justify urgency.
Beyond that, Councilor Warr did not indicate how much savings of city maintenance expenditures would be achieved by this sell off. On page 1 of the document “City of Astoria, Adopted Budget, Year Beginning July 1, 2013,” dated July 1, 2013, the entire, “Total Expenditures” line item for Parks Operation – Maintenance (which includes more than maintaining just these lots) is 5% of the city’s total “projected gross resources” ($457 thousand out of just under $9 Million) for the current fiscal year (p. iv). I could not find a breakout within that budget for maintaining vacant lots, let alone those lots designated for sale. Vacant (mostly forested) land does not require much maintenance. Our city is clearly not spending any appreciable fraction of its resources maintaining the vacant lots designated for sale.
Counselor Mellin stated her objective was to provide resources for the city’s capital improvement fund, needed for purchases such as police vehicles. However, according to that same budget document (pages iv-v), city staff are projecting a $190,350 balance in that capital improvement fund at the end of the current fiscal year (90% more than last year), and that projection already includes $61,000 allocated for buying three public service vehicles. Again, this objective is an unconvincing justification for why NOW.
By the way, moving city-owned vacant land onto the tax rolls in order to increase future city (general fund) revenue is an objective worth weighing against what would be lost in doing so. Yet, the current fiscal year budget for our city is balanced, plus a projected contingency fund of 1.4 million dollars at the end of the year, the same as at the beginning of the year, and this contingency is “18% of budgeted expenditures … [and] remains a sound fund balance.” (p iv, from the budget document referenced above). Here as well, one fails to see urgency.
Counselor LaMear, in her turn, repeated the objective to reduce the cost for maintaining the vacant land, which was rebutted above. She added her hope that this Sales Program would result in neighbors buying adjacent lots for good purposes (e.g., planting gardens). However, if land is designated by the city for sale and the four-week window (during which neighbors must decide whether to write an offer to buy the land) comes at a bad time for someone who would have been a Good-Neighbor for that lot, the property then goes out for “general listing” (as stated in one of City Manager Benoit’s presentation slides). General listing is open to everyone. In stark contrast to Good-Neighbors, developers buy land (preferably at low prices, like now), denude the land, throw up housing units, sell them, and could leave it to others to deal with any resulting, eventual landslides, etc. Speculators buy land at low prices when the market is likely to increase (like now), hang on to the lots for a few years, and then sell the land (usually to developers) at higher prices (which the city could have obtained if not for unjustified urgency). Would-be “mini-timber-barons” buy land at a price below the value of its trees, deforest it, sell off the felled trees for a net profit, and then could walk away (Flavel-like) from the property.
The Sales Program you approved might benefit some Good-Neighbors. I believe, though, ultimately, neighbors and non-neighbors who are developers, speculators, and mini-timber-barons will benefit most (and most often).
The procedures for this Sales Program can be modified to:
— Comply with your fiduciary responsibilities,
— Encourage Good-Neighbor purchases, and
— Preclude the sell off of city-owned land to developers, speculators, and mini-timber-barons.
Starting with the list of all properties deemed “excess” (as you called them), we could permit the sale of any from that list, at any time, but no more than ten annually. This procedure would be appropriate for good stewardship of city assets, because it would reduce the “investment timing” risk of fetching poor prices in a depressed market (like now), avoid flooding the market (which would further lower prices), and avoid rapidly depleting this important contingency resource of land when there is no urgency for a large sell off at this time. It would also avoid forcing residents to hurriedly use or lose their rights within an arbitrarily chosen, four-week window.
We could permit sales only to those whose primary residence is adjacent to the land they bid on. The bidder would have to agree in the written contract to certain restrictions, including requirements that the purchased lot be immediately combined with the buyer’s own property into a single parcel, and that cutting down trees on the purchased lot would remain subject to the rules currently applied to city-owned lots. This would foster Good-Neighbors while inhibiting anyone, including neighbors, from buying in order to develop, speculate, or make a quick profit by just cutting down trees.
The prices could be set at the most recent “Real Market Value” determined by the county tax assessor (which is available on-line to everyone). And a bid would need prior, written agreement from all other neighbors living on land adjacent to the vacant lot of interest. This would promote transparency, fairness, and the rule of law over the rule of whim.
With procedures like these (and this is not yet a vetted, complete list), there would be no need to hire a real estate broker or administrator to enable these small numbers of transparently specified transactions.
We can do the right thing for our city, if you want to.
The average asking-price for this first group of lots is 55% of their Real Market Value (RMV), as found at the County Tax Assessor’s website. Compare that with the following for privately owned properties on the MLS (the Multiple Listing Service for the open real estate market). There are 3 vacant lots in Astoria on the MLS with AREA Properties as the listing agent, and for which the county posts a RMV. Those 3 lots have an average asking-price that is 97% of their RMV. I also researched the remaining 5 lowest priced Astoria, vacant land, MLS entries, from other realtors. (I chose the lowest priced entries for a fairer comparison to the city lots you are selling.) Those asking-prices averaged 98% of their RMV. So, asking-prices for privately owned properties on the MLS, at least for all the properties I researched, are averaging RMV. Your asking-prices are half their RMV.
When someone wishes to sell real estate, a good real estate agent will ascertain how motivated their client is. If the seller is not in a hurry and wants top dollar, the agent will recommend an asking-price at or above what the market can be expected to bear. Motivated seller? — lower asking-price. Very motivated seller? — lower still. AREA Properties is a professional outfit. Surely they would not have set asking-prices at half RMV without someone who represents our city instructing them that you are desperately motivated to sell our land.