Oregon City severing ties with Cove developer
This story has been updated.
Oregon City officials said this week they didn't know about a recent sheriff's auction of the majority share in a major urban-renewal project and are using alleged fraud as partial justification to terminate their contract with a developer.
With unanimous votes by the Urban Renewal Commission on Nov. 25, city officials are attempting to pull the plug on their deal with the current private developer for the Clackamette Cove, a project that's been beset with delays and a more than $118,000 fine from the state DEQ.
City Manager Tony Konkol said that city officials never heard from developer David Mooney (60% project ownership interest) that there was a "serious dispute" with Ed Darrow (40% ownership) and that Darrow had sued Mooney. Konkol alleged that Mooney "induced" the Urban Renewal Commission on Oct. 2 to approve an amendment to a public-private development agreement extending the required completion date of 11 items related to the project to May 20, 2020.
"The URC knew none of these facts for months and did not learn of these facts until Oct. 18," Konkol said. "The amendment was secured by fraud and under Oregon law a party induced to enter into a contract by fraud has the right to disaffirm the contract."
Mayor Dan Holladay said at least the city would retain architectural drawings completed in anticipation of the project so that the buildings could be completed by some other developer.
"It's pretty clear that, as we've been going on these last 10 years, that performance has not been stellar," Holladay said. "Given the facts that are before us today, it doesn't make sense for us to move forward with this group of people. It's been pretty clear for a while that the Urban Renewal Commission had limited if any confidence that Mr. Darrow could perform his functions."
Darrow made a bid to Oregon City officials to save the project at the Nov. 25 meeting, saying nothing about the developers' alleged concealment of facts, instead stressing the various issues he's had securing funding and promising better results if the city continued to work with him.
"We'll have a new player involved who has the capital, commitment and ability to build the project, which is a major issue here," Darrow told the city's urban-renewal commissioners.
According to a document from the sheriff's office, Darrow paid $25,000 on Oct. 9 during a foreclosure sale to claim ownership of Mooney's former 60% interest in the project.
New public sidewalks and a traffic circle near Agnes Avenue were constructed in 2016 as part of a $75 million project consisting of 244 apartments. Additionally, developers built 12,000 square feet of live/work office space and recreational facilities behind the Oregon City Shopping Center.
With a planned 370 units of housing, the second phase of the project was envisioned between Agnes Avenue and the Clackamas River Trail. Developers have been hoping for 23,200 square feet of public retail space there, along with 6,700 square feet for the residents' community/fitness centers.
Darrow, who at one time had been the lead developer of the project, invited Grand Peaks Properties to help develop the first phase of the project. Darrow told city officials that he then turned to Mooney's Hudson Holdings Limited for 60% financial backing for the second phase.
Court documents from September show that Multnomah Circuit Judge Stephen K. Bushong ordered Hudson Holdings to pay Clackamette Cove LLC a $174,267.62 award, plus interest, resulting from the alleged breach of contract. According to the lawsuit, Darrow said Mooney repeatedly threatened him by withholding Hudson Holdings' contracted $15,000 monthly fee to pressure him into resigning as co-manager of the project and reducing his share of the project from 40% to 10%. Mooney did not return calls for comment for this news article.
Oregon City officials said that the developers were challenged to move over 100,000 cubic yards of soil across what has turned out to be an unpredictable and unstable site consumed by years of industrial uses.
John Runyon, a watershed ecologist with Cascade Environmental Group, presented to city commissioners in 2017 on his draft Clackamette Cove Water Quality Habitat Improvement Feasibility Study. $50,000 of the Urban Renewal Commission's payment to developers went to Runyon's environmental mitigation plan for the Cove, and the city had been planning to reimburse the developer up to $695,000 for other qualifying expenses if the 11 preconditions were met.
Runyon's assessment of the existing environment providing some insight into possible improvements and funding opportunities. Runyon recommended that the city create a new channel into the Cove that would help prevent future algae blooms.
Environmental advocate Jerry Herrmann, who was the only member of the public in attendance besides the developer, said there would have been more interest in the meeting if the agenda had made clear that the city was considering kicking the developers off the project.
"Prior to these developers, there was four who tried," Herrmann said. "The Cove is a very difficult project because of the constraints... I'm surprised some have stuck with it as long as they have."
Herrmann encouraged Oregon City to seek brownfield grants to continue to improve the environment around the Cove.
This story has been updated to describe how city officials had been planning to reimburse the developer for qualifying expenditures, up to $695,000, if the 11 preconditions had been met, which could have occurred prior to the completion of the project, according to the terms of the agreement.
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