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The Portland Development Commission is offering a one-time payment of nearly $6.5 million as compensation to the city of Troutdale for welcoming the U.S. Postal Service distribution center to the Reynolds Industrial Park.

The offer is a response to the Troutdale City Council’s request that the PDC put a formal financial offer on the table for consideration.

For the past few months, speculation has run rampant on whether or not the distribution center would relocate from its 14-acre site in Portland’s Pearl District, making way for a lucrative commercial development.

Motivated by the possibility of redevelopment, the PDC has long discussed the potential of relocating the Postal Service. Assisted by a $500,000 negotiation tool, the federal agency only recently agreed to consider relocation.

Among other sites considered, Troutdale has stood out, specifically two lots in the Troutdale Reynolds Industrial Park. The property is zoned for commercial development, and can easily accommodate the planned 789,000 square-foot building.

But as a federal agency, the Postal Service does not pay property taxes, a significant consideration for giving up prime industrial property.

Troutdale city staff estimate property taxes for that site at $20 million over the next 100 years, and had hoped a PDC offer would reach that sum to make the move additionally beneficial for Troutdale.

The council viewed the offer in its Nov. 10 meeting, but offered little insight into the reaction, instead discussing the issue during an executive session out of the public eye.

“We wanted to make sure the letter from PDC is known to the public, so that’s why it’s out there,” Daoust said. “There’s going to be some questions about the letter, but there won’t be any public comment on this because it’s a little different procedurally. The council has not formulated any internal debate on this. We’ll wait for the executive session later to do that.”

Daoust asked the council to consider the offer carefully, and they would discuss the issue at-length during the Nov. 24 meeting.

Based on previous discussions, it’s likely the offer will not be received well. In an Oct. 20 meeting on the issue, the council indicated it might view the deal unfavorably unless the PDC offer reached near, or above, the $20 million mark. Although the $6.465 million offer is nearly double an initial mention of $3.5 million — a number viewed unfavorably by council — it is still significantly less than what city staff estimated property taxes could amount to.

“Let’s continue the discussion and tell the PDC that. Leave it up to them and say, ‘No way, Troutdale, we’re not writing a check for $30 million,” said Councilor Larry Morgan in October. “If they do and it’s more than what we would have collected in property taxes, I don’t think we can just shut the door right now. I think we need to just finish the discussion, make a firm line in the sand about where we’re willing to go and see how they react to it.”

The PDC explained its thought process and how it reached the smaller $6.465 million number.

This included an assumption that property tax revenue to Troutdale would be $138,000 a year, a number arrived at by calculating the number based on a 50-year life span, rather than Troutdale’s 100-year estimate.

The PDC also pointed out that there would be no lost revenue during the first 10 years, due to “the availability of additional land for development at the industrial park, and the likelihood that any new development would be offered a three-year Enterprise Zone property tax abatement,” the letter of intent reads.

“Because TRIP currently has sufficient land available to respond to multiple large-lot requests before turning away any opportunities, the lost opportunity to Troutdale begins not when the USPS facility is built, but when the 183-acre TRIP can no longer offer available land to a similar opportunity.”

With an October 2016 construction date in mind for the new postal facility, decisions are expected to come quickly.

“It was a step in the right direction, I think,” Daoust said of the offer. “We need to analyze some of the assumptions they made in the proposal, so we’ll do that.”

The letter notes it is non-binding, but pending Troutdale approval, the PDC will move forward with feasibility, budgeting and site evaluation.

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