Salem City Council voted unanimously Monday night to give a 10-year property tax exemption to a six-story, 105-unit apartment complex planned for downtown.
The High Streets Apartments, a project by Deacon Development, is set to replace a parking lot and vacant lot at the site of the former city hall at 277 High St. NE.
After several construction workers raised concerns in April over alleged wage theft among sub-sub-contractors working on projects for Deacon and in the construction industry, a vote on the tax exemption was delayed.
Mayor Chris Hoy brought forth an amended motion to add a layer of transparency to projects receiving tax breaks from the city.
When the proposed tax exemption first came before Salem City Council in April, three people in the construction industry complained about Deacon Development. The Portland-based company also developed the former Nordstrom site into the Rivenwood Apartments in downtown.
The construction industry workers who testified said Deacon Development worked with irresponsible sub-contractors who engaged in wage theft, worker exploitation and unethical business practices, citing conflicts with employees not getting paid on Portland-area projects.
Company founder Steve Deacon, who also attended the April meeting, said it was the first time he had heard the accusations. The council tabled a vote on the tax exemption until Monday's meeting so more could be learned about the accusations.
Additional construction workers testify. Deacon, Dalke respond
Chris McGhee, a representative with Western States Regional Council ofCarpenters, told the council Monday evening that misclassification and underpaying employees are rampant in the construction industry.
Trampis Simmons, a representative with the Pacific Northwest Regional Council of Carpenters, said the city should not be giving a tax break to a company that "hired criminal contractors."
Deacon and a representative with Dalke Construction, which helmed the Rivenwood project, contested the allegations of wage theft.
"I don't appreciate being called a cheat and a liar and someone who ignores the lack of payment of workers," Deacon said. "It's just as important to us that workers get paid on our projects.... If we are made aware of any improprieties when it comes to payment, we address them immediately."
He said he was not aware of any complaints over the recently opened Rivenwood project in Salem.
Dalke project manager Jim Schiess said Dalke has a good reputation in the community and the complaints were unfounded.
Mayor Hoy meets with carpenters, recommends safeguards to protect workers
Mayor Chris Hoy said he met with some of the carpenters who testified. He said he took their suggestions to increase the transparency of construction projects in Salem by requiring developers to list every subcontractor and sub-sub-contractor working on the site and provide their licensing information, workers' compensation insurance and tax information to the city. His amended motion included making the list public record.
Deacon said he would be amenable to such a proposal.
Hoy said when he spoke with the carpenters, they did not have any complaints about Dalke and the sub-contractors but rather the people below them — the sub-sub-contractors, who allegedly usie labor brokers to bring in people paid on a cash basis.
"My goal is to make sure we can continue to build housing but also that the workers are treated fairly," Hoy said.
"I don't like the stories that I heard and the videos I saw in terms of labor brokers and cash payments and people not being paid their wages," he said. "I'm trying to figure out a way to provide safeguards so those things don't happen and yet, this project is still able to go forward."
In the future, Salem City Council could consider adding the requirement to its code, the mayor said, adding he was not trying to single out Deacon or Dalke, but rather an industry-wide concern.
"I intend to make this part of our standard work going forward," he said.
Councilor Vanessa Nordyke said she supported the motion and wanted to send a clear message to the industry that if they wanted to have a construction project in the city, they needed to play by the rules.
The amended motion passed unanimously.
About the High Streets Apartments project
Developers plan to demolish the parking lot and build a mixed-use, L-shaped building with 98 apartments and a ground-floor commercial space with seven live/work units.
The apartments will consist of studios and one- and two-bedroom units. The project is expected to cost $27 million.
The monthly rental for the market rate units are expected to range from $1,375 per month up to $1,975 per month depending on the size, number of bedrooms, and location within the building, according to Deacon's application for the tax program.
Additionally, 15% of the units will be set at affordable housing rates.
Deacon Development applied for participation in the city's Multiple Unit Housing Tax Incentive Program.
The program providesa property tax exemption for up to 10 years for new or converted non-transient multifamily housing units constructed within the defined core area that provide one or more public benefitssuch as development or redevelopment of underutilized or blighted property.
The tax exemption is limited to the city’s tax levy, which is estimated to be $44,758 in the first full year. but developers also can seek tax exemption through other taxing districts like the county and school district.
Since 1976, the council has approved 12 properties for the program.
The funds come from the Urban Renewal Agency budget, not the city's General Fund, which is currently facing a shortfall.
Without the tax incentives, developers would likely not be building a project like the High Street Apartments, Deacon said on Monday.
"There needs to be some balance," he said. "When you put in affordable housing, you bring in less income. You decrease the value of the project. The tax exemption is a great way to offset that."
For questions, comments and news tips, email reporter Whitney Woodworth atwmwoodworth@statesmanjournal.comcall 503-910-6616 or follow on Twitter at@wmwoodworth.
This article originally appeared on Salem Statesman Journal: Salem councilors pass property tax exemption, transparency requirements
