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The Council's Builder Bailout 

Privatize the profits and socialize the costs - it's The American Way. We saw it in action on a large scale earlier this summer with

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Privatize the profits and socialize the costs - it's The American Way. We saw it in action on a large scale earlier this summer with the federal bailout of Bear Stearns, Fannie Mae and Freddie Mac. And last week we saw it on a smaller scale in Bend, when the city council voted to bail out our beleaguered local builders.

The council unanimously okayed a proposal to give anybody who builds in Bend a nine-month deferral on having to pay SDCs - Systems Development Charges, meant to help pay for upgrades to roads, sewer systems and other stuff made necessary by growth. The only security the city will have is a lien on the property.

The bailout was pushed by the Central Oregon Builders Association (COBA), backed by the Central Oregon Realtors Association (CORA). Their reasoning (using the term loosely) is that deferring SDCs will help the local building industry get through a rocky patch caused by the popping of the real estate bubble. SDCs typically run about $14,000 per house. Because builders won't have to pay them up front, the argument goes, they won't need to borrow as much and it will be easier for them to get loans and build. And then - presto! - the good times will roll again.
This argument (as we wrote in a previous BOOT) is bogus on many levels. The most fundamental one is that the problem with the real estate market is oversupply: There are a lot more houses for sale than there are people willing and able to buy them. We can't quite understand how encouraging builders to put up more houses that nobody will buy is going to improve that situation.

Meanwhile, the builder bailout holds the very real potential for pushing the city's already teetering finances into the abyss. Finance Director Sonia Andrews predicted that deferring SDCs might mean the city will be unable to make its annual debt payments. Blithely disregarding that warning, the council charged ahead and gave COBA and CORA what they wanted.

Acknowledging that he had "serious concerns" about the financial implications, Councilor Peter Gramlich voted for the bailout anyway. If it looks like the city's going broke, he said, "we [will] pull the plug on this."

Yeah, THAT's gonna happen. In fact, just four days after the council okayed the "temporary" SDC deferral the editorial page of Bend's Only Daily Newspaper (with COBA and CORA waving their pom-poms on the sidelines) was urging the council to make it permanent.

What the SDC deferral does is make Bend taxpayers - whether they like it or not - the lenders of last resort for Bend builders. It is the most outrageously irresponsible action the Bend City Council has taken in our memory.

So we're delivering a size-16, steel-toed BOOT to the whole council - and an extra kick to Gramlich and his fellow members of the so-called "progressive" bloc, Jim Clinton and Linda Johnson. We expect Chris Telfer, Mark Capell and the like to bend over for CORA and COBA, guys, but not you.

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