A recent ruling from the state’s labor agency has thrown a wrench into a City of Bend program aimed at spurring construction of new apartment buildings.
In a July 14 decision, the Oregon Bureau of Labor and Industries ruled prevailing wage standards should apply for workers building a 264-unit apartment complex in southeast Bend because it’s slated to receive millions of dollars in property tax rebates. That’s forcing the City to roll back more than $60 million in planned rebates for three other large apartment developments already under construction or in the queue, as none had expected the added cost of paying prevailing wages.
The decision likely won’t kill any of the projects that got rebates, according to the City. On Sept. 16, city councilors approved a new plan to cover millions in development and permit fees if builders will still provide the same amount of affordable housing the City wanted in exchange for the tax rebates: at least 15% of units restricted to 90% of the area median income, or about $108,000 for a family of four in Bend.
And the developments plan to maintain other commitments, including hiring small businesses for at least one-quarter of its contracts and building energy efficient buildings, according to Jonathan Taylor, the City’s urban renewal manager who created the program.
But with less funding, affordability will only be required for the housing units for a duration of 12 years instead of 24 or 30 promised under the initial program. And the ruling — at least for now — has stifled the Bend City Council’s latest tool for meeting lofty state housing goals and creating the dense, walkable neighborhoods the City and state hope to see.
“It was disappointing,” Taylor told the Source, but the City was, “actually pretty pleased” to still maintain affordability, local contractor and energy requirements. Plus, the City will be able to start collecting property taxes on the developments sooner, he said.
Still, there’s a chance the decision could be overturned. The City and Quarterra, the national development company building the apartments in southeast Bend, both filed administrative appeals contesting the ruling.
According to Taylor, the ruling bucks the Bureau of Labor and Industries’ precedent on similar programs, which caught the City and developers off guard.
Regional development company deChase Miksis has already started construction on a 178-unit apartment complex in north Bend called Britta Ridge. It will cost about $38 million to build, according to application materials. While cost additions from prevailing wage requirements vary, it can add between 15% and 20% to the price of construction, according to Managing Partner Mark Miksis. That can end up stalling or killing projects, he said.
“Anytime we invest that much money into a project, we need to know the rules are going to be consistent,” he told the Source.
Prevailing wage laws, which are required for projects that use at least $750,000 in public funds, ensure working standards, higher wages and benefits for construction workers.
Bureau of Labor and Industries Spokesperson Rachel Mann said decisions are based strictly on statutes written by the legislature. The law exempts tax abatements and tax credits, but not rebates, Mann said.
“Because these payments ultimately originate from public agency funds, they meet the statutory definition of, “funds of a public agency,” and therefore trigger prevailing wage requirements,” Mann wrote in an email.
At a Sept. 16 meeting, several union representatives called on the Bend City Council to embrace prevailing wage standards, warning of substandard working conditions, labor brokers and “fly-by-night” contractors.
“Prevailing wage is a way that workers can actually afford to live where they work,” Chris McGhee, a representative with the North Coast States Carpenters Union, told the City Council. “Getting housing built is a good thing. But at what cost is the Council willing to do it?”
That tension has spurred conversation among local policymakers and Oregon lawmakers, some of whom say the wage rules are getting in the way of badly needed housing.
“It’s very good to try to protect the rights of workers and make sure folks are getting a living wage,” Bend Mayor Melanie Kebler said at the Sept. 16 meeting. “But I’m increasingly having this discussion with folks that we need to have a bigger conversation about what we’re trying to achieve with prevailing wage statutes and what we’re trying to do with affordable housing.”
Affordable housing, which relies largely on state and federal subsidies, is already exempt from prevailing wage requirements — as long as at least 60% of the units serve people making no more than 60% of the area median income for renters and 80% of the area median income for owners.
The developments that qualified for Bend’s tax rebates are not affordable housing by that definition.
Bend City Councilor Gina Franzosa said Sept. 16 she wasn’t supportive of giving tax rebates to mostly market-rate housing in the first place.
However, “we’ve gotten ourselves into this, and I don’t think we can really back out at this point,” she said.
Bend adopted the Tax Increment Assistance for Housing Affordability program in late 2024. It replaced a different tax exemption program the City scrapped after controversy over a 10-year, $10 million award to developers of Jackstraw, a seven-story apartment development in the heart of town. That program had no minimum affordability requirements.
The new program uses tax increment financing, or urban renewal — a tax reallocation tool cities typically use to spur redevelopment in blighted areas. The City essentially creates mini, property-level tax-capturing districts for planned developments that qualify. Once the housing is built, the property taxes on new construction are “reinvested” into the project by paying the developer instead of getting redistributed to other jurisdictions for things like schools, parks, streets and police.
Despite the decision, Taylor said he views the program as successful. If the projects that received tax rebates come to fruition, Bend’s program will have helped incentivize more than 1,000 new apartment units and hundreds of affordable units in new multi-story buildings in west, north, southeast and midtown Bend.
According to a state analysis of housing needs, Bend will need to build 34,000 homes in the next 20 years to keep up with demand and account for undersupply. That includes 12,000 homes below the 80% threshold.
Meanwhile, the state has fallen well short of Oregon Gov. Tina Kotek’s goals to build 36,000 homes per year.
“We’re going to work with our state representatives on how to continue to use tax rebates as incentives,” Taylor said. “We’re nowhere near what the governor wanted for housing production. So we need tools, we need local control.”
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