April Swenson, Managing Broker at
Coldwell Banker Ocean Shores Brokers Real Estate

• The City is offering a 10% discount if you payoff the LID by November 29, 2010. For example, if you owe $3,718.00, then your payment to the City would be $3,346.20.
• If you choose to take the financing over the next 18 years, then your 1st payment is due November 29, 2011.
• If you take the financing option, and if your payments are late, then you will be charged a penalty of 12%.
• You may payoff the assessment amount anytime in the next 18 years (but you will not receive a 10% discount if payment is received after Nov 29, 2010); the payoff amount will be equal to the principal balance plus the interest on the unpaid amount.
• Contact Info: City Utility Billing Department -- 360-289-2487 or e-mail Mike Folkers, City Finance Director, at mfolkers@osgov.com.

The City posted a FAQ sheet about the Street LID on November 1st. Click here to view.
In summary, the 10% discount period is good only until November 29th and the City does not know the interest rate, but estimates about 6.25-6.75%. The City does not know the interest rate because the bonds have not been secured yet and cannot be secured until the City knows how much is to be financed. So hence why there is an early discount payoff period; the City wants to finance the least amount as possible.

As part of my commentary on the handling by the City Council, the Mayor Garland French and Ken Lanfear, Public Works Director, of this entire process for the Street LID, here some more points I am adding:

• These notices were dated October 22nd and mailed October 29th, yet the 10% discount period started on October 28th.
• The City has only provided a 30-day discount period to payoff amounts of about $2,700-$6,000, which is not a lot of time for property owners to scrap together that amount of cash, especially in this economy.
• The timeframes operating by the City have been extremely hurried, as pointed out in my previous posts/updates and in my 2 previous bullet points.
• Poorly worded notice and no contact info printed.
• Many property owners, including many of my own clients, who have contacted me have reported that they have never received any notices prior to this Final Notice.

My previous protests I made known were the following:

• Many property owners have reported to me that they never received any correspondence from the City regarding this Street LID over the past 3 years; many sellers found out about this Street LID through me.
• The timeframes placed by the City were unreasonably short.
• The increased costs of the project with no halt of the project by the City when oil prices went up to $145/barrel in 2008.
• The City needed new roads, but the mishandling of the project by Ken Lanfear and the Mayor(s) & the City Council has created an uproar by the property owners that could have been greatly decreased if common sense was applied.

My hope is that we can learn from the mistakes made in this project and not repeat them.

With all of these events that have transpired, how do you feel about the job completed by the City officials? Do you believe they did their due diligence or do you believe they should be brought to task?
If you want to make your questions, comments and/or protests known, please contact the following responsible parties:

• Mayor Garland French: gfrench@osgov.com
• Public Works Director Ken Lanfear: klanfear@osgov.com
• The current City Council: John Lynn, Bob Crumpacker, Peggy Berry, David Creighton, Jackie Farra, Dick Skewis, and Gordon Broadbent
• Visit the City's web site at www.osgov.com

I would greatly appreciate if all property owners reading this story would please e-mail me at aswenson25@juno.com and answer the following survey:

1) Did you receive your Final Notice Confirming the Street LID Assessment Role dated October 22nd?
2) Did you receive the letter announcing that there will be a LID Hearing on September 20th?
3) If you made a written protest to the Hearing Examiner by Sept 20th, did you receive a letter dated October 7th about the Findings/Recommendations being filed and having the right to file an appeal?
4) Did you receive any other written correspondence from the City in the past 3 years regarding this Street LID? If so, what were they and dated when?

• Wednesday, October 27 ~ Notice & Ordinance 885 are published (will also be published November 3, 2010);
• The 30-day pre-payment window starts with publication of the Notice, so the 30-day window will start Thursday, October 28th and end on Monday, November 29th.

• Bob Macaulay, the Real Estate Appraiser & Consultant of Macaulay & Associates who produced the proposed Street LID assessment role and determined the "Special Benefit" amount.
• David Thompson, Bond Counsel, to establish the LID process, financing, bonds, and other matters.
• Ken Lanfear, the Public Works Director, who is and has been in charge of the entire Street repaving project and overseeing costs.
• Jane Towery of Piper Jaffray, who was present to provide info relating to bond sales and the permanent financing of the LID.
• Mike Folkers, City Finance Department, who was present to provide info relating to the interim financing.
• Art Blaufelt, City Attorney, who was brought in on approval of the Mayor after seeing the potential of the enormous amount of protests and appeals and the surrounding legalities.
• The Hearing Examiner was Wayne Tanaka, an experienced Hearing Examiner and attorney. His role was to accomplish the following:
  • Mediate the Hearing.
  • Consider whether the LID is proportional.
  • If the total assessments will pay for the LID.
  • Listen to and read the protests.
  • Make his final recommendations to the City Council, who ultimately votes in the final assessment amounts.

This Hearing started with introductions by David Thompson, Bond Counsel and an experienced attorney on municipal law, and then moved to an answer & question dialogue. He explained that LIDs are used by municipalities to fund improvement projects, ie sewers and streets. Cities use interim financing to finance the project because of the low interest rate. When the project is complete, then all of the costs are known exactly and long-term financing is purchased through the sale of bonds and the costs are incurred by the property owners to pay off over a given length of time, ie 18-years for this Street LID.

Then the County Assessor began to explain about the State-approved LID payment deferral program. This program is only available for primary homeowners age 65 or older, or disabled. So it is not available to 2nd-homeowners or lot owners. She took questions and many property owners voiced their unhappiness with the current assessed values, which are considerably higher than current sales prices, and thereby higher taxes. She explained that each area/city in Grays Harbor County are re-assessed every 4 years and Ocean Shores was re-assessed in 2008 with assessments based on 2007 and 2008 prices. Our peak in sales prices hit in 2007. Ocean Shores was previously assessed in 2004 based on the low sales prices in 2003 and 2004. As property owners, we incurred the benefits for 4 years of having low taxes during our peak in sales prices. If we could change the assessed values when the market goes down, then we could also do the same when the market goes up.
Click here to view the County's Tax Exemption & Deferral Program.

Then the City Public Works Director Ken Lanfear presented his Powerpoint slides (view entire presentation by clicking here) explaining about the condition of the streets before and after the paving project. He also went over the project costs. Although he failed to effectively explain why the increase in project costs. The original project costs were $32.3M, but now it is up to $44.5M, including all project costs of $39M and the rest is the financing and miscellaneous costs. Here are some the important facts he went over:

• Original condition of streets: potholes, dips, wood/logs were used to fill in the streets during the 60’s when the streets were first paved, only 2-3" of pavement was used.
• Did a lot of log removal; some roads were so bad that the pavement had to be ground up and repaved.
• 30+ years of non-funded road maintenance/department.
• City has put off paving for too long.
• Standards used: WA DOT construction guidelines, along with completing Field Ratings Forms, which are used to compile a database of roads and problems.
• This Street LID was completed over 3 years (2007-2009):
  • South of Taurus Blvd, West of Pt Brown Ave
  • East of the Grand Canal/Pt Brown Ave, South of Albatross St
  • South of Pacific Blvd to Taurus Blvd, West of Pt Brown Ave
  • North of Pacific Blvd, downtown, round-about
• Followed WA State Law to get & chose bids.
• Increased costs created the project cost to go from $32.3M to $39.4M ($44.5M is the total project cost plus financing, if every property owner financed the Street LID and no one paid it off early).

Mike Folkers spoke about the financing end of the LID. He proposed to offer a 10% discount if a property owner paid off this LID when it becomes due next August. He also mentioned that he would like to use the Sewer LID Guarantee Fund, which is over 10%, and apply it to this LID to lower it. He gave examples of what the payments would be, for instance, if the LID was $4000, 6% interest, over 18 years: $462 the 1st year, $328 the 10th year, $235 the 18th year.

The next presentation was done by Bob Macaulay, the real estate appraiser hired by the City, who completed assessment roles in 2007 and the latest, and highly contested, role in August 2010. View his entire presentation by clicking here. He explained what is a LID/Special Benefit Study:

• Compiling amounts per State law.
• Allocates "benefits" to each individual property owners.
• Lists probable market value "with" and "without" the LID.
  • His study stated approximately $3-6K for the assessments (or "special benefit amount") per property.
  • So properties would sell for approximately $3-6K less without the project completion.
• His study was to recommend assessments, not set them, which is the role of the City Council to set assessments.

• Cost Benefit Ratio:
  • = Total Cost of the Project / His Study’s Assessment Total Amount
  • August 2010 study CBR = $44.5M / $47M = 93%
  • 2007 study CBR = $34M / $50M = 68%
  • This increased from 68% to 93% due to increased project costs.
  • Project Costs increased by 40%, but the LID increased by 36%.
• New Streets increase property values by appeal in look and also to buyers.
• Good, quality Streets provide greater increases in value to higher valued property, hence why he used locational differences, ie canal front, Ocean front, etc., to arrive at the "Special Benefit Amount" (or the assessment amount).
• The "Special Benefit Amount" is based on the underlying land value, not the home + land value.
• The "Special Benefit Amount" is not based on the street frontage.

After the City’s presentation by the board of witnesses explaining about the legalities of the Street LID, the financing, the costs of the project, the assessments completed by Macaulay & Associates, etc., the Hearing Examiner began to call up the protestors (property owners) one-by-one. The following were the common complaints/protests that were made:

• Why were BLA’s (Boundary Line Adjusted), or double lots under 1 parcel number, assessed more than a single lot when there can only be one home placed on the property?
• Inconsistent assessments ("Special Benefit Amount") compared to neighboring or like properties. For example, Ocean Shores Baptist Church and the Lutheran Church, each with 4 lots, were assessed with about $15K; the Methodist Church with 4 lots was assessed with about $5K; Faith Community Church on a huge parcel of land was assessed with about $4K.
• The market values placed on each property by Macaulay & Associates was greatly challenged ~ one property owner thought his was assessed too low, but almost all protestors challenged that their market value was too high.
• Vacant Lots should be less than Homes; lot owners can only use their lot for 90 days per year, so if the City is going to assess the same as homes, lot owners should be able to use their lot year-round.
• Condos should be the same as Homes and not split between the multiple owners; condo owners use the roads as much as house owners. Condo owners are getting a much lower bill because their one assessment for the lot is being split between the condo owners.
• Location and Zoning should not matter ~ whether it is an Ocean front property or an interior property, all assessments should be equal and spread out among all property owners. Here is an example: along Sand Dune Ave, Ocean front parcels were assessed with approximately $5,500; properties across the street were assessed with approximately $4,600; same street, but different property/market value. Another example is that multi-family lots were assessed higher than R-1 (residential lots).
• Projections should have been made to up-keep/maintain the streets for the next 18 years.
• Cannot afford the upcoming Street LID Assessment ~ on fixed or low incomes.
• $32M was the initial assessment of the project cost, but now it is up to $44.5M.
• The City did not give property owners enough time to respond with their protests and did not give guidelines on how to respond.
• Lack of voter initiative; this was voted in by the City Council in 2007 and not presented to the voters.

Here are some of the results and answers provided by David Thompson, the attorney, Bob Macaulay, the appraiser, and Ken Lanfear, Public Works Director:

• Because of the consistent amount of complaints, BLA properties will be reviewed.
• The appraisals are based on the underlying land value, not whether the property has home or not.
• The appraisal used these criteria to determine the "Special Benefit Amount": land value and condition of the streets prior to the project.
• Properties west of the Grand Canal were in worst shape than the properties east of the Grand Canal, and therefore have a higher assessment.
• Ken Lanfear said that there were no other viable methods to fund this project.
• Ken Lanfear also stated that there has and will be further discussions with the City Council about funding to up-keep/maintain the streets.
• Ken Lanfear said that the spike in oil prices in 2008 increased the project costs.
• Bob Macaulay said he considered the downturn in market values.
• If the City Council is going to change/revise the assessment role, then another Public Hearing will have to be done per State law.

The Hearing reconvened at 10:00am the next morning and a few others testified. One of the testifiers brought up a very poignant fact that the difference in the appraisals from 2007 and 2010 was only a drop in about 4% total (about $50M to $47M), while sales prices have actually dropped by about 25%-35%.

The last witness to testify was Tom Scanlon of the North Coast News. I wish everyone could have heard his questions. He treated it like an interview and asked some hard-hitting questions. Here were some of the facts his protest brought:

• Macaulay & Associates has received a total of $640K for both appraisals completed in 2007 and 2010.
• As part of State law, the Total "Special Benefit" Amount must be equal or greater than the Total Cost of the Project (so the total "special benefit" amount must have come in at least equal or greater than $44.5M; it came in at $47M).
• If the Total "Special Benefit" Amount is less than the Total Cost of the Project, then State law only allows properties to be assessed up to 100% of the Total "Special Benefit" Cost. The City would ultimately have to find other ways to make up the difference.
• Macaulay & Associates were given the figures of $44.5M by the City prior to doing the appraisal.
• Bob Macaulay said that he has personally not seen as many protests as has been with this LID (over 900 protests were filed).
• Bob Macaulay thinks his appraisal report is fair and accurate.
• Bob Macaulay was questioned about the "Real Estate Agent Interviews" that were conducted earlier this year: he took just one part of an agent’s answers and used that to base an opinion that the new streets have helped with sales.
  • I was one of the Realtors interviewed. I said that the streets were needed, but have not helped with sales. In actuality, many sellers were unaware of the upcoming Street LID and many have sold because the owners did not want to take on another LID.
• An LID is a funding mechanism to which the City Council is ultimately responsible.

I testified at just before 1:00am on the 21st. I protested the way the City has handled the entire Street LID process and costs by going way above the budget (by about $10M). I challenged Bob Macaulay directly from one professional to another. I asked him whether the appraisal numbers of this 2010 Report were based on 2008 prices. He said no; they were based on 2010 sales prices. I said that was impossible because I know the values and these numbers are wrong; they are too high. I also asked him, since he and his company were the ones who handled the appraisals and assessments for the Sewer LID, why he did not do the Street LID like the Sewer LID. He said they did. I told him he was mistaken because the Sewer LID was spread-out equally among property owners. So whether you bought a property down by the Jetty or by the Bay, the original assessment was $5,281 without a septic and $3,521 with a septic that had to be decommissioned (there were some variances on a few properties). He still insisted that they were done in a similar fashion. Clearly, they have not been as evident by the wide range of assessments across the entire town.

Click here to view the September 20th Agenda.