Redmond City Council on Nov. 7 considered a new development fee on commercial industrial projects in the city in order to generate funds for affordable and workforce housing and help ease the housing shortage in Redmond.

City officials said the fee — known as a construction excise fee — could be a valuable tool for generating quick and much needed funds to address the city’s shortage of affordable and workforce housing. On Nov. 7, the council decided to investigate whether the fee would be beneficial to Redmond.

Similar fees are currently in effect in eight other cities in Oregon, including Bend, and are collected from developers and property owners when building permits are issued on commercial properties. The tax could be imposed on both new construction as well as business expansions.

The city has not yet decided what percentage of the the total development cost would constitute the fee. If the city set it at 0.5% the fee would bring in about $133,175 per year. If they raised it to 1.5%, the fee could bring in approximately $399,508 annually, according to rough city projections based on developments in recent years.

The revenues collected from the tax would be put into a fund that could then be used to reimburse developers who build affordable housing projects in the city. The use of the funds would be dictated by SB 1533, which was passed in the Oregon statehouse in 2016 in order to spur more affordable housing in Oregon.

SB 1533 gives cities the ability to charge a fee to both residential and commercial industrial developments, though Redmond said it is currently only interested in charging industrial development.

“On a staff level we are approaching this as sort of a pilot and we think there are more benefits in exploring fees for the commercial industrial permits because there is more flexibility,” said John Roberts, Redmond’s deputy city manager. “It is important to see what happens and to see how much we collect. If it proves to be successful our policy makers would be open to circling back and pursuing additional opportunities.”

The bill also gives the city some leeway in how to spend the money, with 50% of the funds being devoted to housing projects and the other half being put into the city’s general fund. Other uses for the money could include down payment assistance and infrastructure improvements, according to a city presentation on the matter.

“Our interest would be to funnel it all, directly or indirectly, to affordable and workforce housing projects,” said Roberts.

Roberts said the city is already working to help address the shortage in affordable and workforce housing, but they need as many funding sources as possible to keep up with rising demand.

“The city currently does have some tools that we apply or deploy for affordable housing projects, but we need more,” Roberts said. “And this is one that has proven successful in other communities and that can be implemented rather easily.”

Steve Curley, director of Redmond Economic Development, Inc., said his organization had yet to take an official position on the fee. However, Curley said future commercial investment in Redmond depends on employees being able to find affordable housing.

“If companies are building in the area and they know that money is going towards cheaper housing, then it is worth it for them,” Curley said. “There could be a benefit to fund housing for workers that would be employees of those companies.”

Curley said most cities that have this type of fee charge developers 1% of a project’s permit valuation. Bend, which has had its fee since 2006, currently charges residential developers less than those building commercial properties.

He said as the cost of development continues to rise in Central Oregon and across the country, Redmond will have no choice but to continue looking for more money to address the local housing shortage.

“They have to look under every rock to find funding for low to moderate income housing,” Curley said.