J.T. Smith Companies, one of the Pacific Northwest's most prolific residential developers, is in the final phase of a new development in Newberg, Oregon. As a mixed-use development of both residential and commercial spaces, the development is supplying much-needed workforce housing to Newberg and the Portland Metro Area's communities. They are now in the thick of a two-year-long federal dispute over the city's alleged refusal to reimburse the company almost $2.4 million in Systems Development Charge (SDC) credits.
As of now, the Newberg development has built 190 single-family homes, 51 apartment units, and 50,000 sqft. of retail commercial space, with another 196 multi-family homes to be built in the coming months. Located immediately adjacent to OR-99W, the 30-acre property will serve as a gateway into the city for both North Newberg and Portland commuters.
J.T. Smith Companies was established in 1993 by Jeff and Teresa Smith and steadily grew into one of the top local developers of multi-family homes. With a current portfolio of 783 units, they pride themselves on their expertise, resourcefulness, and innovation in land development, residential building, and asset management. The new development will dedicate units to affordable family housing near the commercial center.
Part of the normal procedures for constructing properties and their infrastructure is for local jurisdictions – in this case, the Newberg City Council – to condition the building of infrastructure larger than what is needed to account for the future needs of the city. For instance, if a developer requires an 8" diameter line for their water distribution system, the city will require them to build a 12" water line, for which the cost difference will be reimbursed through a process called System Development Charge (SDCs) credit process.
SDCs are one-time charges exacted from private property building permits used to fund municipal development projects. Through these SDC exactions, a fund is cultivated for Newberg to use for reimbursement, improvement, and compliance costs. In J.T. Smith's first meeting with the Mayor of Newberg in 2022, they were made privy to the total amount sitting in the city's SDC fund – specifically allotted fees such as constructing public infrastructure – approximately $60 million.
Because of the new Newberg development's prime location, J.T. Smith's over-building charges have progressed much further than larger pipes for their waterlines. "Part of the over-building involved widening the highway itself. We took it from a rural condition – with roadside ditches – to a right-turn pocket, curb, sidewalk, and landscaping with underground and overhead utilities such as traffic signals," explains John Wyland, Chief Operating Officer at J.T. Smith.
Since they filed their initial case over two years ago in August 2022, the city has allegedly refused to pay the $2.394 million that J.T. Smith has sunk into over-building and mounting interest fees. However, the city initially agreed to a portion of the request totaling $420,000 of credits to be paid to J.T. Smith, as revealed in an email exchange between the company and a city manager that took place in 2022.
Despite the acknowledged $420,000 due by the city, despite a federal judge overruling the city's first Motion to Dismiss on the shaky grounds that J.T. Smith's suit was frivolous, and despite J.T. Smith's comprehensive itemized credit claims sent to the city, there is still no sign of the multimillion-dollar reimbursement that would actively drive down housing prices in a city whose cost of living is 120.7% the national average.
"Everyone is aware of the housing crisis in this country, particularly in the Pacific Northwest. The city's refusal to pay credits is just a slap in the face of affordable housing," Jesse Nemec, Senior Development Manager at J.T. Smith claims. The new neighborhood holds some of Newberg's least expensive new single-family homes. As a mixed-use property, the development stands as an example of sustainable urban planning, fostering community through seamlessly integrating various land uses and connecting diverse tenants within a single property.
With a Newberg home's average sale price of $475,000, the average homeowner must clear a monthly total of $4,000. For lower-income households, apartment rentals come to $1,500/month. New developments dedicated to the in-between class of workforce housing are essential to mending the broken supply of affordable real estate. With an estimated need for 800 new workforce housing units for the coming decades, there is a significant disparity in homes people can afford to live in. "We are trying to supply workforce housing to combat an out-of-whack scale of affordability," explains Jesse.
Similar to the recently concluded Sheetz v. County of El Dorado, J.T. Smith's federal case challenges the city based on their alleged violation of the Takings Clause of the Fifth Amendment, which states '... nor shall private property be taken for public use, without just compensation.'
"This is an incredibly long and frustrating process. For two years now, we have taken on the growing costs of interest and legal fees – now over $160,000 – and we are working against a public agency for whom it's best to sit back and do nothing. Newberg taxpayers are continuing to fund unnecessary legal fees for a frivolous lawsuit that has already been agreed to in part. With mediation, we could solve the unnecessary spending of legal fees," Jesse says, referring to their decision to file their case for full reimbursement in Oregon's federal courts, including interest and legal fees.
The Supreme Court's recent unanimous ruling in favor of California's George Sheetz has set a strong precedent for future suits against city ordinances, whose conditions often block new housing developments through extravagant fees. While the Mayor of Newberg, Bill Rosacker, has been open to mediation with J.T. Smith, the rest of the City Council and City Manager have been resistant despite the company's sustained efforts.
J.T. Smith Companies welcomes open discussion with the Council over their deserved reimbursement credits and additional fees. The company is committed to its mission of creating more affordable housing for the residents of Oregon and Washington and looks forward to further realizing its vision with the help of the Newberg City Council, through mediation.
