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HomeMy WebLinkAbout6-4-14 Applicant SubmittalsTONKONToRPLlP ATTORNEYS 1600 PIoneer Tower 888 SW Fifth Avenue Portland, Oregon 97204 503.221.1440 David J. Petersen Admitted to practice in Oregon and California 503.802.2054 Fax: 503.972.3754 david.petersen@tonkon.com May 28, 2014 VIA E-MAIL (kevinh@co.descllutes.or.us) Mr. Kevin Harrison Deschutes County Community Development Department 117 NW Lafayette Avenue Bend, OR 97701 Re: Loyal Land, LLC Appeal to Board of Commissioners County File No. A-14-1 Dear Mr. Harrison: Enclosed is transcription ofthe hearing on February 4, 2014 in A-13-8. The transcript is provided as required by DCC 22.32.024. Thank you and please contact me if you have any questions or concerns. Sin~reJi:i ../J_ ~~=-=~-~-.;;;:::,.. David 1. Petersen DJP/djp Enclosure 0371 J7100001 15569779v 1 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN Good evening. My name is Karen Green, and I'm the Hearings Officer for this evening's hearing. We are here for one matter on the agenda, and this is remand from the Land Use Board of Appeals. Well, I'm not going to cite the original, original file numbers, but the LUBA number is 2012-042. The underlying land use decision that was remanded is DR-ll-S. And as I understand it, a new appeal number, Kevin, was assigned to the remand request, and that's the AI3-S. KEVIN That's correct. GREEN Okay. So the Land Use Board of Appeals on January 11,2013 remanded my decision in DR-ll-S, and by a letter dated, I think, January 2, the applicant (underline applicant) Loyal Land LLC requested that the remand be initiated, and so that's why we have a hearing tonight. Is that correct? KEVIN That's correct, except that the, the letter from Loyal Land designated David Petersen of Tonkon Torp as the agent of record was received January 3, 2014. GREEN January 3. Okay. KEVIN F or purposes of, of capturing the statutory time line for a County decision, I think, I believe that January 3 is the correct start date. GREEN Okay. All right. And as I recall from the letter, there was a question about the relationship between Mr. Petersen and the underlying applicant, and you had asked for clarification of that through a letter that you had sent out on the 1st or 2nd of January. Okay. KEVIN That's correct. GREEN All right. And because, that date is important because the statute requires that a final decision be issued on the remand within 90 days of the date that the remand initiation request is filed. So that's, that was when the clock started. Okay. So before I hear from staff and the parties in this matter, what I want to do is just briefly go over the procedures that we follow for public land use hearings. There's a few little different spins on a remand hearing, and I'll talk about those in just a moment, but basically, the purpose of tonight's hearing is for me to consider the remand from the Land Use Board of Appeals. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 1 of33 1 . Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN The order of proceedings will be as follows: I'll open the public hearing on remand; I'll ask for staff report from Kevin Harrison; and then I will hear from the applicant, and then from opponents, and under the statute and County's administrative or development procedures or __. The only parties to this proceeding are those parties who appeared in the previous proceeding, which if I recall correctly is just Loyal Land, Thornburgh, the Thornburgh entity, and Miss Gould and her counsel. And remind me Paul, was Land Watch a party or was it just Nancy Gould. PAUL [Could not hear response.] GREEN Just Miss Gould. Okay. All right. So the limitation established by statute and ordinances that only those parties are able to participate in the remand. So I'll hear from the applicant, from opponent, and that'll be it, and then I'll have a closing and any closing comments from staff. To give testimony as always, you need to be at a microphone. So what I'll do is when I invite you to come up and speak, I'll ask you to come to the table that's on your right, my left, where there's a microphone, and there's a sign-up sheet. And before you start to speak, if you please take a moment put your name and mailing address on the sign-up sheet, and then before you start speaking state your name and mailing address for the record. GREEN Oregon law requires me to make some disclosures, which seem a little odd in this case because the statute requires that I be the hearings officer who hears this matter, but I think just to be on the safe side, I'm going to go ahead and make these disclosures anyway. The first one is whether or not I've had any ex parte contacts, and that would be contacts between myself and any of the parties to this proceeding on the merits of the proceeding outside of the hearing, and I'll state at this time that I've had no ex parte contacts. My only contacts since my last decision was issued or have been with County planning staff to set the hearing and obtain copies of relevant parts of the records. I'm also required to disclose if I have taken any evidence outside of the hearing, such as at a site visit, and I'll state at this time, I have taken no evidence outside of the public hearing, and I have not visited the property in preparation for the remand hearing, and have not received any other type of evidence outside of the public hearing. Any party may challenge my qualifications to act as hearings officer in this matter, even though the statute requires that I be the hearings body to hear this on remand. If anyone believes that I cannot be impartial, I believe you still have the opportunity to challenge my qualifications to act as hearings officer on this remand, and I'll state at this time, I have no personal interest in the outcome, have not, and still do not. I believe that I can be impartial. Does anyone wish to challenge my qualifications to act as hearings officer on the remand? [slight pause] Okay, hearing none, I'll proceed. Transcription of Hearing on Thornburgh Remand (A13-8) Page 2 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN Unless I hear an objection, I'll rely on staff's, let's see, you've not done a staff report, so it'll be staff's oral presentation tonight to list the applicable criteria as well as obviously the Land Use Court of Appeals decision on remand listing the applicable criteria On the remand, this will probably be a good time to tum to the remand procedures and the County's development procedures or --' which is in Chapter 22-34. This chapter sets out the procedures for a remand from the Land Use Board of Appeals or the Court of Appeals. As I mentioned earlier, one of the restrictions through these provisions is that the only parties to the remand are those parties to were those persons who were entities who were parties to the original hearing. The County has done another notice and we've set another hearing. GREEN The hearing procedures are those, the same as those that would be applicable to any other land use matter that is before me on hearing. Section 22-34-040 of these provisions basically kind of establishes the parameters of my review on remand. And let me just go over those. Paragraph A speaks to the issues that are subject to the remand and those are the issues that were required by LUBA to be addressed. So, the guiding document for that would be the LUBA decision itself. Paragraph B speaks to discretion is couched in terms of the Board, Board of County Commissioners. In previous remand matters, the County's hearings officers have concluded that although the language says for the Board, this discretionary provision also applies to hearings officers when the hearings officer is the entity reviewing the matter on remand. This gives the hearings body, in this case, the hearings officer the discretion to allow a modification of the application to address issues involved in the remand to the extent that any modifications would not constitute a new application. Paragraph C, which does not make a reference to the Board, specifically also allows the parties to submit additional evidence, additional testimony to the extent it is required to comply with the remand. And ifI determine that additional or ifI'm, I'm presented with evidence or argument that additional testimony is necessary for the remand, this provision authorizes the parties to raise new unresolved issues that relate to that new evidence, and that new evidence has to be directed toward the issue that L UBA remanded for. Any issues that were resolved by the LUBA appeal or were not appealed are not before me on the remand. Transcription of Hearing on Thornburgh Remand (A J3-8) Page 3 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 GREEN Okay. So I think that's, that's basically the parameters. I know that the applicant has submitted an additional piece of evidence and an , additional, I guess I'd call it a burden of proof statement. I don't know if Mr. Dewey's had an opportunity to review that, but one of the things that we'll need to talk about is whether and to what extent I should consider new evidence that's been submitted by the applicant as well as the applicant's argument. So I'd appreciate hearing from staff as well as from the parties on that issue. Okay, so back to my, my general opening remarks. The failure to address an issue in this proceeding with sufficient detail for me to understand and resolve it in my decision on remand may preclude an appeal on that issue should there be an appeal of my decision on remand. That's what we call the raise-it or waive-it rule. So any argument, any position that you want to take, any, any claim that you want to make in the remand proceeding needs to be made clearly enough so that I can understand it and address it in my decision. A similar issue or similar rule applies to proposed conditions of approval that's not really at issue in this case given the nature of the remand, but a similar issue applies to proposed conditions of approval, namely that any claim that the conditions of approval are unlawful, unconstitutional, or exceed the County's authority, etc. need to be made clear enough before me at this level for me to consider it and address it in my decision or you may also lose your opportunity to raise that same claim down the road in a civil action, for example, for damages. Okay. Any questions about the procedure that we're going to follow for the remand tonight, the remand hearing? Yes. DAVID You didn't indicate whether or not the applicant had the opportunity for rebuttal. GREEN Yes. I'm sorry. The applicant should have opportunity for rebuttal following the opponent's testimony. So thank you for bringing that up. Okay. Any other questions about procedure before we get started? Housekeeping matters -if you have a cell phone or a pager or anything that makes noise, rings, please tum it to the non-ring mode or tum it off. If you have to take or make a phone call during the hearing, hopefully you won't have to, but if you do, please take it out in the hall. Restrooms and drinking fountain are down the hall and to your right. Okay. If there are no questions, further questions, I'll hear from staff. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 4 of33 (, Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 Thank you. For the record, my name's Kevin Harrison with the Community Development Department, and I have not prepared a staff report. Just to help perhaps focus the discussion, the remand was based on the fourth assignment of error, which has to do with Deschutes County Code, Section 22.36.020, subsection A3. And these are criteria that need to be addressed in order to determine that a land-use approval has been initiated. And what LUBA wrote in their decision was the hearings officer must be able to find both at the 38 conditions of approval viewed, viewed as a whole have been substantially exercised and that for any of the 38 conditions of approval where there has been a failure to fully exercise the condition, the applicant is not at fault. So, I'm, I'm here to answer any questions to help guide the process alone, but I don't have anything else to add to that, that direction. GREEN KEVIN Okay. I do have one question I want to pose Kevin to you and to the parties. The LUBA decision looked at both the, the two sections of the initiation review, one of which has to do with substantial construction. Let me get the actual language out. Section 22-36-010, which sets the, the standard for determining if the development action has been initiated. The three criteria are [1] that the proposed use has lawfully occurred; [2] that substantial construction toward completion of the land use approval has taken place; or (3) where construction is not required by the approval, the conditions of the permit are approved and have been substantially exercised, and any failure to fully comply with the conditions is not the fault of the applicant. In the applicant's materials, the applicant argues, makes arguments under subsection 2, which is the substantial construction toward completion standard. My decision did not address that standard and specifically found that, that standard was not applicable. And as LUBA noted, that determination was not appealed, and LUBA proceeded to review my findings under subsection 3, which is the one that, that you just described, Kevin. However, on remand, the applicant has submitted argument and evidence related to subsection 2, and so a question that I would pose to you and to the parties is in the context of LUBA's remand and I consider evidence and argument under that subsection where I didn't consider or rejected that subsection as applicable in the original decision, and LUBA did not. That was not appealed, and LUBA did not overturn that or include that in any of the issues on remand. I think that I perhaps can include findings on that condition in the decision, but it may be superfluous or inappropriate under the circumstances. So do you have any thoughts on that? Kevin to start. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 5 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 KEVIN I have, I did review the Code section on hearing on remand, and I read the section to say that the hearings body, other than the Board of County Commissioners, will hear the remand on the record. The Board of County Commissioners has flexibility that's not granted to other hearings bodies to, at their discretion, take new evidence and testimony. So I, I read a distinction there between different hearing bodies. GREEN And I did not have time today to go back and find my previous decisions on remand where that issue came up, but I do recall that I read, I interpreted that more broadly than just the Board. So your position is that it just means the Board and that I don't have discretion to consider additional evidence even if it's related to or necessary for the issues on remand, that only the Board can do that. Yeah, the Board has to KEVIN Yeah, that's the way I read that. GREEN Okay. The reading is strictly to apply only to the Board. Okay. So generally, it's the County's position that I don't have the authority to consider additional evidence. If, if I do based on my previous decisions, what is your thinking on whether I can take evidence and argument on a, on a subsection that I didn't apply on remand, and that was not, that I did not apply in the original decision that is not a part of the remand? KEVIN Well, I, I don't think I can express a County position. I don't know that this has, this has come up at the stafflevel before. And, frankly, I can't recall a hearings officer decision that, that ruled on this matter, addressed this matter, so this is a, for me, this is a case of first impression of that Code of that GREEN Of that section? KEVIN Yeah. GREEN Okay. Anything else? Kevin? i KEVIN No. GREEN All right. Okay. So I'll hear from the applicant. DAVID Is this on? Yes, it is. Great. GREEN If you would just take a minute to sign in on the sign-up sheet before you start speaking. i DAVID Actually, I already have. GREEN You already did. All right. Then just introduce yourself for the record. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 6 of33 I Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 DAVID Great. Good evening. My name is David Petersen. I'm an attorney with Tonkon Torp in Portland. Our address is 888 SW 5th Avenue, Suite 1600, Portland, Oregon 97204. I'm here today representing the applicant, Loyal Land, LLC. And I'd like to start by touching on a point that Mr. Harrison just raised, which is what is the precisely the question here on remand? Mr. Harrison characterized it as specifically, the third prong of the three prong or the three ways in which a land use approval can be initiated. And I would submit that that's actually not the question or maybe an overly narrow statement of the question. I believe the question is really whether or not the conceptual master plan here has been initiated under sub, subsection A as a whole. And, as, as you know, there are essentially three prongs or three ways that, that can happen. The first is whether or not the use has lawfully occurred. The second is whether substantial construction has taken place. I'm paraphrasing. And then the third is this kind of long test where if construction is not required by the approval, the conditions have been substantially exercised and the failure to fully comply with the conditions is not the fault of the applicant. DAVID I'd intended to discuss those three prongs in kind of the order presented in my letter of January 2, but in light of the preliminary discussion, I feel I should probably address some threshold questions. I believe you said just a moment ago that you had expressly found that the substantial construction prong was not applicable in your initial decision in this matter. I would dispute that. I don't think there was any discussion in your initial decision about whether the first or second prongs applied. I think the, the decision pretty much jumps right into the discussion of the third prong. Excuse me, and I think that was based in those ball park quite frankly on the application but, also on, I think pretty much assumptions that were made by all parties and yourself as well, quite frankly, that, that the third prong was the only one that would apply here. GREEN Let me, let me just stop you for a second. DAVID Sure. GREEN I'm, I'm looking at page 18 of my declaratory ruling decision, which addresses these criteria. I think perhaps my, I did make a ruling on this at least that's certainly what I intended and that's how I read this beginning at the findings toward the top of the page. No use approved through the Thornburgh CMP has occurred, and no construction was required by the CMP. Therefore, there is also finds the applicant must demonstrate the uses initiate, initiate under subsection A3. So I think I, I certainly intended this and I think LUBA read this as well as I do now as saying 2 doesn't apply. And we're looking at 3 also. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 1 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 DAVID So as I believe you're probably relying on the phrase, no construction was required by the CMP. With specifically with respect to prong 2, and I am assuming that those kind of two clauses separated by commas kind of address clauses 1 and 2 in order. Clause 1 is the proposed use has lawfully occurred. GREEN Right. DAVID The decision says no use approved has occurred. Clause 2 is substantial construction toward completion of the land use approval has taken place. Your clause is no construction was required by the CMP. But whether or not construction was required is not, is not responsive to prong number 2. Prong number 2 only says substantial construction toward completion of the land use approval has taken place. It's entirely possible that substantial construction towards completion of the land use approval can take place whether or not it's required to have taken place. And that is in fact the situation in this particular case where substantial construction has taken place notwithstanding that it wasn't necessarily required by the CMP. So I guess I would dispute that. GREEN Okay. Assuming that, that I'm correct that and, and LUBA correctly characterized my decision as focusing only on 3, and there's a fairly extensive discussion in the LUBA decision about why 2 probably applied and why I probably should have applied 2 but I didn't, and there was no appeal on that and so they're going to move on to 3. Assuming that my remand is, is focused on my findings on, on clause 3, can I make findings on clause 2 in the context of the remand? And you know, I, you don't necessarily have to answer that right now. I guess that's, that's kind of the, the, the threshold question with respect to your evidence and argument about substantial construction. DAVID Well, I, part of_ to your question, I think it kind of presupposes the answer. IfI'm understanding your question, you're saying if I'm limited to on remand to considering prong 3, can I make findings on prong 2? I would say if the predicate is true, then, then no, you can't, but I would dispute that, that, the issue on remand is in fact limited to prong 3. And a number of reasons why I would dispute that and I'd, I'd like to go into that in, in some detail if I may. GREEN So I guess for purposes of that, and that's fine, I want you to go ahead and make your record. I guess it's sort of in the nature of an offer of proof. If I can't consider this evidence, then I, then I may not be able to consider what you're going to put on the record, in which you've already put in the record. Ifl conclude that I can, I'll consider it. Ifl conclude that I can't, then I simply can't consider that additional evidence. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 80f33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 DAVID Certainly, and so my, my intention today, and I anticipated this was going to be an issue, but I intended and I'm going to do this and make my presentation primarily on why you can consider these other two prongs. With respect to the third prong, I feel that the argument submitted in my letter is pretty much the argument. I don't want to take up too much of your time restating what I've written, so I'll probably pass over prong 3 and at least to my overall presentation except to maybe in broad terms. GREEN Okay. DAVID So I think the issue here about whether or not you can consider either prong 2 or prong 1 for that matter on remand because I've certainly referred to it in the shorthand as a question of the law in the case. And I think the seminal case on this issue is Beck v. City ofTillamook, which is a 1992 Supreme Court case and, if you're not familiar with the facts, I'll, I'll briefly touch on them. In that case, GREEN What's the citation? DAVID It's 313 OR 148 (1992). i GREEN Thanks. DAVID So in that case, there was an appeal to LUBA from I believe an approval, and the petitioners raised four particular assignments of error, four out of five actually, they had lost, in LUBA, they had lost in those four assignments of error. They didn't further appeal it to the Court of Appeals. It was returned to the County on remand. The County went through the remand process, at least I think it was a city in this case. The city went through the remand process. It went back up to LUBA and those same petitioners tried to raise the same four assignments of error again in the second LUBA appeal. And what the Supreme Court said is, no, you can't do that because those issues were previously resolved; they were discussed; litigated if you will; resolved; and not further appealed to the Court of Appeals. And so that, the opportunity to pursue those claims any further was waived. Beck's not directly on point here because there really has been no discussion, no argument, no litigation, and I would contend really no decision with respect to either the first or the second prongs at any time. I think the applicant and pretty much everybody has assumed from the outset without really any significant discussion that this was a prong 3 case. Transcription of Hearing on Thomburgh Remand (A 13-8) Page 90f33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 DAVID There are many cases under Beck that kind of refine the principal. And I think: some of the other ones are, are a little bit more helpful here. One would be Shatz v. City ofJacksonville, 113 Or App 675 (1992). In the Shatz case, the Court of Appeals talks about how the relationship between LUBA and the local government is really not the same as that, as an appellant in a trial court. Ws a, it's a, it's a different relationship. And the language from that case that I think is particularly instructive here, the Court of Appeals says that a remand only tells the County that its ground for approval are not affirmable. It does not necessarily to note that the alternative bases cannot exist and cannot be considered. So in this edict, just because this had been remanded with, with the instructions that will maybe category three or other maybe wasn't the best choice and you really should have done it under prong 2, and you need to reconsider your decision, that does not mean that these additional bases can't be brought up. DAVID A similar case and the last one I'll touch on is specifically, as far as a case, is Martin v. City ofDune City, 45 Or LUBA 458 (2003). In that case, the City of Dune City approved a partition based on a particular criterion. I'll call it a criterion X. LUBA overturned, remanded it back to the City, and the City permissibly reapproved the partition based on criterion Y which had not been previously evaluated. And what's particularly instructive about that case is that LUBA recognized that in the first, the first time the City heard the partition, they approved it based on criterion X. They reaIJy had no reason to go on Y. And I'll say that's very analogous to this situation. You approved this application based on prong 3. You really had no reason to go on to consider either prongs 1 or 2. It was sufficient to have approved it under prong 3. So the GREEN Remind me. Did the, did the applicant argue under clauses 1, 2 in the original DR burden of proof? DAVID No. GREEN Because it. Okay. So why would that not have been a waived argument? DAVID Well, I think that's, I think that kind of goes back to the good question of the assumption that all the parties were making. By parties, I'm including the County in that. GREEN Had you, had you made that argument in your application for a declaratory ruling, I'm assuming that the staff would have responded to it as would Miss Gould, and there would have been briefing on that question and on the question of substantial construction and evidence on it, which if I recall correctly there is none in the record until what you submitted with your remand burden of proof. Transcription of Hearing on Thornburgh Remand (AI3-8) Page 10 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 Well, I think there's a distinction to be made between assumptions that may have been made that, that did not lead to, that eventually that resulted in these particular bases, alternative bases for approval never being really evaluated, explored, discussed, considered versus the kind of the line of reasoning under Beck, which is that, that are issues that are actually discussed, considered, and resolved, and then not further appealed that whatever stage in the process _they, the claimant may choose to not appeal them. That's really kind of the distinction in this kind of this two sides of the cases that are interpreting Beck. On the one hand, you have the ones where issues are examined and resolved, not further appealed; those are waived. In this case, this is more like the City ofDunes. The situation that I mentioned in Shatz where it's really never even been thought about or talked about. And the land use process is different, and the relationship between LUBA and the County is different than we might be thinking in our heads about the relationship between a trial court and an appellate court where there's going to be much more strict restriction on that kind of raising new grounds for approval on remand. DAVID DAVID So I also want to talk about the, whether you, you can consider new evidence, which is a question you raised at the beginning. Well, I think that maybe before I talk about new evidence, I need to talk about changing the interpretation. So the first time around in your decision, your interpretation was that construction was not required by this approval and therefore prong 3 was the applicable prong to examine the application under. LUBA has certainly suggested rather strongly in its remand that perhaps a different prong should have been applied. Now, local governments are certainly are available. It's certainly available to local governments to change their interpretations, which approval criteria do and don't apply even during the course of an on-going proceeding. And the case that I've got for that is Holland v. City of Cannon Beach, 34 Or LUBA 1 (1998). In that case, the City of Cannon Beach had made a ruling on a subdivision application without saying anything either way on one of the listed criteria from the staff report. That led LUBA to remand it. On remand, the petitioner argued to the City that since I was last here, you evaluated another subdivision just fu~~~~~~~~oo~~~~w~~~ this type. And the City said, on remand, well we, we, it doesn't really matter what we said before. This criterion does in fact apply to subdivisions of your type, and LUBA upheld that decision. So the fundamental premise here, and LUBA in fact used the words fundamental premise, is that the City is free to change its mind on the applicable approval criteria even in the course of the same case as it was going up and down between LUBA. Transcription of Hearing on Thornburgh Remand (A] 3-8) Page]] of33 Transcription of Hearing on Thornburgh Remand (AI3-S) February 4,2014 DAVID Another case is Marquam Farms v. Multnomah County, 32 Or LUBA 240 (1996). In that one, there was two different applications. There had been a previous application for a nonconforming use. GREEN What was the case name again? DAVID Marquam. M-A-R-Q-U-A-M or Marquam Farms v. Multnomah County. In that case, the hearings officer had made a nonconforming use determination. Then in a subsequent application by the landowner for conditional use permit, the County was free to correct the prior misinterpretation of its own code. What it saw was a prior misinterpretation of its own ordinance, applying nonconforming use rules. So I think by analogy, you certainly have the opportunity and you've even been invited by LUBA to reconsider your application of only prong 3 and consider prong 2 and apply it to the application. GREEN You read that as an invitation to consider prong 2? DAVID Sure. I would read it as an invitation. GREEN I didn't read it that way. DAVID So I, I, I, I say all this, and I make this argument all because I'm leading up to the question of new evidence because we've submitted this, this affidavit. We're trying to establish substantial construction. And in that same Marquam Farms v. Multnomah County case that I cited to you, LUBA held in that case that if a county changes an interpretation of its ordinance, the applicant must be given a chance to present evidence and argument in responsive to the new standard. So if, hopefully, you agree with me that you can consider prong 2, that kind of necessarily triggers the right of the applicant to provide the evidence, and certainly the opponent as well to provide evidence that's responsive to that standard. And I think: that DCC 22-34-040C is consistent with this, which I believe is as if additional testimony is required to comply with the remand, the parties may raise unresolved issues. There's nothing in that, that I think: would prohibit the acceptance of new evidence. Now Mr. Harrison touched on the question, well, can the hearings officer do that versus the Board. I believe he was referring to clause A, which does specifically refer the Board, but certainly, but clause C doesn't say having any limitation on what entity authorizes the acceptance of new evidence. So, that's more or less the foundation by which I hope to establish that we can have the consideration of prong 2. DAVID I'd like to go into the evidence on prong 2, ifI may. GREEN Okay. Again, understanding that I may conclude that I can't consider it. Transcription of Hearing on Thornburgh Remand (AI3-8) Page 12 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 DAVID Certainly. Of course. So we have this affidavit from Mr. Lindley. He shows that over $6.8 million has been spent on construction to date. None of this is just generic, if you will, construction. The expenditures and the work that's been done has really has no value other than in furtherance of the proposed resort. There's been about $2.6 million spent on actual physical construction. There's $1.1 million to build the BLM access road, $1.4 million for off-site construction of the community center log lodge which is responsive to a particular condition of approval that requires a certain minimum amount of money spent on recreational amenities. Excuse me. I touched on this a little bit at the beginning. This is a maybe a somewhat unusual situation where even though the conditions of approval to the CMP prohibit development without further land use approvals, that's condition number 2 and also the Deschutes County Code provision that establishes the three-step process for a destination resort, there is the opportunity with this project to have done construction on land not subject to that, to the County's jurisdiction, namely the BLM property, and also the expense is pretty significant money on off-site work. The milling of this log lodge, essentially pre-assembly or pre-fabrication so it can be assembled on site. So we have the situation where significant amount of money, $6.8, almost $7 million has been spent on preconstruction and actual construction activities, which falls well within the definition of what substantial construction is. You look at the definition in DCC 22-36, Code 20B, and to find substantial construction is the alteration of land directly toward completion of the project, which demonstrates a good­ faith effort to complete the development. I think you would be hard­ pressed to argue that spending almost $7 million on things that otherwise of no use is not demonstrating a good-faith effort to complete this project. GREEN So, let, let me stop you there just for clarification. I've, I have, I've assumed and perhaps incorrectly that the work, land work that was done to which Mr. Lindley refers was done on the privately-owned property, and not on the BLM properties that. Was that not correct or was it on both? DAVID Well, the, a very minor physical bit of work was done on the property. There was a conversion of an existing house into an office. I believe Mr. Lindley says 70-odd thousand dollars was spent on that. So certainly a lion's share was not spent on the privately-owned property. It was spent on BLM of $1.1 million GREEN For the road. DAVID for the road, and $1.4 million off-site to mill this building. Transcription of Hearing on Thornburgh Remand (AI3-8) Page 13 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 GREEN Okay. So I guess that just raises a question that I hadn't considered previously, which is whether the substantial construction has to occur on the subject property. It doesn't, it doesn't seem to limit it to, so limit it, but DAVID But I must admit I didn't consider that question either, but it doesn't say that in the Code. It says DAVID & GREEN [They say this in unison.] substantial construction per completion of the land use approval. GREEN Okay. DAVID I think it relates to kind of my point right at the outset about is it required versus did it occur. GREEN Uhhuh. DAVID Now, it may not have been required, but it's occurred. GREEN So that, it seems that the key phrase is toward completion of the land use approval. DAVID Yes. And I, I think it's equally key phrase, if you will, is the definition and the focus on. I can, can paraphrase it. The full definition says that the alteration of the land is directed towards the completion and is sufficient in terms of time, labor, or money spent to demonstrate a good-faith effort to complete the development. GREEN This is 36? DAVID 22-36-020B. I think it was somewhat interesting about that definition is it talks about physically altering the land or structure for changing the use thereof, but interestingly in the Tetherow decision that I provided you, the Planning Department relied not just on what we all kind of think of as classic construction, physical alteration, but also pre- construction costs, if you will, design, engineering, and that kind of thing. And so that's where the $6.8 million number comes from here. And in addition, the $2.6 million spent on classic, physical construction, there's significant investment in planning and design and architecture working towards a tentative plat for the first phase, working on the final master plan. And those were considered in the Tetherow decision and should equally be considered here. DAVID So I'm going to move on to the third prong, the one that I don't think there's any dispute is available for review on this remand. So the first two or three times I read the LUBA decision, I, I, I felt like there was, saying that in your earlier decision, you'd really gone off the rails, if you will. And the more I thought about it, the more I, I came to the conclusion that really you more or less did what LUBA wanted you to do. You just used different terminology. And your decision talks about which conditions are relevant. And your relevance determination Transcription of Hearing on Thornburgh Remand (A13-8) Page 14 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 depends on pretty much in large part on when they either had to be performed or what precursors there were before they could be performed. And that's very similar to what LUBA has said in terms of evaluating the conditions viewed as a whole as to whether they've been substantially exercised. LUBA did say that you can consider in determining whether viewed as a whole the condition has been substantially exercised, or it's possible to reach that conclusion even if some conditions have never been touched for that matter. And I don't want to go into the detail here because I think I do it rather well in my written materials, but if you look at the conditions that have been satisfied, it's almost 40 percent of the conditions but, more importantly I think, it's a 100 percent of the conditions that even could be performed. And so if a substantial exercise hasn't occurred when you've done. everything you could possibly do, then I'm, I'm having a hard time imagining when substantial exercise could occur at all. DAVID There's also, of course, the second half of the task which is the failure that fully comply is not the fault of the applicant. It's, it's, it's another side of the same coin. And as I explain in rather, in some detail in my appendix, all those conditions that haven't been fully satisfied, it's because the applicant isn't able to satisfy them. They're barred by the particular structure of the three-step destination resort process and by the delays that have resulted from appeals and the wording of the conditions. And I think if you look at the conditions in a whole, as a whole, they may make a lot of sense because they fit within the rubric of the three-step process. And I, and I think the, the ordinance, the Code provision that talks about the three-step process is really important to look at and maybe got some short shrift by the applicant the first time around, for that matter, and that's DCC 18.113.040. That's the, the title of it is Application Submission. It talks about how you get a permit for a destination resort. And what's interesting is the very first phrase in that Code section says, the authorization of a permit for a destination shall resort shall consist of three steps. A single permit that has three pieces, not three different permits. And so, what Loyal Land has essentially is one-third of a permit at this point because it doesn't have the final master plan. It doesn't have any site plan review for any portion of the site. And if you look at the conditions, they work the same way. There are certain things that could be done, but many of those things can't be done because those second and third pieces of the permit don't exist. They never existed. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 15 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 DAVID That's my last, my segue into my last point which is the application of the first prong of 22-34-020A, which is that the use has lawfully occurred. The County is the ultimate arbiter of what its Code means. That's ORS 197.829. There's certainly, there's limited exceptions when LUBA is not obligated to affirm a local government's interpretation of its land use regulations, none of which are applicable here. You know, LUBA talked in their opinion a little bit about what is the use, approved by the CMP. And they said the use is a destination resort. They only said that in the context of determining whether or not they thought construction was, whether or not construction was not required because they were considering the application specifically of prong 3, and they didn't actually ever resolve that question. So I think it's an open question to the County at this point to resolve exactly what that means. And I would submit that given the, the three-step structure of the, of the authorization of a permit for destination resort that really the use authorized by the CMP is nothing other than the right to file an application for a final master plan. And that's because as I mentioned it's consistent with the way the conditions are structured, you know, and that, and that use lawfully occurred on April 21, 2008, which is well before the conditional master, a conceptual master plan expired. DAVID And then lastly, I would say that alternatively, the use has also lawfully occurred because 100 percent of the conditions of the CMP that could be satisfied have been satisfied. And to hold that the use requires the applicant to do something more, this is at the same time prohibited by the structure of the County Code and the time that it has taken to resolve appeals on this matter really just wouldn't, would frankly be absurd. If the, when the applicant has satisfied 100 percent of the conditions and done everything it can possibly do before it gets the next approval that it doesn't yet have, it's hard for me to understand how you could say anything other than the use has lawfully occurred as far as going to the next step. And that's the end, the end of my comments. GREEN While you were speaking, I was just refreshing my memory about what, how Title 18 defines use in 18-04-030. Alphabetically, down at the end, it's very quick. I'll read it to use. Use means the purpose for which land or a structure is designed, arranged, or intended or for which it is occupied or maintained. So it, your argument about the CMP, the three-part permit, it doesn't fit precisely within that definition, not as neatly as say a conditional use permit to operate a use like a hotel. I understand your argument. DAVID Yeah, and I guess my response would be that, that the definition of use is going to be applied in many, many, many contexts, and a destination resort is a very specific approval that has a very specific four-paragraph Code provision. And the specific would control over the general. I suspect that definition may be is older than the concept , Transcription of Hearing on Thornburgh Remand (AI3-8) Page 16 of33 (." , Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN Oh, I'm sure. DAVID of a destination resort and doesn't contemplate such a complicated GREEN Goes back to 1979, no doubt, the first design work that's probably, so. Yeah. It's one of many things that doesn't always fit exactly with more modem provisions. DAVID Yes. I suspect it didn't contemplate this kind of situation. GREEN Nope. DAVID Unless there's any othet questions, I'll let Mr. Dewey have GREEN I don't have any at the moment. So thank you Mr. Petersen. DAVID Thank you. GREEN Okay. I'll hear from opponent. PAUL Good evening. Paul Dewey representing Nancy Gould. 1539NW Vicksburg, Bend 97701. The first, and I won't repeat all that I've written in here as well, but our first issue is actually the scope of the remand because we too believe you ruled on page 18 and, in fact on the latter issue of whether or not the use has been initiated, you state very clearly, no use approved through thc Thornburgh CMP has OCCUlTed. And, and actually the L UBA a couple of times referred to the use as being the destination resort. So we believe that, well I'm getting ahead of myself. First, go back to whether or not we're even having addressing. GREEN Prongs 1 and 2. PAUL Prongs 1 and 2. I was reading the language of the Code more narrowly than you were suggesting, I guess more like Kevin was, and because the Code does shift terms. It's at that point, it refers to the hearings body and then it refers to the Board and under the, you know, classic PGE analysis. GREEN Right. Text in context to PAUL Because you're using different GREEN Right. And, and actually I need to, I need to step back and correct myself. As we were talking about this and I looked at that language again, I think my previous decisions related to the third piece of that scope, remand scope provision, not the part that refers to the Board which has to do with modifying, but the third part that has to do only with taking new evidence. And I think in the decisions that I'm recalling, I've said that because there's no reference to the Board or the hearings body in that third piece having to do with new evidence that as if the remand goes to the hearings officer, the hearings officer has authority to allow new evidence as opposed to what I said earlier, which was that the second piece having to do with modifying, it goes beyond Transcription of Hearing on Thornburgh Remand (A13-S) Page 17 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 the Board. So I think, I, I misspoke. What I meant to say was that I have interpreted the third piece having to do with allowing new evidence to come in to apply to any hearings body, not to the Board, because it doesn't refer to the Board specifically. So, sorry for any confusion. I think I just misspoke as to what I recalled from those previous decisions. PAUL And my response to that is that they're not unrelated -one and three. And in fact, see GREEN Right. They can be related. PAUL If additional testimony is required to comply with the remand, and I believe then, that is (a) on remand, the hearings body shall review those issues that include required to be, to be addressed. So we just disagree with what that interpretation is. GREEN Right. Right. So if the, if the scope if as Mr. Petersen argues, the scope includes all three pieces, all three prongs, then I would be able to, under the third piece of the remand, scope section having to do with new evidence, I would be authorized to allow new evidence if it was necessary to address the remand. If the scope of the remand is only prong 3, I would still have authority to allow new evidence if it's required to address the remand issues with respect to prong 3. PAUL Right. GREEN So those are kind of the two, the two options, but they all come back to the threshold question of how, how broad is the remand. PAUL Right. GREEN How broad are the issues on remand? PAUL Yeah. And GREEN So your position is that we're, we're focused on prong 3. PAUL Right. GREEN And reconsidering and redoing the findings PAUL Right. GREEN Making new findings on prong 3. PAUL I think, I think we are at this point. If this was at the Board level, then they obviously have discretion perhaps, although GREEN To allow a modification that would PAUL Right. GREEN Would that actually be a modification though? I'm not, I'm not sure what the Transcription of Hearing on Thornburgh Remand (A 13-8) Page 18 of33 I .; . .' , Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 PAUL Well, I don't know in, in, and, you know, and again, I look at the language of your decision, and, and you did make determinations on these and they weren't appealed, and so I'm wondering whether under the law, the case even the Board GREEN That was, I guess that was my question to Mr. Petersen, and I even looked at those. PAUL Even the Board could do it. Yeah. GREEN Whether the Board could do it and it or it have their discretion. Yeah, and I don't know, and I guess I think of a modification on remand as something different from expanding the, the theories on the same use. I've, I've thought more of a modification as kind of a change in the use, but I haven't, I haven't given it that much thought here in the context of this case. PAUL Okay. Could I back up just a moment? You mentioned at the very beginning that Loyal Land had submitted an addition or supplemental burden of proof. GREEN I called it a burden of proof and that may be inaccurate. What I was referring to is there's a letter dated January 2 from Mr. Petersen to Nick Lelack. PAUL Yes. GREEN And then that had attached to it the affidavit of Mr. Lindley and, sorry, Appendix 1 to the letter to Mr. Lelack, also dated January 2, which I called a burden of proof because that's basically what it looks like. Is that a document that you've seen? PAUL Yes, that I've pulled the County website. It had a number of attachments here, your earlier decision GREEN Right. PAUL The LUBA decision and GREEN Right. PAUL I just want to make sure that there wasn't something new. GREEN Something else. That's the, Appendix 1 is really the document that I was referring to. Mr. Petersen. DAVID Were you thinking of the January 3 letter which is really just an authorization from me to represent Loyal Land. GREEN Okay. And yes, there is an additional letter Mr. Petersen referred to that clarifies his, his relationship with Loyal Land in response to Kevin's January 2 letter asking who, who the applicant is and whether there's a match between the remand, requestor, and the applicant. But when I spoke about the burden of proof, I was talking about Appendix 1 to the Transcription of Hearing on Thornburgh Remand (A 13-8) Page 19 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 letter. Okay? PAUL Okay. But given that objection, I will briefly, and, and I do address A2, A 1 as well as A3 since you might rule that, that could be considered in. I would just like to emphasize that I believe that substantial construction, and it's defined in 22-36-020B really does mean the site not, not offsite. It states substantial construction has occurred when the holder of the land use approval has physically altered the land or structure or changed the use thereof. GREEN You're thinking the land means the land subject to the permit? PAUL Right. And which makes sense in terms of whether or not its use has been initiated by construction, and the use here is the destination resort, and actually in the VRE decision that the applicant refers to which is an administrative decision, they were talking about a final plat in the roads that were in the, in the, the final plat not off-site facilities that they might be constructed. GREEN So, but, as I was reading this, I was thinking it's kind of, it, it resembles in some respects of vesting standard, you know, a substantial construction to vest. PAUL ~it's being argued here is sounds GREEN And you're saying it's PAUL Sounds like vesting, but GREEN But vesting would be broader potentially because it could include other expenditures. There's not the, the language is a little different in common law vesting cases, I think, at least from recalling some of the cases I did under Measure 49. I don't think any of those involved off-site improvement, but I think, I've, I've interpreted homes, the homes test and so forth to be pretty broad. PAUL Right. GREEN In terms of, you know, the amount of expenditure and the level of expenditure based on the overall expenditure for the development, which could theoretically include off-site improvement So you're saying you don't think off-site improvement expenses, either land clearing or milling, is the, is the case here. Milling for a building would count. It has to be construction on the site itself. PAUL Right. The, the initiation of use is of the, the permit I mean there's no permit here to go on to BLM land and, and billed, you know. The permit we're looking at here and whether or not it's been initiated is that which allows construction on, on the site. That's what the conditional use permit, the final master plan, all of that is, is focused. And so whether or not there's Transcription of Hearing on Thornburgh Remand (A 13-8) Page 20 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN There's a condition of approval specifically referring to the, the access through BLM land is, is part of what the applicant is required to do to make the destination resort work to get approval. So in that situation, since that's part of the approval itself would it not be reasonable to argue that expenditures, that certainly an expenditure toward the approval because it's part of the approval, part of the required approval. PAUL And, and that might be considered in, in terms of the conditions of approval GREEN Prong 3. PAUL Prong 3, but in the language of A2 and the definition of substantial construction, we don't believe that, that, that really, that really applies. And, we're all, you know, it's kind of difficult in this 90-day remand time period, but at the, you know, there's just no evidence here other than Mr. Lindley'S affidavit of these summary statements about expenditures incurred of what was actually spent on what, and a lot of the expenditures here appear to be planning expenditures that were done. GREEN preparation PAUL Pr~paralion for the application in the first place and the, again, the, the focus of the substantial construction prong is on an effort to complete the development. If, if all that one needs to do to satisfy the substantial construction test is expend all the money on an application, in the first place, that would, that would really defeat the whole purpose of this, of the, of the test because everyone could qualify because they spent money preparing an application, planning, but they then do the GREEN Well, it would still though come down to, to what's substantial. I mean, again, kind of thinking of the vesting cases, like I've probably looked at, I don't know, probably 8 or 9 or 10 maybe, where part of the expenditures presented as evidence of meeting the Holmes test included preparation expenses, some of which were not directly, sometimes would not be directly related to the proposal like a subdivision. It would something unrelated to that and others that were directly related to the proposal. And I've always assumed that those are relevant, but they may not be sufficient to be substantial, which are two different questions. Do you, do you get to count them? And then, if you do, are they significant enough to be substantial? PAUL Right. GREEN So you're saying you wouldn't even get to count them because of the reference to the land in this substantial construction definition. PAUL Yeah. Yeah. Physically altered the land or structure or change the use thereof, so no, I believe we're arguing this. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 21 of33 Transcription of Hearing on Thorn burgh Remand (A13-8) February 4,2014 GREEN That language limits it to the, the land that's subject to the pennit itself, and not land that's subject to a condition of the permit, such as the BLM land. PAUL Right. And construction or altering or changing the, the use thereof. Right. Let me see if there's anything else. And I don't think there's any dispute. They acknowledge that this was off, off site. I might briefly address A3. The applicant. First of all, the applicant states that viewed as a whole standard that LUBA raised, but if you'll look at LUBA's decision, it doesn't say, thou shalt use the, view it as a whole. It says, you could decide either each one should be substantially exercised, and so that's a decision, that's an open decision for you to make and GREEN y I read it, that it was an alternative. PAUL Right. GREEN Analysis, a means of analysis under prong 3. PAUL And so we've made an argument for why it should be each, not viewed as a whole. Or in the alternative, if it's viewed as a whole, why that doesn't apply. GREEN ..1. PAUL Because so many, so few of the conditions have been satisfied, but even more importantly, the really significant conditions that are related to the advancement of the, of the, of the project, that is, you know, the final master that are based on the final master plan or tentative plan, the, the 50 units that come in, the $2 million that should be spent on something. What, what, what the applicant is focusing on are conditions as simple as correct a math error that was involved in the CMP or put on a map where certain lines are or show on a map where the open space is. If there's going to be an analysis of, of, viewed as a whole of the conditions of approval, there needs to be some way to give it to, to them. GREEN Uh huh. PAUL And the, and the bottom line here, and actually I might just go ahead and jump to, to the fault aspect of this is because the applicant so often relies on the fact that there was no final master plan approval, so it really couldn't do many of the things contained in the conditions of approval, but something we have often wondered is why the applicant didn't initiate remand proceedings on the, on the final master plan, that is after the Court of Appeals made their decision. I think it was in April of 2010. The two-year period here for the expiration of the permit didn't expire for another year and nine months. And now, and now we're four years later, and there's still no attempt or no initiation of remand. And this isn't something the County controls or, or my client. It's something completely under the control of the applicant to initiate remand proceedings. And so, we don't believe it's appropriate for the applicant Transcription of Hearing on Thornburgh Remand (Al3-8) Page 22 of33 {­ Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 to argue that they're somehow hamstrung or have been and are excused from performing all these conditions of approval because they didn't have a completed FMP, when it was within their power to initiate remand proceedings, but they've just let that, let that drift. That's, that's the fault of, of, of the applicant. PAUL The other argument that's often made in the applicant's materials is that the appeals that were filed in this case made it impossible for them to do what they wanted to do within the two-year time period. But do recall that County Code actually tolls the running of the, of the two-year period for appeals until they're all resolved. And so the two-year period here ran for four or five years. I mean, they weren't prejudice at all by the appeals. GREEN Well, I, I believe that the evidence submitted by the applicant on that prong, and I believe it actually there was evidence to this effect in the original record although I'd have to look at it, has to do with economic conditions that occurred during that period of time. f-P_A_U--:L.,---,:-_____~a, that's a separate issue, and I, I will address that as well. GREEN But it, but I think it goes to your point of, you know, if it's under the, the appeals were not under the control of the applicant fully. Those were under the control of your client to some extent, under the control of State entities that were determining when and how things were going to be processed, and time elapsed during that period of time, and economic conditions changed. Other conditions changed during that period of time. PAUL But they weren't, they, they didn't stop. If you look into the record when the conceptual master plan was on appeal, they went ahead with the application for the final master plan GREEN For the final. Right. PAUL approval. And they, and then they got the remand. The problem here again is with not the appeals, there is no stay of these proceedings. Things progressed as fast as they wanted to progress. And the fact is that once the remand happened on the FM, on the FMP, nothing, the, it just wasn't initiated again. GREEN Well, I, I understand your argument. I, I'm looking at the LUBA decision again today. I, I was struck by. Well, there was a term that was used, not with respect to the, the multi-pronged conditional use for destination resort process, but LUBA talked about some sort of metaphysical exercise. I think it had to do with what the LUBA just the conditions of approval or the representations that LUBA said no, those, those don't count. I, in reading this decision, as a whole, I felt like we were in a metaphysical exercise because of trying to fit the three prong or the three part conditional use or a destination resort approval process. Transcription of Hearing on Thornburgh Remand (AJ3-8) Page 23 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 To fit that within the, the requirement to include conditions of approval and the sort of construct that the County hearings officers have used since the earth cooled about laying out conditions of approval out into the future, you know, what happens now and what happens six months from now, and what happens a year from now, and then taking the language of the initiation standards in the County's Code and trying to fit those three things together, and they don't fit. And while I understand your point, I think LUBA also pointed out pretty clearly that it is, it's difficult to make this work. As probably what's intended by the County or by whoever drafted this, given how the decision was written, given how the conditions were written, given how the initiation provisions are written, and given this multi-stage process where you can have an appeal going on as was the case here, an appeal ofthe conceptual master plan, and then something going on with the final master plan, one of which is contingent on the other. I mean, it's just, it's like this, this sort of endless, you know, Rubick's cube of how do you get all these pieces to fit together in a timely way, not to mention what's going on as time is passing. The market may be changing. Economic conditions may be changing. It's, it's, it's not a simple whose fault is it. It's. I think LUBA made clear this is, there's a whole lot of factors that go into how these things are handled, mUltiple appeals, multiple stages that can be appealed. PAUL Right, but, but if the process isn't stopped during the appeals, and the process can move forward as it did GREEN Uhhuh. PAUL That they, too much is being made of the appeals, and those appeals didn't stop anything. What stopped everything was the failure to initiate the remand on the FMP. That's what stopped everything, and, and they had plenty of time - a year and nine months -to do the FMP. GREEN What WOUld, what would have been the PAUL And the results. There was also no, no extension request. GREEN What would have been the effect? Let, let's say they had done what you're proposing and gotten the FMP final approval? And then, we're in the initiation, the question of the initiation of the conditional or of the conceptual master plan, which if that's concluded, if the conclusion is that, that has expired, then there can't be any final master plan approval, because it's contingent on the conceptual master plan being approved. So would it not be prudent for an applicant to establish the validity of the conceptual master plan before, trying to get the final master plan approval? Transcription of Hearing on Thornburgh Remand (A] 3-8) Page 24 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 PAUL Oh, I, I wouldn't think so. I mean, and, and here, they certainly didn't think of doing that. They just, they just, you know, stopped. I mean, of all the other resorts that they just go on CMP, FMP, tentative, tentative with plat, final plat and then, and then there's no question about whether or not construction has been initiated or use has been initiated. And if there is, then, you know, there's next, usually, this argument about economic situation arises for extensions. That's where I've seen it mostly, and then that's what. If that had been necessary, that could have been done. GREEN Well, there were extensions applied for as I recall and granted. Were there, were there not a couple of extensions granted, and those were also appealed? ! PAUL No. Well. GREEN I recall at least one and the appeal of the extension was, was withdrawn. Wasn't there PAUL There was an extension granted administratively, and it was appealed. GREEN Right. PAUL It went to hearing. GREEN And then it was withdrawn? PAUL And eventually it was withdrawn. GREEN Right. Right. PAUL But, it, yeah. Yeah, so there GREEN It's a complex. I guess my point is it's a complex process. PAUL It is a complex process. GREEN Standing by itself. PAUL It is a complex process, but if you were. I don't know if this is in the record. I assume it, I don't know. I'll have to check, but, you know, the, the findings, a conceptual master plan was, was, the conditions of approval, as I understand, were, were drafted by the, by the applicant. And, and it, it, GREEN That's, that's not unusual. PAUL No. It's no un, unusual, but it's. I think LUBA's point is, is well-taken. The conditions of approval were drafted in this way. And jfthere was concern about that, then they should have been drafted in a, in a different way than they were. Transcription of Hearing on Thornburgh Remand (A13-8) Page 25 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN Had, had, had hearings officer Briggs known what was coming, she probably would have written them a different way. I think the way they were written was the way the hearings officer have written the conditions of approval since time in memorial laying out a chronological pathway [(?) someone coughed loudly] for what comes first, what comes second, and so forth. And, and obviously with respect to destination resorts, that it didn't, it doesn't work as well. That, that model doesn't work as well. PAUL On your point, is the economic, economic down tum, there's also one reason given in the applicant's materials for why this didn't happen, but if you look at the CMP, and we've cited the pages, this is some five or six pages of the fmdings of the County concern the financial ability of the applicant to build the resort, and. GREEN As of that time. PAUL Right. With, with, with, and it's substantial, and it's, and it's detailed. And so, you know, it's one thing if, if the economic GREEN That's, that's a different. I mean, the applicant has to show the ability, the financial ability to carry this out, but that's I think a separate question from whether the applicant would choose to based on economic conditions in terms whether it would pencil out or not. Those are, those are separate questions, and the fact that you just say we have the money to do this doesn't necessarily mean that the time is right to do it. I don't think one necessarily follows from the other. PAUL Yeah. Although, if, if one can just choose because of the, one's financial situation not to initiate a use because they don't, don't want to do it at that time. What's the point? GREEN Well, they run the, they run the risk. They run the risk that Loyal Land ran, which is that if they, you know, depending on how much they've done, they may find themselves in exactly the spot they're in now, which is trying to argue that they did enough under the circumstances. That's the risk they take. PAUL Right. GREEN That they may not have done enough in hindsight to initiate the use. • PAUL I think everything else, I've, I've addressed in, in the written materials. I GREEN Okay, which I look forward to reading and, obviously, haven't read yet. Okay. Let me see if the applicant has any oral rebuttal. DAVID I do. GREEN Okay. DAVID I'll be very brief. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 26 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN Okay. And then I'll hear from Kevin and then we'll talk about a, a post-hearing schedule. DAVID David Petersen again. So I always find rebuttals to be kind of longer than this list of bullet points, but that's how it kind of ends up happening. I would go on to repeat the request that we leave the record open to have the opportunity to respond to the memorandum we were provided. I want to make sure. This is the distinction I focus in my letter, but I do just want to highlight it for you, and that's the distinction between full compliance with the conditions and full performance of the conditions. The Code provision talks about, in the clause about fault talks about failure to fully comply. We make the point in our Appendix that in fact every condition has been fully complied with because to the extent that there was the opportunity for performance that has occurred and, in every other respect, the opportunity for performance is not available. So therefore, we're still in compliance because ifyou, if you performed the condition before it was permissible, that would, that would essentially be noncompliance. So I think that as a, as a threshold matter, there's really not even a need to evaluate fault, and we've certainly got into some questions about if evidence about fault, an argument about fault as a back-up plan, but I think the evidence is in the record certainly to make a finding that there has been full compliance with every condition, and fault does not need to be evaluated. DAVID The, the suggestion that the definition of substantial construction is limited to construction on the site. Well first off, I disagree with that for the reasons I made in my opening presentation, and I don't think that's what the Code provision says. I did forget to mention, however, that there was $800,000 roughly in golf course work, which is mentioned in Mr. Lindley's affidavit and some of that is land-clearing on the site as well. GREEN How much of it is? Do you know? DAVID That's a question I'd have to answer for you outside of these proceedings. I don't know the answer to that. And I believe you pointed out that the BLM road is required by the conditions. The lodge is also required by the conditions in a, in a generic sense. The condition requires them to spend, I believe GREEN Overnight lodging DAVID Yeah. $2 million in 1984 dollars on recreational amenities, which is going, that's probably is going to be a significantly larger number than $2 million today. So even without the planning costs, even though the Tetherow decision did in fact use planning costs towards the substantial construction determination, even if you carved them out, there's still going to be a substantial amount of money spent on classic construction activities. You touched briefly on the question of whether the vesting Transcription of Hearing on Thornburgh Remand (A I 3-8) Page 27 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4, 2014 analysis under Holmes might be appropriate here. My recollection of Holmes, and it's been awhile, is that Holmes GREEN That's actually changed with the, I can't think the name of the case, but the Supreme Court modified Holmes in a case about a year ago. DAVID Yeah. Yeah. Yeah. My recollection is that applies a kind of a percentage test like GREEN Well, it, it does although it they've said don't, don't spend too much time on the percentage test. Look at all of the criterion overalL DAVID Well, I guess the point I would make here is the construction that's allowed by the conditions of the CMP is actually nothing. So, so any construction is going to, it's going to blow a percentage test out of the water because you're taking a percentage of zero. GREEN And, I guess that, this is question that's kind of floating around in my head which is to what extent does substantial construction have to be viewed in the context of what is permitted under the approval? DAVID Yeah. It does present a little bit of a logical merry-go-round, doesn't it? GREEN Yeah. There's a little conundrum because if you can't even move dirt on the site until you have final master plan potentially or something, how much is substantial? Is it substantial in the context of what you're permitted to do or is it substantial in some sort of broader context of what the overall cost would be? I mean, it's just one of these pieces that doesn't fit as neatly. DAVID Sure. I appreciate the conundrum, and I've, I've struggled with it somewhat myself. I guess that what I would say is this is a somewhat, well maybe I don't know how unusual it is, but the conditions do expressly contemplate construction off, off off site at a BLM road at the very minimum. So I think that's what happened GREEN Well, overall, that's a relatively small percentage of the overall construction for the resort, if you look at everything that has to be or is proposed to be constructed, it's a relatively small piece of it. DAVID Yes, although in absolute dollars, it's a significant amount of money. And in the Tetherow decision, there wasn't this percentage-of-the-pie approach. And I would also point out that it's pretty much everything that they could do, given the limitations of where they were. So you could certainly, you could say it's 100% of the construction that was available. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 28 of33 .,"". Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN But again, this, this initiation of use, I think, also I would guess predates the destination resort provisions of the Code. So it was probably drafted with much simpler land~use approvals in mind, I would think, and, you know, Kevin, you may want to weigh in on that, but it's, it's again one of these pieces that doesn't, where the destination resort process and, and construct doesn't fit as neatly within some of these older provisions of the Code. DAVID The last thing I want to do is respond this question of why hasn't there been an FMP remand initiated by the applicant. I hope this is in the record but, it's, I suspect it is, but for a long time, it was impossible to request an FMP remand because kind of the central issue of the FMP remand, as I understand it, was where wildlife mitigation would occur. GREEN Uhhuh. DAVID And that required BLM to make some decisions about where it could take place, and that didn't happen until mid-2011. And then the initiation application was filed on November 1,2011. So we're really talking about a, maybe there's a four to five month window in there where it even conceivably could have been, or would have made any sense whatsoever to request a remand. And then I also, I want to blunt the risk of minimizing the severity of the economic downturn that we're relying in part on for explaining why the project wasn't moved forward with the speed that maybe Mr. Dewey thinks we should have moved it forward with. I mean, those are some pretty scary numbers that I've provided in my brief in terms of really how this region suffered. And I'm, I'm sure there are developers and other businesses much more well- capitalized than Thornburgh Resort Company that didn't survive. So, you know, there's some pretty significant unprecedented, kind of economic damage that, you know, really cannot be blamed on the applicant. It's obviously a result of global factors and, you know, very complicated analyses that don't, that the applicant has no control over. That's, that's all I have. GREEN Okay. Thank you Mr. Petersen. DAVID Thank you. GREEN Okay. Kevin. KEVIN I don't have any specific comments except the relationship in the, between the timing of adoption, the destination resort ordinance, the initiation of the use section of the Code. I suspect that the destination resort ordinance came first early. GREEN Oh really. Okay. KEVIN Early '90s. GREEN Okay. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 29 of33 Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 KEVIN And it was driven by Eagle Crest to make use of the collate language. The initiation of use language I think came sometime later. GREEN Okay. KEVIN But I suspect that when this was written, because of the unique development process that's associated with destination resorts that this, there's probably some unintended consequences here as to how this procedure could relate or would relate to a destination resort. So that's GREEN So you're saying the initiation piece was prompted by issues that came up with respect to Eagle Crest and its phasing and KEVIN No. I think that the desire to put this initiation of use language in the Code was driven by a, a, the desire to, to have some means of vesting, if you will, with projects not, not related to destination resorts per se, GREEN Right. Okay. KEVIN But to more standard types of development projects. GREEN Okay, which was my assumption that I had the timing off. KEVIN Yes. GREEN Okay. KEVIN And so I think we're dealing with some unintended consequences because the destination resort development process is different, so different than any other project that we normally say. GREEN Right. Okay. I, I don't, I doubt that there have been many initiation and use questions with respect to destination resorts, and I may be wrong about that. Have their been others besides Loyal Land and Thornburgh that you're aware of? KEVIN The VRE decision, that's GREEN That's KEVIN That's cited in this GREEN Okay. KEVIN In this record. GREEN That has an administrative approval based on that analysis. Any, any others besides VRE? • KEVIN I can't think of any . GREEN Okay. Okay. All right. Anything else Kevin? KEVIN No. GREEN All right. I'm going to go ahead and close the oral testimony on remand and talk about the post-hearing schedule. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 30 of33 ('. Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 So we are approximately 30 days into the 90-day time frame, if I recall, if I'm doing the math correctly,just about exactly 30 days. I'm anticipating whatever decision I issue will be appealed by somebody. The Board mayor may not hear it, but we need to at least allow enough time for the Board to have an opportunity to hear it. So help me with the math on that working back from the 90th day and the time frame for the Board, you know, to receive an appeal and set a, set a meeting at least to decide whether they're going to hear it or not. Would that be a 30-day process, do you think? I'm trying to figure out how much time I have between now and the bottom line to get something to the Board in the 12-day appeal period. KEVIN So if we rough the calculation right, 90 days is April 3rd. GREEN I think I figured it was April 2nd. Well, let's be conservative and say it's April 2nd. KEVIN I think the Board, ifthe Board had 30 days. GREEN After the appeal is filed. KEVIN Yes. GREEN Or after the 12th day. KEVIN Right. GREEN Okay. So then, we've got to add 30, got to add 12 to 30, that's 42 days back. So that leaves me only about 3 weeks to be on the safe side for the record to be opened and for me to write a decision. And I think I have to leave the record open at least 7 days by statute, and the applicant has 7 days for argument, so there's 2 weeks right there. So it's tight. KEVIN It's tight. GREEN It's very tight. Okay. All right. So in light of that, my usual 3-week, you know, opening evidence, rebuttal evidence period, and then a week for final argument we may not have time for. So what I'm thinking is I, I want to have at least a week in this initiaL I want to have at least a week for you to be able to respond to Mr. Dewey's and for both staff and Me Petersen to be able to respond to Mr. Dewey's memorandum and for Me Dewey to review anything else in the record that, that he wants to. And speaking of the record, I'm assuming the record would include everything that came in, in the initial [somebody coughed and covered her voice] declaratory ruling. KEVIN DR-II? GREEN DR-II, whatever is, that record plus whatever has come in now. KEVIN I have the entire record sitting in my office. GREEN And is it. So here's the question about that. Should, are we, are we Transcription of Hearing on Thornburgh Remand (A 13-8) Page 31 of33 Transcription of Hearing on Thornburgh Remand (AI3-8) February 4,2014 looking at the LUBA record as the record? Is that, does that make sense to treat the LUBA record as the record of DR-ll-S and then the remand record would be everything that came in after that? Does that make sense since the LUBA record is already put together? Would we, would we lose anything if we use the LUBA record as the DR-II record? Thoughts on that, Paul? [They all talk at once.] GREEN All of you. DAVID Fine with me. GREEN Okay. All right So then, so what I'm suggesting then is if we're going to use the LUBA record as the DR-II-S record that it might be useful to refer to any documents out of that record by the LUBA number, by the page number. Does that make sense to be a little bit clearer? All right So the record, I want to talk about the record will be the L UBA record of LUBA 2012-42 and DR-Il-S. The remand record will be anything that came in after that up until the close of the record. So what I would like to do is have 7 days for general response to what's come in so far and then a shorter period for rebuttaL Let me look at the calendar here real quick. Okay. So if we look at the first round closing on the 11th, a week from today, and then go to the 14th for rebuttal of evidence that came in by the 11 th, and then the 21 st for final argument, and then I would need to get a decision out. DAVID What was the last one? 21st? GREEN The 21 st for final argument, and obviously sooner would be better if, if you can get it in sooner, then I would have more time to, to write the decision. Paul? PAUL I have to be in, in court. My schedule is being critical for that Thursday and Tuesday in Eugene. GREEN Which, which Thursday and which Tuesday? PAUL Day after tomorrow and next Tuesday. GREEN Okay. PAUL Is there only way I can copy of that __ GREEN For the 12th? Sure. All right, so let's. What I want to do is to try to keep Friday as that, as the end of the rebuttal period, so that just leaves you with one day less for rebuttal on what came in on the first week because I've got to give you 7 days by statute. That's, that's going to be pretty tight, but I, I think that's the only way we can do it within the time frame. Is that going to create too much of a headache for everybody? PAUL No, works for me. Transcription of Hearing on Thornburgh Remand (A 13-8) Page 32 of33 ( . ~. : Transcription of Hearing on Thornburgh Remand (A13-8) February 4, 2014 GREEN All right. So February 12 will be the first round. February 14 will be rebuttal, ifany. And then February 21 would be fmal argument by the applicant and sooner is better. DAVID These are aIlS o'clock? GREEN S o'clock. Right. DAVID GREEN Just, just be sure that you get it in plenty of time in case the email system crashes or something else crazy happens. Okay. And then that would leave me about a week, that last week in February to get the decision out. I'll do my best to, to get it out by the 28th. Barring that, it would be the first week in March, and then we'll just have to try to cram as much into the 30 days remaining to allow the Board to. Actually Kevin, can the Board, could the Board go ahead and set a meeting on the appeal before an appeal's filed? Have they done that before? Knowing that an appeal is likely, they've just gone ahead and put it on the agenda, or will they wait until there's an actual appeal? KEVIN Well, they, typically, they wait until an actual appeal unless they want to call it up. GREEN Okay. Well. Think about that. So my goal would be to get a decision out on the 28th or, if that's not possible, that first week in March as early in that first week in March as possible. So, let's say I get it out on the 3rd, 12 days would take it out to the 15th, 14th let's say for appeal, so that would give the Board only about 2 weeks, 2 1/2 weeks to, to review it and decide if they want to hear it, which is tight but that's the best we can do. All right, so to review. First round of evidence closes at 5 p.m. on the 12th. Rebuttal 5 p.m. on the 14th. Final arguments on the 21 st by 5 [p.m.] or earlier. And Mr. Petersen, if you do submit them earlier, please let me know or let Kevin know they're coming in earlier so Kevin can let me know that record is closed and I can get started on the decision. Okay. All right. So, any questions about process from now on? Okay. We're adjourned. Thank you. DAVID Thank you. 0371 I710000 1/5506695v I Transcription of Hearing on Thornburgh Remand (AI 3-8) Page 33 of33 TONKONToRPup AlTOl\NEYS 1600 PIoneer Tower 888 SN FIflhAwnue Portland. Oregon 97204 503.221.1440 David J. Petersen 503.802.2054 Admitted to practice in Oregon and California Fax: 503.972.3754 david.petersen@tonkon.com May 19,2014 VIA E-MAIL (kevinh@co.deschutes.or.us) Mr. Kevin Harrison Deschutes County Community Development Department ] 17 NW Lafayette Avenue Bend, OR 97701 Re: Loyal Land, LLC Declaratory Ruling Request County File No. DR-11-8 Appeal to Board of Commissioners Dear Mr. Harrison: Enclosed are copies of the following documents to be placed into the record for this matter: 1. Memorandum "Impact of the Great Recession on the Resort/Second-Home Industry Nationwide and in Centra) Oregon" prepared by Peterson Economics dated May 12, 2014; 2. Affidavit of Kameron DeLashmutt dated May ]6,2014; 3. Affidavit of Terrence Larsen dated May 16,20]4; and 4. Letter from Peter Livin~ton to the Board of County Commissioners dated May 13,2014. An original of the letter from Mr. Livingston should already have been delivered to your office. Originals of the other documents wi II be delivered to your office later this week by Mr. DeLashmutt. Thank you and please contact me if you have any questions or concerns. David J. Petersen DJP/djp Enclosures cc (bye-mail, w/o encl.): Mr. Kameron DeLashmutt I, • PETERSON ECONOMICS MEMORANDUM IMPACTS OF THE GREAT RECESSION ON THE RESORT / SECOND­ HOME INDUSTRY NATIONWIDE AND IN CENTRAL OREGON PREPARED FOR LOYAL LAND, LLC May 12,2014 Project Number 427 Ii!06 ivlf.'.RINE DRIVE ANACORTES, VVA 9822 I TEL 360 588.9f30 I FAX 360588 9870 I MEMORANDUM IMPACTS OF THE GREAT RECESSION ON THE RESORT / SECOND­ HOME INDUSTRY NATIONWIDE AND IN CENTRAL OREGON Peterson Economics was retained by Loyal Land, LLC in April 2014 to prepare this memorandum discussing impacts ofthe Great Recession and Financial Crisis on the resort I second-home industry nationwide and in Central Oregon in particular, with a focus on impacts on the proposed Thornburgh Resort. This memorandum was prepared by Jon Peterson, President of Peterson Economics. MEMO OUTLINE This memorandum includes the following components: 1. A summary of Peterson Economics' relevant qualifications; 2. A summary of second-home I resort market trends nationwide over the past decade; and 3. A summary of market trends in Central Oregon and implications for the proposed Thornburgh Resort project. PETERSON ECONOMICS' QUALIFICATIONS Given our experience in the industry, specific experience in Central Oregon, and numerous assignments examining the proposed Thornburgh Resort between 2004 and 2008, Peterson Economics is uniquely qualified to comment on development potential and development parcel values at Thornburgh before, during, and after the Great Recession and real estate market crash. Peterson Economics was established in 2002 by Jon Peterson, a former principal at Economics Research Associates. Since that time, Peterson Economics has been retained to complete more than 420 market and financial analyses for proposed new communities, resorts, and golf courses, making the firm an industry leader across North America. These assignments have included over 100 relevant consulting assignments in the Pacific Northwest (most likely more than all of our competitors combined). Consulting assignments completed in Central Oregon have included: • Brasada Ranch: we completed the original market and financial analysis for Jeld­ Wen in 2002, as well as a series of follow-up studies that helped guide overall market positioning. • Caldera Springs: we completed the original market and financial analysis for Lowe Enterprises in 2004, as well as several follow-up studies. • Pronghorn: we completed a targeted market analysis for Pronghorn in 2004. PETERSON ECONOMICS (" . • Black Butte Ranch: we were retained by the Black Butte Ranch POA in 2007 to complete an evaluation of market and financial potential for a proposed annexation into the community (adding about 350 residential units), • Thornburgh: we completed a series of market and financial analyses for the proposed new Thornburgh resort between 2004 and 2008, as well as an economic benefit study. • Remington Ranch: in 2010 and 2011, serving as an expert witness, we completed a detailed analysis of historic and future potential for Remington Ranch, a failed, partially developed community near Redmond, which lost funding in 2007 due to the emerging financial crisis. • Pine Forest / Caldera Springs: in late 2013, we completed a market and financial analysis evaluating potential for a new resort community adjacent to Caldera Springs. • Other Proposed Resort/Second-Home Communities: between 2004 and 2013, we completed market and financial analyses for about ten other proposed new resorts or second-home communities in Central Oregon. • Primary Home Communities: in 2011 and 2012, we also completed targeted market and financial analyses for a client who purchased several existing, partially developed, primary home communities in the region, including McCall Landing in Bend and Ochoco Pointe in Prineville. Among other assignments, other notable experience in the Northwest includes: • Suncadia: we completed a series of comprehensive market and financial analyses for Suncadia, culminating in an exceptionally detailed market and financial analysis that largely served as the initial business plan for the new resort community. In total, we have completed in excess of20 major assignments for Suncadia / Tumble Creek. • Other Upper Kittitas County Projects: we have completed over one dozen other assignments for major land owners completing new resorts or second-home communities in the region around Suncadia (Sapphire Skies, Plum Creek Timber, etc.). • Lake Chelan I Methow Valley! we have completed over one dozen market and financial analyses for proposed new resorts, hotels, and second-home communities in the region stretching from Wenatchee to the Methow Valley, including about 12 projects overlooking Lake Chelan. • Columbia Gorge: we have completed market and financial analyses for three proposed resort communities in the Gorge. • Northern Idaho / Montana: we have completed market and financial analyses for over 20 proposed new resorts and second-home communities, including several proposed large-scale golf resort communities. • Other Assignments! we have completed dozens of other relevant assignments in the Northwest, including numerous assignments in the San Juan Islands (with ongoing work for Rosario resort), several assignments on Vancouver Island, and a variety of assignments on the Washington and Oregon coasts. PETERSON ECONOMICS 2 Over the past four years, Peterson Economics has also served as an expert witness on three major resort/second-home community projects in the Pacific Northwest (Remington Ranch, Semiahmoo, and a proposed resort in the Columbia Gorge) focused on retro-active valuations of resort development parcels, evaluating development parcel values before, during, and after the market crash. We have also served as an expert witness on similar retroactive resort-parcel valuation assignments in Michigan, New Jersey, Mississippi, California, and Mexico. INTRODUCTION The boom-and-bust cycle seen in the resort and second-home market over the last decade in large part followed a similar cycle in the overall residential housing market, though it was even more pronounced. The residential market experienced dramatic gains in the early 2000s, fueled in large part by an ever increasing capital base directed towards residential lending. The Subprime Mortgage industry, using sophisticated financial products, securitized mortgage obligations attracted more and more capital into the US residential housing market allowing promoters to package and sell vast amounts of US mortgages. To attract new customers, lenders routinely relaxed credit standards. This financial bubble fed from and off of the housing bubble. Although neither was sustainable, so long as home prices were rising the long term risks were masked. Once the residential market peaked in 2005, and then softened in 2006 it exposed some of the underlying risk ofthe Subprime industry. With that credit began to tighten. As subprime defaults rose real questions were raised as to the value ofthe mortgage paper. By late 2006 the market for collateralized mortgage obligations was very limited. In July 2007 when two large "Mortgage" funds managed by Bear Steams collapsed it created shock waves throughout the financial community. Trillions ofdollars of similar "Mortgage" securities sat on the books of banks and institutions around the world with questionable value and no liquidity. This lack of liquidity created the financial crisis which in turn led to the recession. As the residential housing market had boomed on the back of easy credit, it collapsed under the weight of no credit. Prices dropped. Defaults and foreclosures rose and values were further depressed. Similarly as the resort and second-home market had rose on the heels of the residential market it also dropped, often in much more severe fashion. This had dramatic and widespread impacts, including to the resort and second-home industry nationwide and in Central Oregon in particular, as discussed in more detail below. NATIONAL TRENDS IN RESORT / SECOND-HOME MARKETS Over the past decade, virtually all major U.S.-driven resort / second-home markets experienced the following distinct trends: • Market Boom: in 2004, 2005, and 2006, market conditions soared in virtually all attractive resort destinations, with soaring prices and soaring sales volumes. This led to a surge in new and proposed new development, and a dramatic surge in underlying development parcel values. PETERSON ECONOMICS 3 • Market Softening: by early 2007, as credit began to tighten, market conditions began softening somewhat in most resort destinations. In general, second-home prices (for lots, homes, cabins, and condos) remained fIrm, but sales volumes began declining quickly. In 2007 it also became extremely difficult for new development projects to obtain fInancing, even if fully entitled and situated on premier sites in top­ tier resort markets, and even if recording strong pre-sales. For example, in early 2007, a long-term client pre-sold 30 of 69 proposed ultra-high-end condos on a waterfront site on Maui, collecting non-refundable deposits averaging about $1 million each, but nevertheless failed to obtain fmancing to develop these condos, even after approaching more than 100 prospective lenders. In this type of environment, lack of entitlements and ongoing appeals became a major impediment for new projects seeking to attract fInancing. • Market Freeze: with the onset ofthe Great Recession and the Financial Crisis­ recreation-property demand in most U.S.-driven resort markets largely evaporated by late 2008. The long-term impacts of this pullback varied greatly based in large part on the profIle of owners when the market froze. In fairly stable, established markets (or resort communities) that saw minimal new development in the mid-2000s, the primary impact ofthe downturn was a rapid decrease in sales volumes, coupled with a modest decrease in sales prices (or values). However, the impact of the market freeze was very different in emerging/fast-growing second-home markets -like Central Oregon --that experienced massive development and sales in the mid-2000s. Dozens of second-home destinations around the western United States boomed in the early and mid-2000s, adding multiple new large-scale second-home/resort communities. Many of these came to market in 2004 and 2005, enjoying exceptional success by attracting large numbers of speCUlative buyers, hoping for even more price appreciation. Many new resort-style communities in these markets sold hundreds of lots during the market peak, with many purchased by speculators or others who simply could not hang on to properties in the long run. The majority of these buyers fInanced their purchases, often buying homesites with only fIve or ten percent down payments. Many also relied on low-interest fIve-year "baJIoon" mortgages. • Market Crash: when the market froze in late 2008, at fIrst, perceived values drifted only moderately lower. However, within a year, a combination of factors (including reduced net worth, reduced income, other liabiHties, and falling property values in both source markets and second-home markets) resulted in the "perfect storm" to create a self-perpetuating market crash, especially given the timing of fIve-year "balloon" mortgages on properties sold in 2004 and 2005. As more and more speculative properties reverted to bank ownership, banks dumped more and more inventory on the market, often reducing prices once every two weeks in an effort to unload inventory at any cost. Just as the belief in future inflation begets future inflation, the belief in falling prices spooked remaining buyers to remain on the sidelines, and falling prices persuaded more and more existing owners to simply take a credit "hit" and let their properties revert to bank ownership. By 2010, many lot owners who purchased homesites for $300,000 to $600,000 (or more) in the mid­ 2000s, but paid only fIve or ten percent down, could not justifY continuing to pay PETERSON ECONOMICS 4 interest on huge loans. In the hardest hit major new second-home communities, average homesite values quickly fen by 70 to 95 percent. For example, lots that previously sold for $500,000 began selling for only $50,000 to $1 00,000 (or even less in communities with structural issues leading to uncertain futures). • Market Stabilization: by 2011, market conditions began stabilizing in many areas, as improving economic conditions and market confidence encouraged new investors to scoop up discounted, distressed properties. In many areas, distressed sales comprised the vast majority of sales in 2010 and 2011, but represented only a small minority by 2013. • Market Recovery: with conditions in source markets (Le., major metro areas) improving dramatically in 2013 and early 2014, many emerging second-home destinations and many relevant second-home communities are now enjoying significant appreciation, as inventories fall, home building starts back up, and long­ term use-oriented buyers return to the market. However, in most cases around the western United States, underlying homesite values remain well below "replacement cost." For example, in many cases, premier golf-front, mountain-view, or lake-view homesites in top-notch communities (typically with $30 million to $75 million amenity packages, in established second-home destinations) that once sold for $500,000 or more are still available for only $75,000 to $175,000. Many of these communities also remain "flooded" with large inventories of standard interior homesites, often valued at only $10,000 to $50,000 -far below prices necessary to justifY this type of development from scratch. Home and cabin values also feB sharply in many ofthese new, large-scale resort-style communities. In most cases, home, cabin, or condo values fell by 30 to 60 percent -much less than underlying lot values fell, but still enough to bring finished unit values down weB below replacement cost. For example, in many cases, homes that were once valued around $1 million now sell for around $500,000. Such a home might now occupy a lot worth $100,000, but this house could cost about $700,000 to build from scratch. Until such units are cleared from inventories, lot demand will remain somewhat muted and new communities will find it difficult to market new units at prices high enough to justifY development costs. The severe market downturn impacting individual property values and absorption within new large-scale master-planned resort-style communities in these emerging second-home destinations also had a very substantial negative impact on development parcel values, as well as the values of partially developed new communities. For example, in the aftermath of the market crash, it became common for attractive new partially developed communities -with substantial unsold inventory to sell for a small fraction of prior values -often five to 15 percent of pre­ crash values or "replacement cost." Thus, large new, partially developed communities (often 500 to 2,000 acres) featuring $30 million to $60 million in new amenities (golf courses, clubhouses, recreation centers, etc.) and often $30 million to $70 million in new infrastructure have been selling for as little as $2 million to $10 million, even when they have several hundred homesites or other residential units remaining to develop and sell. In most cases, infrastructure has already been developed to serve some of these remaining, unsold developer-owned PETERSON ECONOMICS 5 homesites or units, with remaining areas simply requiring extension ofexisting infrastructure (at lower cost than new development). With such exceptional values available, demand for undeveloped resort community parcels has remained quite weak over the past five years. TRENDS IN THE CENTRAL OREGON RESORT / SECOND-HOME MARKET Over the past five decades, Central Oregon has grown to become one ofthe largest and most popular resort I second-home destinations in the western United States. During this time, development activity and market conditions have been through a series of booms and busts, but none were more pronounced than the boomlbust cycle of the past decade. In fact, Central Oregon witnessed one of the fiercest boom/bust cycles of any U.S.-driven second-home market in history over the past decade. Between 2000 and 2007, the region commonly topped national charts for fastest growing population, fastest appreciation, and most spectacular second-home sales; however, between 2008 and 20 I 0, it also topped many charts for fastest depreciation, fastest decline in sales, and fastest surge in regional unemployment rates. Between 2000 and 2011, the following major resorts were developed in Central Oregon: 1. The Ranch at the Canyons (started development in 2001); 2. Pronghorn (started development in 2002); 3. Brasada Ranch (started development in early 2005); 4. Caldera Springs (started development in late 2005); and 5. Tetherow (started development in late 2006). Remington Ranch, a massive proposed new resort community, also started development in late 2006; however, it ceased development within one year when it lost its primary funding source due to the emerging financial crisis --and has been entangled in legal battles since. During the exceptional market environment of2005 and 2006, Pronghorn, Brasada Ranch, and Caldera Springs all achieved record-breaking pricing and absorption, opening the door to strong developer profits if demand could be sustained. However, illustrating the severity ofthis market collapse, by 2010, only Caldera Springs remained profitable (i.e., cash flow positive, with sales revenues to date exceeding development costs to date). For the proposed Thornburgh Resort, the most relevant" existing resort communities in Central Oregon include Pronghorn, Brasada Ranch, and Caldera Springs. These communities all came to market in the early to mid-2000s, featuring extensive amenity packages including golf, and offering a variety of high-end real estate products appealing to recreation-oriented buyers. Tetherow, the Ranch at the Canyons, Sunriver/Crosswater, Black Butte Ranch, Eagle Crest, Aspen Lakes, and Cascade Meadow Ranch are also notable secondary comparables. However, these are somewhat less relevant due to age (all but Tetherow are older), market positioning, or location (Tetherow's location in Bend allows it to appeal to a different segment ofthe market). Tables 1 through 7 provide a comprehensive summary ofthese top relevant resort-style communities. This includes a summary oftheir sites, locations, amenities, real estate products, pricing, and absorption, including comparisons of peak market conditions to market conditions by late 2011. PETERSON ECONOMICS 6 Y%l iJi .~t;.~d oM n L' i" l~f'Jo"""'~~' "~'U "1'6;." 'v~"h!'Q"lj.viW'>w~,1p;"'fij'&Sli ~ HY.'I'~~~·'l!jj1jijj' 'G!tiRH.1k)f*i:pl'-~"Hl -&'f~' (WI&OiZ\'S:iN it*"1dW"M*;'If'~"hlhhh;j"~''$ w+ t '~1;li!i!'.~ 'jnt;ri.):lt jJ-r( ~~~ (fAA)' irIt 'f "­t, Table I CHARACTERISTICS OF RELEVANT EXISTING RESORT COMMUNITIES IN CENTRAL OREGON Proximi!l: to Hi"h-End Services Total Total Date Est. Annual Developer 1 Size Resort Closest Upscale Drive General Inches Resort Namil Location ~ (acres) Opened Service Center Time Settin" Precipitation Pronghorn NE of Bend Hix Rubinstein 640 2002 I Bend 27 minutes flat, open, junipers, 7 mountain views Brasada Ranch NE of Bend Jeld-Wen, 1,800 2005 I Bend 28 minutes sloping, open, junipers, 7 now Northview panoramic mountain views Caldera Springs Sunriver Lowe Enterprises 400 2005 Sunriver 2 minutes meadow, forest, 18 Bend 30 minutes man-made lake Tetherow Bend three separate 709 2006 Bend 5 minutes rolling, few trees, open, 12 ownership interests good mountain views The Ranch at the Canyons NE of Redmond GardnerlHumphries 1,700 2001 Bend 45 minutes dry, open, next to 7 (Pac Trust) Smith Rocks (dramatic) Sunriver Resort! Sunriver Lowe Enterprises 3,970 19671 Sunriver Mall onsi,te pine forest, meadows, 18 Crosswater Sunriver 1994 Bend 30 minutes rivers, mountain views Black Butte Ranch Sisters Brooks Scanlon, 1,830 early '70s Sisters 5 minutes mountains, 25 nowHOA meadows, trees Eagle Crest WofRedmond Jeld-Wen, 1,240 1985 Bend 20 minutes high desert, 8 now Northview rural Aspen Lakes Sisters Cyrus Family 800 Late 1990s Sisters 5 minutes forest 25 Cascade Meadow Ranch Sisters Not Available 360 Late 1980s Sisters 5 minutes forest, meadow 25 Group Average: 1.345 15.2 Refers to year construction started. Source: onsite resort managers and sales persons; and Peterson Economics. Table 2 COMPONENTS OF RELEVANT EXISTING COMMUNITIES IN CENTRAL OREGON Est. Cost of Overnight RetuiV Totul Planned Resort Name Golf CIl!bhousel Other Amenities Amenities Lod!:;in!:; ComJ!leted Dinin!:; Commercial Residential Pronghorn two 18-hole 38,000 sq.ft. rec. center, trails $65 million 24 townhomes fine dining in small retail space 289 lots, courses with 48 keys clubhouse, plus casual in rec. center 79 homellot units, in rec. center 90+ built units Brasada Ranch 18-hole course 13,500 sq.ft. large rec. center. trails, $45 million 80 cabins wI 180 keys, dining in Ranch House pro shop up to 750 lots, equestrian center plus four rooms and golf clubhouse; ISO built units rooms in Ranch House juice bar in rec. center Caldera Springs 9-hole golf park 6,500 sq.ft. rec. center, pools, $22 million 17 deed-restricted Zeppa Bistro general store I 320 lots, (plus Crosswater lake, trails, playground cabins cafe 45 cabins and Sunriver courses) with 68 keys Tetberow 18-hole course 17,600 sq.ft. none $15 million none dining in clubhouse none 3791015, 510 built units The Ranch at tbe Canyons none 8,000 sq.fl. event "barn," tennis, $5 million2 none limited dining none 60 lots vineyard, canyons, equestrian Sunriver Resort two 18-hole courses I in Lodge; spa, pools, river, n.a. 240 guestrooms fine dining, 105k sq.fl. 3,396 lots, plus Crosswater I stand-alone trails, air strip plus 1,400 rentals casual dining 850 condos Crosswater 18-hole semi-private 15,000 sq. ft. small pool, tennis, rivers, n.a no lodging, but dining in clubhouse none 94 lots, course trails Osprey PI. rentals 23 Osprey PI. Black Butte Rancb two 18-hole two clubhouses; new $7M rec. center; n.a. 76 condos, fine dining, 2,000 sq. ft. 1,177 lots, courses one renovated tennis, fitness, 224 homes casual dining 76 condos trails, equestrian Eagle Crest two 18-hole courses two clubhouses 2 rec centers; n.a. 100 gueslrooms casual dining small shop 1,737 lots, plus short course tennis, fitness, plus 75 condos in lodge cabins, and condos trails, equestrian Aspen Lakes 18-hole course 17,000 sq.ft. small community center n.a none snack bar pro shop liS lots Cascade Meadow Rancb none small clubhouse horse barn and paddocks, n.a none none none 24 lots indoor and outdoor riding arenas, trout lake, tennis courts, storage I Conditioned space only. ~ Estimated by Peterson Economics. Source: onsite resort managers and sales persons; and Peterson Economics. Table 3 SUMMARY OF DEVELOPER-OWNED CUSTOM HOMESITE SALES AT TOP RELEVANT EXISTING COMMUNITIES Property Name Planned Number of Lots Average SalesNr in Market Frenzy (2005 to 2007) Total Sales in Market Freeze (2008) Total Sales in Market Slide (2009) Total Sales in Market Collapse (2010) Total Sales in Market Trough (2011*) Developer Homesite Sales to Datel RemainingAverage • 1 Developer AbsorptIOn I tnven ory Pronghorn Brasada Ranch Caldera Springs Tetherow The Ranch at the Canyons 289 750 320 379 60 37.7 105.3 101.6 29.0 5.0 0 0 2 28 0 I 0 2 0 0 0 3 2 0 0 0 0 14 5 0 266 319 273 65 22 28.0 23 45.6 431 42.0 47 14.4 314 2.4 38 Total 1,798 279 30 3 5 19 945 26 853 Average Developer Homesites Sold Per Year (life of project): 26.5 (homesites/yr) Average Developer Homesites Sold Per Year in Market Frenzy: 55.7 (homesites/yr) Average Developer Homesites Sold Per Year at New Resorts Since 2008: 2.9 (homesiteslyr) • From January through late December. I Where applicable, includes sales prior to 2005. 2 Developer homesites only. Calculated since start of sales (mid-2002 for Pronghorn; early 2005 for Brasada; mid-2005 for Caldera; mid-2007 for Tetherow). Source: Peterson Economics, AmeriTitle, MLS, and individual communities. Table 4 SUMMARY OF TOTAL CUSTOM HOMESITE SALES AT TOP RELEVANT EXISTING COMMUNITIES (INCLUDING DEVELOPER SALES AND RESALES) Property Name 2005 2006 2007 2008 2009 2010 2011* Pronghorn Annual Sales 66 27 20 13 12 4 5 Average (Mean) Price $630,000 $622,000 $638,000 ~527,OOO $132,000 $272,000 $86,800 Total Volume $41,580,000 $16,794,000 $12,760,000 $6,851,000 $1,584,000 $1,088,000 $434,000 Brasada Ranch" Annual Sales 201 102 23 13 15 38 32 Average (Mean) Price S325,OOO $325,000 $348,000 $335,000 $174,000 $77.600 $64,600 Total Volume $65,325,000 $33,150,000 $8,004,000 $4,355,000 $2,610,000 $2,948,800 $2,067,200 Caldera Springs Annual Sales 203 37 28 14 3 26 26 Average (Mean) Price $339,900 $360,300 $366,000 $351,000 $199,000 $145,600 $127,300 Total Volume $68,999,700 $13,331,100 $10,248,000 $4,914,000 $597,000 $3,785,600 $3,309,800 Tetberow Annual Sales N.A. N.A. 29 28 3 0 7 Average (Mean) Price N.A. N.A. $584,700 $551,900 $483,000 N.A. $214,000 Total Volume N.A. N.A. $16,956,300 $15,453,200 $1,449,000 0 $1,498,000 The Canyons Annual Sales 8 4 3 0 0 0 1 Average (Mean) Price SI 176,000 SI,031,300 $1,300,000 N.A. N.A. N.A. $2B5,000 Total Volume $9,408,000 $4,125,200 $3,900,000 $0 $0 $0 $285,000 Total Sales 478 170 103 68 33 68 71 Average Price (Mean) $387,683 $396,472 $503,576 $464,312 $189,091 $115,035 $106,958 Total Volume $185,312,700 $67,400,300 $51,868,300 $31,573,200 $6,240,000 $7,822,400 $7,594,000 • Recorded from January through late December . .. Sales exclude two homesites sold at auction in 2011. Source: Peterson Economics, AmeriTitle, MLS, and individual communities. ____"""u""''''J'i..· ",,;,-J",'~~~~-~~~,~~" ';';"~%;i;'.'o');r ~~~Jh'i/iI,,",j';;I;v1!\llfWioJi;;l\\H'i 'd' '<j °ilo"rlli~I\!O~ii~,*~{'i!rtii'~'nl~*,.iIi_"_li''''aM"Z.!fi')IIi&iY,.,4tilli/l.' -"i'it'-lhi';Wa -i1l1li'1f.Iili&i~1 '. "lilili1i1o<'.'tI••l.i"~J.,,._4mil.l:!!tiq;·"W;:_)ri "<;l~~ Table 5 PEAK DEVELOPER PRICING VERSUS CURRENT RESALE PRICING OF HOMESITES AT TOP RELEVANT EXISTING COMMUNITIES1 Property Name Interior Homesites Golf-Front I Premier Homesites Peak Developer Pricing Current Resale Pricing % Change Peak Developer Current Resale Pricing Pricing % Change Pronghorn1 Pronghorn wI mandatory golf membership Brasada Ranch Caldera Springs Tetherow The Ranch at the Canyons $450K to $550K $550K to $650K $200K to $325K $295K to $350K N.A. N.A. $6K to $85K $121K to $200K $25K to $60K $90K to $130K N.A. N.A. N.A. -69% to -78% -82% to -88% -63% to -69% N.A. N.A. $600K to $900k $14K to $100K $700K to $l.OM $129K to $215K $370K to $530K $55K to $120K $390K to $480K $130K to $140K $320K to $775K $l55K to $199K $495K to $1.35M $285K N.A. -79% to -82% -77% to -85% -66%to-71% -51% to 75% -69% I Peak pricing generally occurring from 2006 through early 2008. Current pricing as of late 2011. Focuses on active segment of market (some higher). 2 Estimates subtract value of mandatory golf membership (all owners are compelled to put·chase). Resale prices focus on range with active sales. Price drop w/out membership misleading, as $115k membership still required. Source: Peterson Economics, AmeriTitle, MLS, and individual communities. Table 6 SUMMARY OF DEVELOPER BUILT PRODUCT SALES AT TOP RELEVANT EXISTING COMMUNITIES M, ~ Property Name Planned Units Average SalesfYr in Market Frenzy (2005 to 2007) Sales in Market Freeze (2008) Sales in Market Slide (2009) Sales in Market Collapse (2010) Sales in Market Trough (2011 *) Total Sales l Average Absorption2 Remaining Inventory PronghornJ Brasada Ranch Caldera Springs Tetherow4 90+ 150 45 510 10 26 4 0 11.2 0 5 0 I 0 4 0 0 2 4 0 1 0 0 0 35.8 80 17 0 5 11 3 N.A. 66+ 70 28 510 Total 795 40 16 5 6 1 133 7 674 *From January through late December. I Includes sales prior to 2005 when applicable. 2 Developer units only. Calculated since start of sales (2005 for Pronghorn; 2005 for Brasada; and 2007 for Caldera). 3 Includes whole-ownership and fractional unit sales (expressed as whole-unit equivalents). 4 No built product released as of December 2011. Plans have included 210 townhome units and a condo-lodge with up to 300 for-sale units. Source: Peterson Economics, AmeriTitle, MLS, and individual communities. Table 7 PEAK DEVELOPER PRICING VERSUS CURRENT RESALE PRICING OF BUILT PRODUCT AT TOP RELEVANT EXISTING COMMUNITIES l Property Name Peak Developer Pricing Current Resale PriCing % Change Pronghorn2 $540/sq.ft. $150/sq .ft. ·72% Brasada Ranch $435 to $475Isq.ft. $180 to $224/sq.ft. -53% to ·59% Caldera Springs $440 to $500/sq.ft. $300 to $320/sq.ft. ·32% to -36% Tetherow3 N.A. N.A. N.A. I Peak pricing generally occurring from 2006 through early 2008. Current pricing as of late 2011. Expressed as price per square foot. 2 Prices for whole·ownership built units. 3 No built product released as of December 2011. Source: Peterson Economics, AmeriTitle, MLS, and individual communities. ' ..' As depicted, Central Oregon's 11 relevant resort-style communities: • Range in size from about 360 to 4,000 acres (averaging about 1,350 acres); • Typically include extensive amenities, including golf courses, clubhouses, recreation centers, pools, trails, and other amenities; and • Typically include 400 to nearly 1,800 residential units (though one includes only 24 homesites and one includes more than 4,200 total units). All are within five to 45 minutes ofeither Bend or Sisters, and most are within 30 minutes of these upscale service hubs. Newer resorts such as Pronghorn, Brasada Ranch, and Tetherow occupy open sites, typically dotted with junipers rather than prime forested sites like Sunriver or Black Butte Ranch. While Tetherow is located on the outskirts of Bend, Pronghorn and Brasada Ranch are both about 30 minutes away from Bend. Due to a wide variety of factors -ranging from strong macroeconomic conditions, to excitement surrounding new resort development, to the real estate bubble itself-Central Oregon enjoyed a remarkable real estate boom in the mid-2000s. Between 2000 and 2005, many of Central Oregon's resorts saw typical homesite prices double, transactions increase, and sales volumes soar. New resort communities like Pronghorn, Brasada Ranch, and Caldera Springs were the prime beneficiaries ofthis boom. By 2005, Central Oregon had clearly entered into a "market frenzy," where buyers were literally lining up to buy homesites priced as high as $500,000 at resorts like Brasada Ranch, often in hopes of further appreciation. As shown on Table 3, the region's five newest resort-style communities -Pronghorn, Brasada Ranch, Caldera Springs, Tetherow, and The Ranch at the Canyons -sold an average of about 55.7 developer homesites per year from 2005 to 2007. Brasada Ranch and Caldera Springs both initiated sales in 2005 and sold more than 200 developer-owned lots and units (each) in their first year of sales -apparently setting new records for the State of Oregon. If these resorts had continued to enjoy even modest success selling developer homesites and units at such prices, they could have potentially generated strong developer profits in the late 2000s, despite high initial development costs. However, absorption rates began to cool in 2006 before declining precipitously in 2007, with price appreciation outpacing the amount most prospective buyers were willing to pay. In 2007, sales of developer-owned homesites and units within Pronghorn, Brasada Ranch, and Caldera Springs dropped to rates ofonly about ten properties per year a decrease of more than 95 percent at Brasada Ranch and Caldera Springs from initial levels. As shown on Table 4, the average (mean) price of a homesite sold within Central Oregon's five newest resort communities had climbed higher than $500,000 by 2007 (pulled up by high prices at Pronghorn and Tetherow and a few $1 million-plus sales at The Ranch at the Canyons). As shown on Table 5, peak pricing for interior homesites ranged from $200,000 to $650,000, and peak pricing for golf-front I premium homesites ranged from $320,000 to $1.35 million. By 2008, the resort real estate market in Central Oregon had degenerated from a frenzy into a freeze, with transactions plummeting. Price declines finally followed suit. Annual homesite sales volumes (including developer properties and resales) at Pronghorn, Brasada PETERSON ECONOMICS 7 Ranch, Caldera Springs, Tetherow, and The Ranch at the Canyons dropped another 39 percent from 2007 to 2008. Then, as the market entered into a deep slide, homesite sales volumes dropped another 80 percent from 2008 to 2009. Moreover, this was accompanied by a catastrophic drop in average (mean) homesite sales prices, from about $464,300 in 2008 to only $189,100 in 2009. This brought average homesite sales prices well below the mark needed for most new resorts to simply break-even on resort development costs, curtailing developers' desire and ability to continue chasing prices downward with additional price reductions. While 2009 can be characterized as a steep market slide, 2010 represented a market collapse. Driven downward by the large number of bank-owned distressed homesites hitting the market, average (mean) homesite sales prices within the region's five new resort communities in 2010 fell to only about $109,700, compared to $464,300 in 2008. This represented a price decrease of about 76 percent in only two years. However, these low prices finally caught the attention of bargain hunters. In 2010, sales volumes were up about 30 percent from 2009. However, most ofthese sales were occurring at "pennies on the dollar" relative to original sales prices. During this market slide and subsequent market collapse, developers at Pronghorn, Brasada Ranch, Caldera Springs, Tetherow, and The Ranch at the Canyons were typically unwilling to compete with bank-owned properties. This resulted in a situation where most bank­ owned homesites and units were priced at less than half the price oftypical developer listings and perhaps 75 percent the price of non-distressed resales. For example, at Brasada Ranch, it became common for developer homesites priced at $200,000 or $300,000 to sit adjacent to identical bank-owned homesites asking $50,000 or $100,000. As a result of the influence of low-priced resale properties (typically either short sales or foreclosures), developer sales came to a near standstill by mid-2008. In fact, from 2008 to 2011, the developer sales pace at Central Oregon's five newest resort communities averaged a dismal three homesites per resort per year­ despite remaining developer inventory ofmore than 850 homesites. To a large extent, the market collapse of2010 represented a "nasty echo" of the sales success enjoyed at major sales launches in 2005, when a high percentage of buyers opted for low down payment five-year balloon mortgages. As these came due in 2010 without good options to sell, negotiate terms, or refinance -many homesites reverted to lenders, who subsequently priced them as low as 10 to 20 cents on the dollar (relative to initial pricing) in order to unload them quickly. Making matters worse, during this transition, most lenders refused to pay club dues and homeowners' association fees, thus exacerbating club operating shortfalls. Prices within Central Oregon's new resorts slid another seven percent on average in 2011, with average homesite sales prices dropping to about $127,000 at Caldera Springs, $86,800 at Pronghorn, $65,000 at Brasada Ranch, and $285,000 at The Ranch at the Canyons. Interior homesite prices within the region's five newest resorts ranged from a mere $25,000 to $200,000, while golf-front / premium homesite prices ranged from $55,000 to $285,000. However, prime west-side resorts (including Black Butte Ranch, Aspen Lakes, and Sunriver) continued to support much higher values on average, and numerous indicators suggest that the market may have hit bottom, with a significant recovery likely within the next several years. PETERSON ECONOMICS 8 ! Sales volumes held fairly steady in 2011, with fewer distressed listings available to spur demand. Fortunately, however, inventories also declined notably in most Central Oregon resorts in 2011. With demand from Central Oregon's major source markets (portland, Seattle, and San Francisco metro areas) recovering strongly and the supply of distressed inventory largely gone, Central Oregon's resort communities enjoyed a very strong recovery over the past two years. This recovery gained strength in 2013 and 2014 year-to-date. For example, average lot sales prices at Brasada Ranch surged 56 percent between 2011 and 2013, and lot sales volumes surged 109 percent. Thus, resort real estate values and overall market conditions in Central Oregon appear to be well into a broad-based recovery. To some extent, price appreciation will almost certainly be tempered by releases of existing unsold developer inventory and "shadow inventory" (lots or homes individual owners wish to sell, but have held off the market waiting for conditions to improve). These future releases could add about 500 to 750 lots and a much more limited number ofbuilt units to the market over the next several years. However, in a stronger market, given the size of the Central Oregon marketplace, this might represent a two-to four-year supply of new inventory. Moreover, beyond this, other potential additions to supply will likely be limited until prices have experienced a notable recovery. CONCLUSIONS Clearly, the resort I second-home industry was directly and very significantly impacted by trends in the national economy and credit markets in particular. The industry experienced a massive boom in the mid-2000s, followed by a freeze and severe collapse in the late 2000s. As a result ofits location, stage, and number ofnew large-scale communities, Central Oregon experienced one of the fiercest boom-and-bust cycles of any markets, with direct implications for Thornburgh's development parcel value and the ability to obtain funding before, during, and after the market crash. Although local market conditions remained fairly strong in 2006 and early 2007, credit began contracting with funding uncertain in 2006 and 2007 prior to the market crash. A local example of these trends comes from Remington Ranch, a proposed new large-scale destination resort near Redmond. Remington Ranch received full entitlements in late 2006 and began construction in November 2006, funded through several sources (including bank financing, developer assets, and a Founders program). Initial development efforts were proceeding successfully until March 2007, when Bank ofthe Cascades informed Remington Ranch that it no longer had the capability of funding the Phase 1 construction loan. However, Columbia River Bank then authorized an $8 million increase in its existing credit line, enabling construction to continue. Additional funds were also reportedly raised through a Charter program. However, additional funds were needed to move forward, and Columbia River Bank was unable to provide sufficient funding alone. As such, in late summer 2007, Remington Ranch, LLC ordered its contractors to cease construction and has been seeking construction financing since that time. Following this, Remington Ranch reportedly refunded all lot reservation-holders. PETERSON ECONOMICS 9 Remington Ranch is just one example of how the financial crisis was impacting the Central Oregon resort industry prior to the recession. Thornburgh was also experiencing challenges in obtaining funding from early 2006 onward. In that environment, Thornburgh's ongoing land use appeals and resultant delays further increased uncertainty, reducing lenders willingness to provide project financing no matter how great the project is. Following the onset ofthe Great Recession and the financial crisis, Central Oregon's resort real estate market froze, and then eventually collapsed, as more and more properties reverted to lenders, who dumped large inventories on the market and continuously reduced prices until eventually finding a bottom. As shown in Table 4, average lot sales prices at the area's most relevant resorts --which peaked in 2007 at $503,576 --had dropped to $106,958 by 2011. Absorption of developer homesites in top relevant communities also fell from an average of about 56 sales per year before the crash, to only three sales per year during the crash (2008 through 2011). As a result, financing sources were effectively eliminated. Furthermore, tremendous uncertainty existed at the time over what type of products the market would be interested in, and when that would be. Developers couldn't be certain that the products they had planned in the heyday would be of interest following the collapse, or when. Even if a developer was financially able to move forward with additional entitlements, planning and permitting actions, in the middle of that environment, anything they did would likely be a waste oftime, and money. By 2011 Thornburgh was on the edge of bankruptcy, fighting for survival. For it to have redirected its efforts and pursued further permitting until market conditions warranted would have been ridiculous. Although Central Oregon's resort industry has seen much recovery since then, until sales prices increase substantially capital sources are unlikely to invest, which will limit development for at least the short term. PETERSON ECONOMICS 10 ···~~~t~TE.~~·Q~6N ..) ·.:¢o~:~»~~~.. ."J~.'.' ·;.~~~~~.~..~4~~~~~~ WQrwatlOlli~a,Uhave knoWledg~;6f; L .IWf)S the C~fuUP~~fPf'Pwmb~;Re501;t'.~,.lJr,C me)developer of the, Thornb~Re$ort Irptn;l®4llDtilLoyrutant\,tL¢iQt~Jti~on~e resort property owned.\iyTt(C.in August 2QH.Inlate.7l000 lent~mt,03'¢Ontmct19huy larla6Whed by my 6ran,dpareu.ts, ~vere~ and Eva'Thotnb:Utgh. fUid began tl,te'initialplannmg pr~ I consulted leg:;il counsel about the cost ana. time required fqr entitlements and was. a9vised to budget $500;000 and schedule 18 months for the CMPIFMP. 2. ill Jllhe 2004, I fooned me with David Chapm:at).. ijD,d assigned the contract to the company. From then until June: 2007, we were TRC'sco-managers. In June 2Q071became mc's sole manager, and I am still TR:C'ssole managedoday. In my role as mahager ofTRe, I am familiar with: a) all expenditures incurred by TRC in connection with the project, b)a1l actions taken by me to obtain funding, c) all entitlement efforts. land use actions, and appeals, and; d) how entitlement delays, the financial crisis and the Great Recession impacted TRe. 3. In August 2004, TRe retained Schwabe, Williamson and Wyatt as legal counsel, plus numerous consultants needed for the eMP and FMP. Per earlier advice I expected it to cost about $500,000 to achieve a final, approved FMP, but to be safe TRC budgeted $600,000. On February 18,2005, TRC submitted its CMP application. It quickly became apparent that Ms. Gould intended to object to nearly everything regarding the project, and as a result the administrative record for the eMP became huge and time consuming. The record for the first Affidavit of Kameron Delashmutt Page 1 t t CMP:appeaho LWAwas·.wen<>v~StOOO~.:)3ecauSeoftheslie ofth« reoordandsevetal recoitlobjedi~~ffqDi'~"~i4i~t;k)n~Dearly a y~(~ertbanthe,21 days,. . . ..:.;....1b. L··UBA'·' ......1 ....'\.·,.... .;:..1'"~...... ·~lA...·t \i.... " . .,..:-... to~'I':A the recota TR.C's'"'....;;;..,;..·~• ...4-a".·reqLl.l,\~ if .1UD;;h auuw~~~".1 i)~.W.~1 . ~y", ~y . .I"~-~"" , c'ounsel did Once the,~d'~:fi:na'Dy\iijOOled,Ll.TDAtoQlt ~~five monthS ra'thertban the statutori1y~required77dq:SJo1SSUean,~<OV«ra.Ut theLUBA appeal of the eMf took nearly one thll.year, ~'With.Ltil:l~:Ii~Qlmltgfl:\e County's decision with respect to all but 3 ofMs. Gould's 3t)~:rveral1;assignmentsol':mot", 4. LUBA'sCMP<keiaion ~fOllowedby antlbsuccessfU1lJPpeal to the Court of Appeals(COA). Aftet1heJ;enlalldfinally'1l:1adeit back to the. County, Ms. Gould again app~led to LUBA, ahd then again to the COA When sM diu.not prevail at either LUBA or the COA, Ms. Gould asked the: COA toreeotlSlder. Aft,ef r~nsi4eqltion was denied, Ms. Gould appealed to the Oregon Supreme Court, Which refused tollear her appeal. TRC finally received "final" approval ofthe CMF on Decembet 9. 2009, five years after filing, at a cost of $2,269,095 most ofwhich was spent defettdingfour years ofappeaIs. Except for increased cost and time, Ms. Gould's appeals had little,.if any, discernible effe~t on the project. S. Prior to being able to suQmit the FMP application lRC needed to complete numerous items to meet conditions of approvaL To this end we pursued at substantial cost, applied for and received the following permits and approvals, a) Water Pollution Control Facility permit issued on February 14, 2007ata cost of$] 54,846.91, b) ODFW Water Rights Permit, issued on March 22, 2007, that along with water rights cost $239,984, which included defending and settling the protest and appeal of our permit, c) Annexation into the Redmond Fire Department on May 10th, 2007, d) DRS Drinking Water Permit on May 21, 2007 at a cost of $100,089, e) Right of Way with the BLM issued on July 16,2007, which was subsequently Affidavit of Kameron DeLashmutt Page 2 I -_..........'*-,--,-----==--~--. \' :-,~-.~.... { W;~~l·~tJri.;at·;~'···'._f)DFWonApri14?10Ql~', ......•.'........ '...Q.pP)iMliqti.:fot::RMP't~~h:~ . . . ~~8)1~'bytJie'C()UIltyQn ~Q"r'~2;()8r~""" '. •. ~~1l'F.h;";.i\1'!i·. A" .• n~ustimes,Wit1:l:a·tblal Qrder'bYiJ.,UB:A;' .:., '.',.' .'•'.it' ...~t¥~I[~\1gu8t:J·6~;"'A.~'·'0:.~lirik..ib-v.·1,...ee ···ems .1het'kitlal·· .... ,.o:,\1:if ... '. pUUY ... ~J.U.l. .. Y ". . ......-".,. '~p~tion~>~" ··'·~'t:l1~,.aooI1eanoitanddefCri~git on~ppeal was$lA94;g~ :tht:.··' . 'rem~a~';" ;:; ..~a~{·;':ltthe:FMPtemand.iS:ihltiated'ruid theFMP're-a~Yeil"Ms,'.,· GOilla~!:i1~~~~~'~~itilUr:th~,;m~g itwill1ikely take 'another 18 mpJ;Jthst&2 yeatstoe()mpl~t&malFMP.TR~¢ostof~tmitfmgthe CMP and,FMP to tmteis $41310,152'. .' nearly.$4,OO(),OQO b~ef:b1l4~'(.n.ot t;ountingthe costto finish theFMP or the tehtatl~pl~t)and far inexcess6ftli~~aDlOllths'8llocatedtodoS()"In addition to those costs. TRC 'also spe;nt $364~999 p~glts P~e A 1'~1ative Plat, Wbi~h comprises 27 pages ofengineered draWings. the'~te;n$ive'penni~~,ebsts and delays had severe ramifications, which were like a snowball: the :further TRe,p~edthe larger the issues became. 7. T:bro~~ut rulland use appliCations by TRC I pushed as hard.as I could to complete them. Fol"e,xample, TRCfiled its fitst FMP on August II, 20'0'7, over two years befoxe 'fRCeventua}ly received final approval of the CMP in 20'0'9. The eMP was still on appeal at this time and the County held the FMPapplication pending the outcome of the CMP appeals. 8. The reason 1 pushed ahead on the FMP, notwithstanding the risk that the eMP approval would be overtumedtheteby rendering the FMP application moot, was to assist TRe's financing efforts with Sterling Bank (discussed below). However, filing the application for the FMP before the CMP appeals were complete created logistical issues with the County. On January 30', 20'0'8, TRels counsel had a phone conversation with Ruth Wahl and Laurie Craghead Affidavit ofKamer on Delashmutt Page 3 l i I I otflle.·a()lmty~~gthebest.tnatmetin,wbiehro,proceed as qUicldY M~l?Pssible. The, County , ".. . ,."., ' . ~lt~'l1(;rhad jufu~:fhe;gun iiI filii1gtheFMP~whenitdid,.,tQ ~~,tbe.Coun~~ . ': ' . . ... ' . . .,:, ..',. . con~.ilt.n ~edtc:JmrthetextcmSions.()fthelS0.Y:c.1oek(orade~biolt o~thefFUr ~4 th~~j~tlyi~.asChedUle offIow to. proceed.After,:theJit'St~dQ;f~e:GMP from.LtmA On A.ifll1~2008J,the County asked that TRC,terminate,the.;o:ri~al.EMf 3P}7lication andleSubnnt'it 'fie didsb With1:henew.s~bnrittal filed·on April~l~~OQJkl}.~ly 19'Dl9il~ t>rJ.9l'to. . the eventUal. final a.pprov,alofthe CMP in Decem.ber2()09~ .Tb.~;~ubnUttedFMP'.....-. ," appljCatiOrtWBS linlnedime1y qeemed complete and the b:~gscheduleiil. This.appro~b ·was bighly unustihl and cattie4 significant risk that the eMF would n01beapptDYed;bad no ptoi!eeded ina more :typical maimer it would have waited until after theGMr~;final to file the FMl> application after December 9,2009. Thus; only by takingsignmqmttisk.$.to acceletatethe process was TRC ableto obtain a remand ofthe FMP in August 2010. Raditinstead waited an additional 19 months to file the FMP applicatiolt,. and otherwise Ms. Gould's appeals of ~e mP proceeded on the same schedule, the FMP would not have been remanded until March2012 four months after the CMP expired in~November 2011. 9. Beginning in 2006, TRC was looking for additional funding. Despite strong early interest in the project including over 500 unit purchase reservations, TRGs financing efforts were hampered by the delays and the conflict within the entitlement process. TRC had discussions with dozens ofpotential lenders. The status of the entitlements was a constant issue. Because ofthe constant appeals TRC wasn't able to conclude funding. As a result Mr. Chapman and I were personally lending TRC substantial sums. 10. In late 2006 I began negotiations with Parker Group Investments, LLC (pOI) and Mr. Jeff Parker regarding possible financing. Through early 2007 I was trying to finalize an agreement with PGI. As that progressed, in April 2007 PGI lent TRC $1 million. Then in June Affidavit of Kameron DeLashmutt Page 4 ( . ,~emetrt's!:.~,~~,~~"~(,l!~~O;Ml1t~~tl~?·•..••. ,a,:j~~~~'; '·'0., ..' wt>lilap~~_DMbrid~~lgAn~'~>.... .fa~,~~itoy,1i~d~v~~~fUnding, . . .. '''~m'',;:,;I'Ji.<t'·l.........j~~;l:m··""~d"..a ...;~c.:J~b:..',mD"lo~~;..-:'~:+'k....:~~1..u....~,..~...· ... ~~.:...1 ..:tl,k~"...l;1 Cuow er."! ~_,lU,. "',l.'o~C!'" ,I.:UUuw~.. .l~\.(. ~.;...... ~~1~~....,~~~'.1'Y~:<;IIt........~...~ .v~ '006"% "'f'~~'" ·.··."\il;$l.ts' , ...•.·.·.··.·.... raiseifvaiwDrfi1ni.'·cal·k~~.·,t(''''.·.·'l~·.:i~iJ...: +a.·.t'·ihattime.·.·', VlOv u.,K;~J, .. apR.. . ...~, ·.lK.A . ~~1lf~"-~. ~,+;~~ .. ',' 12. .OilAugusdlOt2007,]9'daY$~~tb,t~f_~1lcat,ion~,mM, 8~lin~ iSSlied a L;etter ofmtetest t.91'rovide a $15 million.1tlan.,t k:new tlmr,emtcnQI1m ~eliitfrom $:20M to $i5M was gom'gtb ~ause'acash crisisllithehear,ten,1lfw'l'RG, an4 was hopeful that once; the appraisalwas com.pleted the'value w()uld,~:$tteb,~t.S~ling would inereasethe loan amount bliSeptember 19,2007 the appraisal was cOfU..'Pleted.(~t;taehedExfu'bit 1)showing a valile of$5Q million. Even though it.badprovid~d ~~JllfUJ,~'for$20M, Sterling would not increase the loan as requested. Sterling W8$ coneemed,about the deteriorating ~~qnomy and its portfolio exposure to development lands. On OOtober'li) 2007 J S~issued a commitment letter for the $15 million loan. which wasohly :30% of the appraised value (compared to 60% Loan to Value ratios that were common earlier in 2007). 13. On November 8,2007 the Bend Bl1lletin ran an article with the headline "Thornburgh Runs into Hurdle", and "Developers must show resort won'thave negative impact on wildlife!' That caused Sterling great concern and it had a new appraisal prepared on November 15,2007 establishing a value of $36,520,000 (a decrease of 29% in just one month). As a result, Sterling reduced the loan amount 10510;956,000 (30% of the new value) which was far short ofTRC's needs. This reduction eliminated all interest reserves and after paying items due at closing TRC had little cash on hand with substantial operating expenses. Over the course Affidavit of Kameron DeLashmutt Page 5 ofaoout7montllsfIOmA;pr;it'tn NGvembCJ':2,OO1·the loan.)~ge;ne fiol:n.af$20~11WillQ$l aSsutane~ Whlt'll)in~:mOte:possitifb~'itt'oU1~~fiNmresima$lS"mill1oil co~eIlt,.tc> an S11 xriillion Joaa ' 14. Witltf&eetonomy tt~()mting rapidly and ll():OWet optjQ~ ngclosed the loan .on NovemOOt t9~'2001/1, 'Atolo..g me::kda S9DUllioDi*et short:(aUlJittleoperating . . . . capital~nQ inte:rest'f~sU~al::~asi.t~i~L~e tnit¥le ofnumerous land use actions. ThiS Jnclu~d processing tlie,(;kp,l:ematt~~.~QCOllIlt}'and defending jt in several ap-pea.ls, 'aptlPulliii~and~~g'the,FMPapplioation,anddefendingjt ~)fl appeal. From November 2001 ()nwatdt.ItCeomact~d hunorerulof parties 'regatdingatiditiQnal funding, but with the countrY in: fiilancful :cnsis atidthe ecQl1omy:in lr¢efall, no 39ditional funding was available. 15. PrIor tQ closing the Sterling loan , there were nQ conflicts between POI arid TRC, but beginIiing in early 2008, the cash shortfall fon()wing~losing created substantial conflicts between TRC and POI. In later 2008,tlitough 2009 and .on, POI had discussions soliciting investQrs tQ finance PGrs purchase .of the Sterling lQan so POI CQuld foreclQse .on TRC. In early 2010 a PO] affiliate cQntracted tQ purChase the Sterling lQan. In October201 0 Sterling Bank issued a nQtice .of intent to fQreclQse .on the Thornburgh property .on March 3, 2011. 16. Parker was still trying tQ line up the capital to finance his purchase QfthenQte, and around February 15.,2011, lleamed he had asked Mr. Terry Larsen tQ finance his acquisitiQn .of the lQan frQm Sterling. In late February 2011, I spoke tQ Mr. Larsen a cQuple .of times, but nQthing came .of thQse discussions. At the same time, in the event the fQreclQsure sale was going fQrward I'd been preparing fQr TRC to file bankruptcy tQ .obtain a stay from the sale. In early March 2011, I talked to Mr. Parker and was trying tQ reach Sterling tQ fmd out what they were dQing. On March 3,2011 I learned Sterling had PQstponed the sale date fQr a week to March 10, Affidavit .of Kameron DeLashmutt Page 6 , ., '. ," .. ' , .... ,' . iJ.;jmlID1li~kl.ytilea· a mQtiOA1b(reQ~f1W~~~,wktb the < . . 'IlW,tmil .'{co~to !tic ~.nver $SOO;OQti}t\ie<lUQ~~X(1t.,· :rQfij~~Wl'Al1.~.30i 20t1. DUringt1'1~~~;r'\l;.•.. ' :stay;wassothat tlle buyeratthe'foreOl~~~~'~Q~d . 'r~~()ll ('Qneyear aftelteInmid), I ttb$j$.tQ~~thatm¢ ofi~year a~~dltn~~;' "~~~ri~although the COun1;YJaterl>acltw,~way\ftomthat '. posItion ahaagreea"tbatih~"~~~()deadlinetoinjt1ate the FMI' remand. Howev~,tbe Countys iillii,hl:PQ$1AAh ~~maferi1d dti'ver behi;nd the aggressive effort by Loyal L3Ild., LtC to quicklygetJeUefiftom·Stay. IS. The'prilnal'Y lS$Ue'!Qn'rernl:J4d ofthe FMP was the locatioIi oflands to be utilized for wildlife~IDiti,gatiQi1. The'~tp'~d'Qrderrequired that the BLM advise TRe as·tQpotential IQCations for WiI<l1ife ~fMlti()~~>nBLM land. However, BLM could not provide that infonnauOrt, unfilitcbtripleted its Clme Buttes Area Recreation Plan. Despite BLM'g promises thatthe Plan would 'be cotnpJet~nlUch earlier, BLM did not m fact advise IRe ofpotential wildlife mitigatioD'sites lllltll,Febnmry 23, 2011 atthe earliest, six months after the FMPwas remanded and oruymne montb~b3t'oreUte CMP was due to expire. 19. I can state without hesitation that at all times from the inception of the company until the foreclOsure sale in August 2011, 1 did everything possible. given the circumstances~to push the ThombUtgh Resort along as fast 3$ 'possible, taking significant risks that many other developers would not take at extreme cost. in furtherance ofthe project. 1ms included; costs of the CMP. filmg for FMP appmval and defending it on numerous appeals, even while the eMP Affidavit of Kameron DeLashmutt Page 7 I l I t i wasrillOit~do~$.lgnificalit onsit'~eQnstrUctions, whieh incl.udedconsfiU~g th~ SLM ROW m.''' J"'~~ .' ntsmestin 'bstantiai su:msDltbthe .. rls'.,. to eel ~~I'aecess~ ., v. tg$1 ...'.' . ',,<:.,;'teSO . ~._~.inellldw;.bWng.world class go1fdesignet$;~t,d.:P~lm~iBexIJ ,', H' • ~D$litw:~dtomW~tG desigo,.l'Q~'~ then beghHX>Dstruction;activities~tbeii'go1f co~s {$895,244);'Bhd;,~tion oia log lodge that wDUld.be::resp~;(}ommuuity C#1tet I ,($lA51;i23S~:spteparirig tb~ ll~A tentative Pla~ evenJ)~Qre hfl~J."~FMPt1and:t;~Q extensivepw-deveiopll1emplanning, including extensiveengineeting,loau:smdies and.}Jlmw.fug I for th.e tesoJ$S ~bleenergy plan, including soIal'and alternative.energy smn:ces~ In t()ta:t~ ! ImG ~~$9,83l;402onpermitting and entitlements ($4,675,151), resort ~enities ($2~S94J93)~on constructiOn ($1.205.127), and planninglpre-developmen~ activities ($1,556,931), all in furtherance of developing and building the Tho;mburgh Resort This-nearly $10 million excludes land acquisition, finance costs, sales and marketing costs, and Gen~and Administrative costs, which combined, were several times more. 20. DuringTRC's stewardship of this projec4 from inception to foreclosure, we encountered adversity unlike anything seen before. Challenges that were completely outside of its control. TRC was SUbjected to an unprecedented number of complex, detailed and exhaustive appeals. During which the nationa1 and local economy came crashing down around TRC, causing all sources offinancing to vanish, almost completely eliminating the market for TRe's products and creating significant uncertainty about the proper path for project development. TRC invested tens of millions of dollars in the Thornburgh Resort, and in spite of the incredible challenges, took extraordinary steps to expedite the projects development. Not only could TRC not have moved things along any faster, in retrospect its surprising TRC accomplished so much despite such immense obstacles. Affidavit of Kameroll DeLashmutt PageS Affidavit of Kameron Delashmutt Page 9 05/18/2014 13:16 FAX ~001 AFFIDAVIT OF' TERRENCE LARSEN STATE OF CALIFORNIA ) CountY of IIIN./~ _ ~ 88. I. Terrence Larse~ being first duly swom, depose and say the follo~g information that I have knowledge of: 1. I am the sole member of Loyal Land, LLC (Loya1)~ which is the owner ofthe real property known as the Thornburgh Resort Loyal was organized in the state of Oregon on March 7,2011. Loyal is tho applicant for a declaratory ruling that the Thornburgh Resort CMP has been initiated, which is currently on appeal to the Deschutes County Board of County Commissioners. This affidavit is being presented in support of this appeal. 2. 1 first became aware ofthe Thornburgh project in January 2011 when I was introduced to leffParker in Pal.rn Springs. CA. Mr. Parker was at the Tradition Golf Clubhouse, where 1 am a member. He was sitting with other members whom I know. At the time I was introduced to Mr. Parker, he was discussing the Thornburgh project and what Mr. Parker saw as the opportunities for it. Prior to that meeting I had never met nor spoken to Mr. Parker. nor had 1 ever heard of or had any involvement in Or with the Thomburgh project. Following that introduction I had further discussions regarding the project both with Mr. Parker and others. From Mr. Parker I learned that: (a) he was aware of a company which held a contract with Sterling Bank for the purchase ofth.e Note secured by the trust deed on the Thornburgh property; (b) Sterling had scheduled a trustee's sale for March, 3. 2011; and (c) if the sale took place then Mr. Parker's interest in the Note would be lost. Mr. Parker proposed that I finance his purchase ofthe Note prior to the foreclosure sale. AFFIDAVIT OF TBRRRENCE LARSEN --_..... _-­ raJ 00205/18/2014 13:16 FAX 3. After speaking to a few other acquaintances about the project, I decided to visit the property. which was probably sometime in February 2011. I also spoke to Kameron DeLashmutt about the project a couple oftimes in February 2011. Nothing came ofthose discussions. In early March 2011. I agreed to purchase the interest held in the Sterling Note and trust deed for $4 million. At that point the trustee's sale was still scheduled for March 3, 2011, so to give more time to complete the 1ransaction, the sale was postponed for one week. The transfer documents were completed and the trustee's sale was ready to move forward on March 10. 20 11 ~ but TRC filed for bankruptcy protection that morning which automatically stayed the sale. 4. Around the tUne of TRe's bankruptcy f1.ling, I understood the FMP for the project had been remanded to the County on August 17, 20 I0, and had received advice that the remand had to be initiated within one year, by August 2011. It also was my initial understanding that Loyal needed to own the property in order to initiate that remand. Because the August 2011 deadline was only five months away, Loyal could not afford to wait long to complete the trustee's sale. so we filed a motion for relief from stay in the Thornburgh Resort Company (IRe) bankruptcy. During the trial on our motion it became apparent that there was in fact no such one-year deadline under Oregon law. and that the applicant could initiate the remand whenever it determined it to be appropriate. 5. Following Loyal's purchase of the Note, Loyal's interests and those ofTRe were often opposite which led to extensive legal actions by all parties. On August 30, 2011, the trustee's sale occurred and Loyal obtained title to the real property interests in the project of TRC and Parker Group Investments, LLC (a Parker entity). After protracted negotiations, in December 2013 Loyal entered into a settlement agreement with TRe and Mr. DeLashmutt resolving their various disputes. AFFIDAVIT OF TERRRENCE LARSEN IaI 00305/18/2014 13:17 FAX 6. In summary, I can state without exaggeration that: (a) neither 1 nor Loyal had any involvement with Jeff Parker or the Thornburgh project before January 2011 when I met Mr. Parker in Palm Springs, nor did I or Loyal play any role whatsoever in the financial difficulties that TRe had before that time; (b) SterJing Bank had issued its notice of default and scheduled the trustee's sale of its trust deed on the Thornburgh property prior to any involvement by Loyal or me; and ( c) it was my understanding that jf Loyal did not purchase Sterling's interest, then ::l:::t:=:y~mmree"~J1;: the State. personally appeared Terrence Larsen who proved to me on the basis of satisfactory Terrence Larsen State of California ) County of /11 A-£(ttl ) ) On May ,c,t 2014 before me, r'M RO'1QII •a Notary Public in and for evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instnunont the person, or the entity upon behalf of which the person acted, executed the instrument. I certify under penalty ofperjUl')' under the laws ofthe State of California that the foregoing paragraph is 1rUe and correct. WTINESS my hand and official seal. Signature 1'"", J,,2 0J7117/OOOO11SS4J016v2 AFFIDAVIT OF TERRRENCE LARSEN r;'" •. L A c K H E L T E R L N E LLP ATTDRNItYa A'ND gaUNSELQ·R8 AT LAW PBTBR LIVINGSTON D1RECTDIAL: (503)417-2153 E-mail: pl@bhlaw.com Admltled In Bar -Oregon and Washington May 13,2014 Board of County Commissioners Deschutes County 1300 N.W. Wall Street,2nd Floor Bend, OR 97701 Reference: Thornburgh Resort A-13-8, DR 11-8 Dear Commissioners: I am writing in support ofthe appellant in this proceeding. Kameron DeLashmutt, the principal of Thornburgh Resort Company ("Thornburgh") retained my former law fIrm, Schwabe, Williamson & Wyatt, PC ("Schwabe"), in 2004 to represent him in the land use process associated with the application for a destination resort ("Thornburgh Resort") in the County. Until Schwabe resigned as counsel for Thornburgh in 2010, I worked closely with Mr. DeLashmutt as Thornburgh's principal land use counsel. During the period that Schwabe represented Thornburgh, we prepared and fIled two applications, one for a conceptual master plan ("CMP'j in 2005 and one for a fInal master plan ("FMP") in 2007 (revised 2008). There were two lengthy, tumultuous hearings before a hearings officer, Anne Corcoran Briggs, and one more before the Board on the CMP application. There was another lengthy, only slightly less tumultuous hearing before Hearings Officer Briggs on the FMP application. The County's CMP decision of approval, including fmdings, was approximately 100 pages long. The record in the CMP application file was well over 5,000 pages long. Starting in January 2006, there were four appeals to LUBA associated with the two applications, which led to three appeals to the Oregon Court of Appeals and one appeal to the Oregon Supreme Court. The great majority of the issues raised in these appeals were decided in Thornburgh's favor. Nevertheless, the size ofthe fIles on appeal and the complexity ofthe issues in two of the appeals resulted in unusual, costly delays. For example, because of numerous objections filed by opponents to both the original record and the subsequent, first aos SOUTHWEST aRCAOWAY • SUITE 1900' PCRTLA~D OREGON 97205·3359 Ts:!...ItPHDNE aC3.224.5!S60 f"AC9tMILE 503.224 .. 6149 WWW.SHl..AW.COM Board of County Commissioners May 13,2014 -Page 2 supplemental record, it took almost a year, instead ofthe usual 21 days, before the record in the frrst CMP proceeding was settled and briefing to LUBA could begin. LUBA, in turn, required about five months, instead of the usual 11 weeks, to issue an opinion. There was at least one ongoing appeal during the entire time between the County's CMP approval in January 2006 and the Court of Appeals' third opinion, which remanded the FMP to LUBA in February 2010,1 Consequently, there was not a single moment during those four years (January 2006 to February 2010) when Thornburgh and Schwabe were not in some doubt about how the applications would or could progress. Because, in its first CMP opinion, the Court of Appeals interpreted the law applicable to phased developments more strictly than Thornburgh (or LUBA) had expected, it was necessary on remand for Thornburgh to do detailed wildlife and fish studies that were challenged in every possible way by opponents. The Bureau of Land Management ("BLM") assured Thornburgh that it could mitigate for environmental impacts on BLM land as soon as the Cline Buttes Recreation Area Plan ("CBRAP'') was completed. Unfortunately, the BLM's estimate of the likely CBRAP completion date was several years off-target, which meant that even when the FMP application was approved by Hearings Officer Briggs in 2009, Thornburgh could not identify exactly where wildlife mitigation would occur. Consequently, first LUBA and then the Court of Appeals found that, despite its best efforts, Thornburgh still had not met the requirements ofDCC 18.113.070(D). When I ceased work for Thornburgh in February 2010, the CBRAP still was not completed? . Thornburgh was the first destination resort applicant in the region to trigger the steadfast, determined opposition it encountered. While the opponents certainly were not at fault in exercising their legal rights to object and raise new issues, that does not mean Thornburgh was at fault in failing to anticipate the great expense and long delays that ensued. In my experience, the appeals process associated with a development application typically takes about a year, including remands and even subsequent appeals, although two appeals of the same application are rare. In Thornburgh's case, the appeals process associated with the CMP alone took from January 2006 to October 2009. The FMP process, from application to remand by the Court of Appeals, took from August 2007 to February 2010. While Hearings Officer Green is correct that the FMP process is normally simpler and less time-consurning than the CMP process, this just was not true in Thornburgh's case. This FMP application, like the CMP application, was not normal. The one issue deferred from the CMP to the FMP wildlife mitigation -could not be resolved even after almost three years, due to the delays associated with the BLM's late adoption of the CBRAP. Given the opposition Thornburgh has encountered and the difficulty inherent in I LUBA then remanded to the County in August 2010. . 2 This should have been clear from the record to the hearings officer, Karen H. Green. Board of County Commissioners May 13,2014 -Page 3 preparing land use applications of the magnitude of the CMP and FMP applications, with so many criteria to meet, so many findings to prepare, so much evidence to supply and so many opportunities for objection, there is good reason to believe that every time period established by statute or ordinance will be fully used in the future, as in the past, and, more likely than not, will have to be extended. The unusually long delays that resulted from the strong local opposition and opponents' appeals made.potential investors anxious and triggered conflicts between existing investors, which in tum made it virtually impossible for Thornburgh to attract new investors. The unprecedented decline and ultimate national collapse of the real estate market, began in July 2006, not 2008, as stated bl Hearings Officer Green, with matters growing increasingly and alarmingly worse in 2007. These economic events turned what might have been a major headache for a developer (strong development resistance from neighbors) under normal circumstances into a financial catastrophe. Thornburgh Resort was not the only destination resort development in the area to suffer. In Crook County, development of the Remington Resort halted in 2006; after the general plan for the Crossing Trails resort was approved in December 2008, the project was shelved.4 Pronghorn and Brasada Ranch also faced extraordinary difficulties, which still linger. All of these resorts were represented by competent counsel and had experienced developers. Many other resort developments around the country have met the same fate. "Fault" is a subjective standard, but it is generally defined as a moral weakness or failing, a mistake, a misdemeanor,a responsibility for wrongdoing or failure. In this case, the ''fault'' found by Hearings Officer Green in Thornburgh's case is apparently the failure to meet a schedule that could not be met. Mr. DeLashmutt and Thornburgh pushed the project forward as hard as anyone conceivably could have. For example, even while the CMP was on appeal, Thornburgh began the FMP application process, taking the substantial financial risk that if the CMP decision were remanded again, it would jeopardize any FMP approval that might have been obtained. Thornburgh pushed forward with the FMP application knowing that -as it turned out the BLM might be inaccurate in stating a completion date for the CBRAP. Without exaggeration, I can say that there was not one day in the more than four years that Schwabe represented Thornburgh when Mr. DeLashmutt's relentless push on all fronts to complete the project waivered. In my view, Thornburgh was not at fault in any way for failing to meet the 3 See: The Financial Crisis Inquiry Report, Final Report ofthe National Commission on the Causes ofthe Financial and Economic Crisis in the United States, Official Government Edition (2011), pp. 4, 17,22-24,187-88, 203-04,212-15,221,226,233-35. 4 In recognition ofthe economic situation, Crook County increased the amount oftime available for extensions to 12 years. See Crook County Code 18.04.080 and 18.160.070. Board of County Commissioners May 13,2014 -Page 4 deadlines that LUBA has found apply to the satisfaction of the conditions imposed in theCMP approval. Please include my letter in the record of this local appeal proceeding. Very truly yours, r~ LlNWff'T;... Peter Livingston PL:res 836647 Deschutes County Board of Commissioners Thornburgh Resort Appeal June 4,2014 File No.A-14-1 Loyal Land, LLC -Appellant David J. Petersen, Counsel for Appellant Tonkon Torp LLP 1600 Pioneer Tower 888 SW Fifth Avenue Portland, OR 97204 Initial Considerations • This is, at essence, an appeal requiring an explanation of what several provisions of the DCC mean • To interpret the DCC, the Hearings Officer was bound by instructions from LUBA on remand • Hearings Officer decision, pp. 14-15: • I~t the outset, the Hearings Officer finds there are ambiguities in LUBA's directions on remand." • Two-page discussion of internal inconsistencies in LUBA's analysis • Board of Commissioners is not so bound (ORS 197.829)-Board does not need to defer to LU BA. The Board has final say on interpretation of the DCC. • Hearings Officer was also limited by her conclusion that she could not consider new evidence (p. 27), but Board is not so limited Permitting DR's Under DCC Chapter 18.113 18.113.040. Application Submission. The authorization of a permit for a destination resort shall consist of three steps. A. Conceptual Master Plan and Conditional Use Permit for Destination Resort .... B. Final Master Plan . The applicant shall prepare a final master plan (FMP) which incorporates all requirements of the County approval for the CMP.... C. Site Plan Review . Each element or development phase of the destination resort must receive additional approval through the required site plan review (DCC 18 .124) or subdivision process (DCC Title 17) .... 18.113.050. Requirements for Conditional Use Permit and Conceptual Master Plan Applications. The CMP provides the framework for development of the destination resort and is intended to ensure that the destination resort meets the requirements of DCC 18.113. Permitting DR's Under Dec Chapter 18.113 • For decades numerous resorts were successfully planned, permitted and operated under the 3 step process by developers, county planners and staff • In the 3 step process, the CMP provides the framework • Now the previous decades of how the County interprets its code is being challenged. How? • By replacing the 3-step process with the general two-year requirement to initiate all land use permits under DCC 22.36.010.B.1: "a land use permit is void two years after the date the discretionary decision becomes final if the use approved in the permit is not initiated within that time period." • Is this consistent with the CMP as a framework? No. • Why does Ms. Gould support this approach? • Because this approach voids the Thornburgh CMP, and it will effectively eliminate resort developments PLUS other multi-phase, complex projects Brief Chronology: How Did We Get Here? conceptual Master Plan 2/18/2005 CMP application filed 5/10/2006 CMP approved by Board 2006-2008 Appeals of CMP to LUBA and Ct. of Appeals by Ms. Gould 4/15/2008 CMP approved by Board on remand 2008-2009 Further appeals by Ms. Gould 12/9/2009 CMP approval becomes final Days between initial BOCC approval and final CMP: 1,310 Hard costs to developer: $2,269,095 Final Master Plan 4/21/2008 FMP application filed 10/8/2008 FMP approved 2009-2010 appeals of FMP to LUBA and Ct. of Appeals by Ms. Gould 8/17/2010 FMP remanded by LUBA re wildlife issues 2/23/2011 (at earliest) BLM identified wildlife mitigation sites Days between application filing and remand: 849 Hard costs to developer: $1,494,892 Chronology Continued Other Permits (required prior to final FMP approval) DEQ WPCF Permit ODWR Water Rights Permit Annexation into the Redmond RFPD DHS Drinking Water Permit BLM Right of Way Permit Hard costs to developer: $1,024,016 (pre-construction only; additional $575,000 to build BLM road) Ms. Gould appealed (and lost) both the water rights permit and the BLM right of way permit Chronology Continued Initiation of CMP 8/30/2011 11/1/2011 11/18/2011 4/12/2012 1/8/2013 6/12/2013 12/23/2013 3/18/2014 3/31/2014 4/9/2014 Loyal Land acquires most of project by foreclosure Loyal Land files application for declaratory ruling that CMP has been initiated (DR-11-8) CMP expired (per LUBA decision 1/8/13) Hearings Officer determines CMP has been initiated LUBA remands initiation decision back to County (LUBA Case No. 2012-42) Ct. of Appeals affirms LUBA without opinion Loyal Land initiates remand (A-13-8) Hearings Officer determines CMP has not been initiated Loyal Land files this appeal Board agrees to hear appeal de novo as to whether the CMP was initiated pursuant to DCC 22.36.020.A.3 D e e 22.36 .020.A.3 Development action undertaken under a land use approval ... has been "initiated" if it is determined that: (3) Where construction is not required by the approval, the conditions of a permit or approval have been substantially exercised and any failure to fully comply with the conditions is not the fault of the applicant. Two key elements: • "conditions of a permit or approval have been substantially exercised " • "any failure to fully comply with the conditions is not the fault of the applicant " Conditions of Approval CMP effectively has 41 conditions of approval -original approval had 38 conditions, but one condition (#14) has five parts A through E, and one condition (#28) was deleted on remand • 19 conditions have been fully exercised (1, 3, 8, 9,10, 11, 13, 14A, 148, 14E, 15, 19, 22, 23, 24, 30, 32, 36 and 37) • 1 condition has been substantially exercised (38) • None of above findings challenged on appeal • Remaining 21 conditions are at issue Hearings Officer's Decision -Key Findings Fault of Applicant • For the remaining 21 conditions: • in every case the Hearings Officer held that the condition imposed an obligation contingent upon an approved FMP or later land use approval • in every case the Hearings Officer found the applicant at fault for the non-occurrence of the contingency Substantial Exercise • Defined as {(performing or carrying out a condition of approval to a significant degree but not entirely" • Must be determined {(viewed as a whole" rather than as applied to each individual condition • {(Substantial exercise" did not exist based solely on the 20 conditions she found either fully complied with or substantially exercised Errors as to Fault: Contingent Conditions Error #1: Hearings Officer held that conditions that cannot be exercised without later DR approvals are contingent conditions • Many are not contingent conditions at all • Many are restated verbatim in the FMP • directly contradicts three-step permitting process for DRs • directly contradicts approved 10 to 12 year CMP phasing plan for Thornburgh approved by the Board Errors as to Fault: Contingent Conditions Error #2: Hearings Officer held that when a condition of approval imposes a contingent obligation, and the contingency has not yet occurred, the non­ occurrence of the contingency must not be the applicant's fault • Not supported by language of DCC 22.36.020.A.3 • Contrary to lUBA Decision 2012-42 ('Imay be sufficient ... to find that failure to comply ... is not the fault of the applicant because the contingency that would trigger obligations ... does not and may never exist.") • Effectively rewrites DCC Chapter 18.113 and the Thornburgh CMP • in every case the contingency that has not yet occurred is a final, approved FMP or later land use approval • her interpretation requires those approvals be obtained , and the action in the condition taken , within two years of approval of CMP unless failure to complete within two years is not applicant 's fault • tolled only by CMP appeals Errors as to Fault: Contingent Conditions Consequences: • Prohibits imposing any condition of approval on a CMP that cannot be fully exercised within two years • Takes away County's discretion to impose a phasing plan longer than two years • Effectively prevents DRs or any other complex, multi-phase projects in Deschutes County • Three-step process cannot realistically be met in two years • Gives opponents veto power • Forces County to abandon meaningful management of complex projects and effective mitigation of impacts Specific to the Thornburgh project, the ruling: • Means the applicant should have violated the phasing plan and condition of approval #1, and instead built the whole project in two years • Retroactively creates impossible-to-meet conditions • Works a tremendous injustice Errors of Fact as to Applicant's Fault Error #3: Hearings Officer held that the applicant is at fault for failure to satisfy the contingencies preventing full exercise of all conditions • in every case the contingency that has not yet occurred is a final, approved FMP or later land use approval Applicant not at fault for five reasons: 1. Delay in BLM identification of wildlife mitigation sites . This prevented any action on FMP remand from 8/17/2010 until at least 2/23/2011, less than 9 months before CMP due to expire. • 1,310 days to get from BOCC approval to final CMP • 849 days to get from application to FMP remand, which did not toll eM P expi ration • Likely will be further FMP appeals Errors of Fact as to Applicant's Fault 2. Gould Appeals . Hearings Officer held that Gould cannot be faulted for filing appeals, but this does not mean that the applicant is at fault for the resulting delay. • Procedural and record objections caused substantial delays • Overwhelming majority of assignments of error denied • Only CMP appeals tolled expiration of CMP 3. DR Approval Process . Under DCC 18.113 the remaining conditions could not realistically be exercised in two years. • Tolling of CMP two-year deadline ended on 12/9/2009; CMP expired 11/18/2011 but project could not advance until 2/2011 • Hearings Officer decision requires full exercise of conditions within those two years • Simply impossible to achieve all remaining approvals and construct the full project by 11/18/2011, even without other delays (i.e. appeals, BLM) • Hearings Officer findings to the contrary (pp. 30-31) are absurd Errors o f Fact as to Applicant's Fault 4. Relentless Pursuit of Approvals . In spite of all challenges, developer acted always in good faith, took significant risks and pursued approvals at breakneck speed. • Nine-month window between BLM identification of mitigation sites (2/23/2011) and CMP expiration (11/18/2011) only existed at all due to significant risks taken by TRC • FMP application filed 4/21/08 rather than 12/10/09 • If filed 12/10/09, remand would have occurred 849 days later on 4/7/2012 • See Delashmutt affidavit, Livingston letter, tentative plat 5. Great Recession . Global and local economic calamity from 2007­ 2011 eliminated available capital and potential markets. • Hearings Officer implausibly found no causal link in the record between the Great Recession and project delays • Substantial evidence of link already in the record • Additional evidence of link submitted for this de novo hearing • Erroneous factual findings of Hearings Officer contradicted by the record and new evidence Impact o f the Grea t Recession Hearings Officer decision (p. 29): "there is no evidence in the record of a direct connection between the general economic downturn which began in 2008 and Thornburgh's financial difficulties which the record indicates clearly predated the recession." • Fundamentally misunderstands the evidence already in the record and the actual facts of the recession • Peterson report: • Top Central Oregon economic analyst for real estate development • "Great Recession" began with trouble in subprime mortgage market in 2006 (not 2008) • Bear Stearns collapse in July 2007 sent "shock waves" through the financial community • Central OR experienced one of the fiercest boom-and-bust cycles; resort financing vanished • From 2007 to 2011, average sales prices at area resorts dropped 79% and annual developer lot sales fell from 56 to 3 • Evidence submitted to Hearings Officer but not considered shows that project value slid from $50mm to $8mm between 2006 and 2011 (lost $14 mm alone in two months Sept. to Nov. 2007) Impact of the Great Recession • Peterson report (p. 10): "Even if a developer was financially able to move forward with additional entitlements, planning and permitting actions, in the middle of that environment [between 2007 and 2011}, anything they did would likely be a waste of time, and money. By 2011 Thornburgh was on the edge of bankruptcy, fighting for survival. For it to have redirected its efforts and pursued further permitting until market conditions warranted would have been ridiculous." • Other considerations: • Jeff Parker has never had any financial or ownership interest in Loyal Land • Loyal Land and its owner Mr. Larsen had no knowledge of the project until January 2011, long after the financial slide began Other Er rors Related to Fault Full Compliance Does Not Mean Full Exercise • Full compliance with conditions is possible without full exercise • Example: condition #7 -"all new proposed road names must be reviewed and approved by the Property Address Coordinator prior to final plat approval." • Full compliance exists = no final plat has been approved without prior road name approval • Full exercise does not exist =applicant has not obtained road name approval But, Hearings Officer found failure to fully comply with condition #7. In fact, all contingent conditions have been fully complied with because none of the contingencies that would allow exercise have yet occurred. Only condition 38 is not fully complied with and therefore fault analysis applies only to that condition • Applicant not at fault due to BLM delay Other Errors Related to Fault "Any/} Failure Does Not Mean "All" Failures • "Fault" test met if anyone failure to fully comply is not the fault of the applicant • Hearings Officer held that "fault" test met only if applicant not at fault for failure to fully comply with all conditions Prohibitive Conditions Do Not Impose Affirmative Obligations • Hearings Officer found four conditions that solely prohibit action (16, 18, 20, 34) are affirmative conditions subject to contingencies • Example: condition #18 -uNo development shall be allowed on slopes of 25% or more on the site." • Hearings Officer instead found this condition to impose affirmative obligation contingent on final FMP approval and therefore not fully complied with • Hearings Officer also found that this condition not substantially exercised because the applicant did not "provide development on the resort outside slopes of 25% or more" • Conditions 16, 20, 34 prohibit temporary structures, excessive density and disturbance of native vegetation Errors Related to Substantial Exercise Elimination of any significance for the word "substantial" • ((substantial exercise" of a condition does not require full performance • Hearings Officer decision p. 33: "Substantial exercise as I have defined it -i. e., performing or carrying out a condition of approval to a significant degree but not completely -cannot reasonably be expanded to include performance of prerequisite acts rather than the specific actions required by the condition." Greater weight given to exercise of certain conditions over others, without authority Finding of no substantial exercise "viewed as a whole" not supported by the evidence • Significant progress has occurred at hard cost > $9.8 million (Delashmutt affidavit ~ 20) • Every condition that could have been performed before CMP expiration, has been fully performed (except only condition 38 which has been substantially exercised) Decision Violates State and County Law • Hearings OfficerJs finding that the CMP expires after two years under DCC 22.36.010.B.l violates State and County law • ORS 21S.43S(2)(a) sets no deadline for applicant to initiate the FMP remand • Initial County misinterpretation of this statute created false urgency in TRCJs bankruptcy (see larsen affidavit ~ 4J Delashmutt affidavit ~ 17) • DCC 18.113.030 prohibits DR uses without a final J approved FMPJ but Hearings Officer effectively requires uses to exist within two years of CMP approval • Where does this leave the three-step DR process? Policy Implication s Do the rules for initiation of permits override the three-step destination resort approval process? • DCC 18.113 (specific) -DRs subject to complicated, extensive, three-step approval process and allows for extended phasing • DCC 22.36.010.B.1 (general) -land use approvals expire in two years unless initiated at that time How does the two-year rule apply to a DR? How is the longstanding three­ step DR process still viable if the decision stands? Does the County expect all conditions to a CMP to be fully exercised within two years, unless there is a valid excuse? How will the decision impact the County's ability to effectively manage future complex projects? Will the County punish the applicant for failing to achieve impossible results in an unrealistic time frame? Policy Implications What is the better approach? • The Hearings Officer got it right the first time (2014 decision p. 23) -the 21 remaining conditions (plus 6 others) "were not relevant to the initiation of [the CMPj primarily because the CMP approval decision specified times for compliance with these conditions that were after CMP approval." • LUBA fundamentally misinterpreted the Dee in a way that makes DR's functionally impossible • Hearings Officer obligated to follow LUBA, but the Board is not • Those conditions that could be exercised, or by their terms must be exercised, prior to FMP approval are the only conditions relevant to initiation of the CMP under DCC 22.36.020.A.3 • This harmonizes Dee 18.113 three-step process with the two-year deadline and initiation rules in Dee 22.36 Conclusion Hearings Officer Errors • Fundamental misapplication of the Dec giving priority almost exclusively to DeC 22.36 over DeC 18.113 • Hamstrung by LUBA's misunderstanding of the Dec • Multiple significant errors, both legal and factual End Result • A completely unworkable interpretation of the Dec if complex projects like DRs are going to occur in Deschutes County subject to meaningful oversight and mitigation • Misinterpretation of the evidence and injustice to the applicant Better Outcome • A sensible, balanced interpretation of the Dec in a way that harmonizes the two chapters of the Dec and makes DRs and other complex projects workable and achievable within customized time frames GY: LANDWATCH IJtUVERED BY: June 3, 2014 ­ Board of Commissioners Deschutes County 1300 NW Wall St. Bend, OR 97701 Re: Remand Hearing on File No. DR-11-8; Loyal Land LLC Dear Board of County Commissioners: I am writing on behalf of Central Oregon LandWatch in opposition to the Loyal Land remand argument in support of its claim of initiation of use of the Thornburgh Destination Resort. This case squarely presents an example of why we have rules that provide for the expiration of permits. The approval criteria for a Conceptual Master Plan (CMP) require proof of a developer's wherewithal to develop the proposed resort, traffic studies to predict traffic impacts over the next two decades and infrastructure needs and other information regarding impacts of a resort. Most of the information on which the Thornburgh Resort CMP was based is 10 years old and outdated. Economic, traffic and other conditions have changed over the past decade. The original developer, Thornburgh, filed for bankruptcy and there has been no showing that Loyal Land can carry out the development or has the water and other permits that were required of Thornburgh. The Resort CMP approval expired in November of 2011 and Loyal Land was at fault for not seeking an extension of the CMP approval and for not initiating a remand of the Final Master Plan (FMP). Please inform me of any decisions on this matter. Thank you for this opportunity to testify. Very truly yours, ~c!'----- Gail Snyder, Program Director www.centraioregonlandwatch.org o Deschutes County Board of Commissioners Thornburgh Resort Appeal June 4, 2014 File No. A-14-1 Applicant's Exhibits Submitted at Hearing 1. Self-Contained Appraisal Report, September 19,2007 2. "Thornburgh Runs Into Hurdle," Bend Bulletin, November 8, 2007 3. Self-Contained Appraisal Report, November 15,2007 4. Conditions of Approval, Thornburgh Resort Final Master Plan, October 8,2008 0371 17/0000115583307v 1 o SELF-CONTAINED APPRAISAL REPORT 1,982 Acres of EFU Zoned Land with Destination Resort Overlay Located Along Cline Falls Road, Redmond, Oregon Date of Value -September 19,2007 Prepared For: Kenneth Davis Sterling Savings Bank 312 SE Stone Mill Drive, Suite 135 Vancouver, WA 98684 Prepared Bl'.· Jeremy L. Cowan Dana L. Bratton, MAl Bratton Appraisal Group LLC 25 NW Hawthorne Avenue Bend, Oregon 97701 o o ,r "";;:"~ mi \T: (l\ (' 5iJf' , -'I' \' -i: \: -~ , eXPERT., IS 1lE -\1 E.5T:1TF ':V·i) l"iS 25 N\V Hawthorne A,"c. ilel1d. On....--gOIl Q7701 4050.\\ ! ]11: he \;,: Lj~, f\!(inh'1r1,J. l )re~ll'l ~;i-;(-. Dana Dr-uml1. MAl Mike Cabn. MM Jeremy (.nwan C:tl Clahrrl Nji\ncy lr:lhcM. SR..\ Grrgt1ry Jones Mich<:k Payne Dt:bordh Scblntcr ~u.s.an Smith ScOtl Thomas Mafi!>f-r>1J1C{' \Vows J()nt~ Bout ,41 ~!l" 22" 'LL\: 54LJ~9.t'lt1i / wwv••brflltOnarrraisal.fOIl1 September 21, 2007 Kenneth Davis Sterling Savings Bank 312 SE Stone Mill Drive. Suile 135 Vancouver, W A 98684 RE: Valuation of 1.982 Acres of Destination Resort Land Located Along Cline Falls Road. Redmond. Oregon. Dear Mr. Davis: Enclosed is the .veif-c()/'Jlained appraisal report of the property identified above. The purpose of this appraisal is to estimate the market value of the "fee simple estate" of the subje<:t property. in light of market conditions in effect on September 19. 2007. The intended use of this appraisal is to assist lending representatives with Sterling Savings Bank in regard to utilization of the subje<:t property as collateral for a real estate secured loan. A physical inspection of the property was made on September 19,2007. The subje<:t property consists of a 1.982 acre parcel ofEFU owned land with a "Destinatioll Resort Overlay" covering 1.970 acres. The site has been described within the body of this report. This appraisal has been written to conform with the Uniform Standards of Professional ApJXaisal Practice (U5PAP) set forth by the Appraisal Standards Board of the Appraisal Foundation and adopted by the State of Oregon, and is consistent with requirements ofScction 323.4 of Title XI of the Federal financial Institution's Refonn. Recovery and Enforcement Act of 1989 (fIRREA). This appraisal is intended to be utiliT.ed in all federally related transactions. All factors believed to have an impact on the market value of this property have been analyzed and it is our opinion that the current market value of the "foe simple estate" of this property is Fifty Million Dollars ($50,000,000)." Photographs of the subject property are contained in the addenda of this report. Thank you for this opportunity to be of service. Sincerely. ~---~.---.Jeremy L. Cowan Dana L. Bratton, MAl Stall: Certified Appraiser #C-000889 State Certified Appraiser#C-000021 "This value i. based on !be eXlrOOrdinary as5UIJlption !hat lhe subject I'fOP"rty will reccive Final Masler Plan approval 01\ ." belOre January 15. 2008. In irs =t -...< is" condition. we believe that market participants would pure""" the property for SSO.OOO.OOO a.".uning that the entitlements are in pi""". Please see the Special Is."""" section ofthis rep;>r1 for further informaliOf!. SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS PROPERTY LOCATION TAX ACCOUNT # OWNERS OF RECORD LA.lIiD AREA IMPROVEMENTS ZONING HIGHEST AND BEST USE As Is VALUE ESTrMA.TE DATE OF INSPECTION DATE OF REPORT ESTATE VALllED TYPE OF DOCl.lMENT APPRAISERS 1,982 acres near Cline Fall" Road, Redmond Oregon 15 12 00 5000, 5001, 5002 7700(1) and 7700(2), 770 I, 7800, 7801, 7900 and. 8000 Thornburgh Resort Company, LLC Parker Group Investments, LLC, et al 1,982 Acres There are two wood frame residential structures and several outbuildings. No value has heen placed on the structural improvements. EFU-3 with "Destination Resort Overlay" The Highest and Best use of the subject property "as is" is to hold the property and pursue entitlements and approvals to construct a destination resort. $50,000.000'" Septemher 19,2007 September 21, 2007 Fee Simple Estate Se(f~C(}ntained Appraisal Report Jeremy L. Cowan State Certified Appraiser #C-000889 Dana L. Bratton, MAl State C ertiti ed Appraiser #C-000021 25 NW Hawthorne Ave., Bend, Oregon 97701 'This value i. bosed 00 the extraordinary assumption that the subject property will receIve Final Mll.'ter Plan approvaJ on or before January 15.2008. In its current ~'9$ is'" conditio". ""'c bc)Jcvc that markel participants would purchase tile prop.:rty for $50,000,000 assuming that tbe entitlements are in place. Plcase see the Special Issues section "fthis report for further information. ._____.__..-'-___._JI o o-~····~ PRELIMINARY DATA PROPERTY LOCATION The subject property is identified as Deschutes County Assessor's Map # 15 1200 tax lots 5000,5001,5002, 7700(1), 7700(2), 7701, 7800, 7801, 7900, and 8000, Deschutes County, Oregon. A reduced copy of the Deschutes County Assessor's tax map highlighting the location and configuration of the subject property is set forth below: 27 "~I I ! I 35 :if~ 1 Y 2 Thornburgh runs into hurdle IThe Bulletin () o " : Buttes V;:..:I\~ Thornburgh runs into hurdle Developers must show resort won't have negative impact on wildlife By Cindy Powers I The Bulletin Published: November 08.2007 5:00AM PST http://www.bendbulletin.comiapps!pbcs.dll1artic1e.!AID-/20071108INEWSO 11711 080446 (2 of 7) 11/812007 7;45: 39 AM Thornburgh runs into hurdle I The Bulletin 0 o The Oregon Court of Appeals ruled Wednesday that developers of a proposed destination resort near Tumalo need a concrete plan, subject to public review, showing it will not negatively impact wildlife. The decision stems from an appeal filed by neighbors opposing Thornburgh Resort, a proposed destination resort on 2,000 acres along the Cline Falls Highway between Bend and Redmond expected to have 950 homes and three golf courses. Deschutes County commissioners gave initial approval to the resort in February 2006. The ruling isn't expected to stop the development. Thornburgh partner Kameron DeLashmutt said Wednesday that the ruling -along with an earlier decision by the Oregon Land Use Board of Appeals -will serve as guides about what changes they need to make before seeking final approval from Deschutes County. "We're thrilled -it is the step that we have been waiting on and it gives us the path to finish the issues with LUBA and get our final master plan and move on," DeLashmutt said. Wednesday's decision was the result of an appeal ofa May ruling by the Oregon Land Use Board of Appeals. LUBA found the resort's initial application lacking in four areas, but took no issue with Thornburgh's approach to mitigating its impact on wildlife. To address the wildlife concerns, Thornburgh developers had entered into an agreement with the Oregon Department ofFish and Wildlife and the Bureau of Land Management. The agreement requires Thornburgh to conduct a wildlife impact study and complete a wildlife mitigation plan showing that "any negative impact on fish and wildlife resources will be completely mitigated so that there is no net loss or http://www.bendbulIetin.com/appslpbcs.dWarticle?AID=/200711 08INEWSO 11711 080446 (3 0[7) 11I8/2007 7:45 :39 AM f t I Thornburgh runs into hurdle I The Bulletin 0 o net degradation of the resource." But the study and the plan were never completed. When Thornburgh's application came before the county, it only included statements that the developers had identified a wildlife management area and were "working with" ODPW and BLM. Resort opponents Nunzie Gould and Steve Munson, who live in Tumalo, appealed LUBA's finding that the agreement was adequate to address wildlife mitigation concerns under Oregon law. On Wednesday, the appeals court found that Thornburgh's initial application was flawed because it failed to include a mitigation plan. "First, the county's findings were inadequate to establish the necessary and likely content of any wildlife impact mitigation plan," the ruling states. "Without knowing the specifics of any required mitigation measures, there can be no effective evaluation of whether the project's effects on fish and wildlife resources will be 'completely mitigated ... '" Gould referred questions to her Bend attorney, Paul Dewey, and Munson could not be reached for comment. Reactions to decision But lawyers for both sides said they were happy with the decision. "We're very pleased with the court's decision because it really doesn't do anything to slow down the project," said Portland lawyer Peter Livingston, who represents DeLashmutt's partner, California developer David Chapman. Dewey said Wednesday that the key issue for Gould was ensuring that the public gets a chance to see the mitigation plan and comment on it before final approval of the destination resort. "It's important not only for this case in the wildlife mitigation area but as a precedent for other counties that LUBA and other counties will have to keep their eye on the ball," Dewey said. "And the ball is the public's right to comment on this stuff." Now the developers will need to revise the resort's application to comply with the rulings before putting it back before the county. Livingston said his clients will conduct the wildlife impact study, revise their application and ask commissioners for another review. While they say it won't slow them down, the appeal has been one more hurdle along a path to approval that has been anything but smooth. http://www.bendbulletin.com/apps/pbcs.dlliarticle?AlD=/200711 OS/NEWSOIl7110S0446 (4 of7)11/8/2oo7 7:45:39 AM Thornburgh runs into hurdle I The Bulletin 0 o In November 2005, a Deschutes County hearings officer rejected the Thornburgh proposal, saying it failed to show it could obtain enough water to supply the resort. That decision was overturned by commissioners in 2006, in a 2-1 decision, with then-Commissioner Bev Clarno and current Commissioner Mike Daly voting to grant land use approvaL Daly could not be reached for comment Wednesday. Commissioner Dennis Luke, who opposed the resort, said he could not comment on an issue that will be reviewed by the board in the future. Commissioner Tammy Baney had not been elected to her position when the Thornburgh Resort was approved. The initial approval came with a list of conditions developers wou1d have to meet before commissioners would grant final approval to the developer's master plan. Gould and Munson appealed the commissioners' decision to LUBA. The appeal listed problems associated with increased traffic, insufficient water, the resort's impact on wildlife and the number of overnight lodging units that developers must build. In May, LUBA found inconsistencies in the application and ruled that Thornburgh developers did not adequately address road issues or how the resort would maintain the required ratio of homes to overnight lodging under destination resort rules. But LUBA rejected more than two dozen issues raised in the appeaL In August, Gould and Munson asked the Oregon Court of Appeals to review that decision. Livingston said that his clients will now make the necessary changes to their fmal master plan and ask county commissioners for one last review. Once the county receives the request for review, it has 90 days to make a ruling, said Deschutes County Legal Counsel Laurie Craghead. Cindy Powers can be reached at 617-7812 or cpowers@bendbulletin.com. Tenns of Use • Privacy Policy • Contact Us • Comments/Questions? http://www.bendbullctin.comiappsJpbcs.dll/articlc?AID=/20071 108lNEWSOll7l 1080446 (5 of7)11/8/2007 7:45:39 AM o o SELF-CONTAINED APPRAISAL REPORT 1,826 Acres of EFU Zoned Land with Destination Resort Overlay Located Along Cline Falls Road, Redmond, Oregon Date of Value November 15,2007 Prepared For: Kenneth Davis Sterling Savings Bank 312 SE Stone Mill Drive, Suite 135 Vancouver, WA 98684 Prepared By: Jeremy L. Cowan Dana L. Bratton, MAl Bratton Appraisal Group LLC 25 NW Hawthorne Avenue Bend, Oregon 97701 o o EXPERTS IN REAL ESTATE ANALYSIS 25 NW Hawthorne Ave. Bend, Oregon 97701 465 NW Elm Av't., SlC 103 Redmond. Oregon 97756 Dana Bratton, MAl Mike Caba, MAl Jeremy Cowan Cal Gabert Nancy Gabert. SRA Gregory Jones Michele Payne Deborah Schlmer Susan Smith Scon Thomas Marie·france Woods Jones Bold: 541.389.2233 fax: 541.389.6677 Redmond: 541.548.2233 fax: 541.548.8206 ?'ww. brattonappraisa] .com November 19,2007 Kenneth Davis Sterling Savings Bank 312 SE Stone Mill Drive, Suite 135 Vancouver, WA 98684 RE: Valuation of 1,826 Acres of Destination Resort Land Located A10ng C1ine Fans Road, Redmond, Oregon. Dear Mr. Davis: Enclosed is the self-contained appraisal report of the property identified above. The purpose of this appraisal is to estimate the market value of the "fee simple estate" of the subject property, in light of market conditions in effect on November 15, 2007. The intended use of this appraisal is to assist lending representatives with Sterling Savings Bank in regard to utilization of the subject property as collateral for a rea] estate secured loan. A physical inspection of the property was made on September 19, 2007. The subject property consists of a 1,826 acre parcel of EFU zoned land with a "Destination Resort Overlay." The site has been described within the body of this report. This appraisal has been written to conform with the Uniform Standards of Professional Appraisal Practice (USP AP) set forth by the Appraisal Standards Board of the Appraisal Foundation and adopted by the State of Oregon, and is consistent with requirements of Section 323.4 of Title XI of the Federal Financial Institution's Reform, Recovery and Enforcement Act of ] 989 (FIRREA). This appraisal is intended to be utilized in all federally related transactions. All factors believed to have an impact on the market value of this property have been analyzed and it is our opinion that the o o Kenneth Davis Page 2 November 19, 2007 hypothetical market value of the fee simple estate of the subject property, in light of market conditions in effect on November 15, 2007, is Forty-Five Million Six Hundred Fifty Thousand Dollars ($45,650,000). * A current "as is" value, in light of market conditions in effect on November 15, 2007 is estimated to be Thirty-Six Mil1ion Five Hundred Twenty Thousand Dollars ($36,520,000). Photographs of the subject property are contained in the addenda of this report. Thank you for this opportunity to be of service. Sincerely, Jeremy L. Cowan State Certified Appraiser #C-000889 b~-{~tlk(j Dana L. Bratton, MAl State Certified Appraiser #C-000021 "'This value is based on the hypothetical condition that the subject property has received Final Master Plan approval as of November 15,2007. Please see the Special Issues section oftbis report for further information. o o . ~ .v. c, . For the reasons 68t out above; the hearings ' officer condudes that the proposal.satIsfies all appflCable criteria, or that it Is feasible to ~Ule. criteria through the Implementalion of conditions of approval. Accordingly, M 07-'1IMA.Q8.6 are approved, subfed to the foUowing conditions. ,To ~,~~enoy among the' dedsionS, ~, ~'~~retains the numerical,'listings ~in the BOCC'a CUP declslon~ noting 6y the won::I~·sati$fied· those conditions that no longer apply. . 1. Approval Is based upOn the submllted plan. Any substantlai th8nge to the approved plan wiD require ,8 new ..,plfcation. 2. AI development in the'resort shall require tentatN:8 plat approvarthrough Title 17 '. of the, ~,~,·thEHX)UQty SubclM8lonlPaiti 0RIrianc;e. and/or Site Plan RevIeW Ifll'ough TItJe 18 of !he County Code, thi SubdivIsion Ordinance. . • '~" :, "~lisfied,, ',', ' ..' . , 4.. :;':, Subieci.'tq US ~,of' the"lntertor-8uteau of lind Management (aLM) ,'",:~ " :: " approval, ~Oy second_I')' .emergency, fngr8eeIegre&s'~the BLM-own8d land , ot ioadways,shal"b,e.,implOved toa:mIi1Imumwidt,h of 20 teet wiIh aJC..weatI1er $Udace 'capab(. Or supportIng a 6O,OQO-I). 1m vddcte. Emergency SeCondary , . resort access roads ahaJI be. Improved before any Final Plat approval'or iseuanoe ~a~ng,~~comesfJAit' " .... ", ' ' ' 5. The developer,wfI design and constnid the road system In ~with occ '_ ,; . n"'.17. , R~1rrtprQ'IIrnQllt plans &hal be apprOved bY. the Road ~ . , .' , ";,:, priOr to COhstructJon:. " . , 6. All easements of record' Or right-of-ways shaIi be shown on any 'final pIal Plans shall be approved bY the Road Department ~r~~Ir\:ICfion.'. ,', ' " , " 1~" :,"All new'~road'~~~ ~~,be reviewed and approved by~Property Address Coordmator priotto 'final .pIat t¥lprovaL .. :' " " , ' . .' .'. ::.', ..... a~ : 'Satisfied., .... ' ,": " ': . ' .... .,' 9..SatfSMd~ '., '. '" .' :. . 10. Aw.i~ ~ai pRwide, 'stthe time' of ~~ each·.~planreview for~ indMdual.~oftM..re$ortdevelopment. ~~for ~. . . ~ter right 'permitand I:!n ~or the. fUn amount of mitigation. as reqti ':under the water.IIght,. for that lndIvfdual phasi:.," .'", . .... . . • .' • • • .?' ",'. • .., .~. • • • • '11.' 8atiSfj~~: ", '~'... . '.... ", , 12. 'COmmerCial, '.~~!lI~t ~~~.~~'~' Part, of the , <, • destinatiOn resort shan be contained wilhin the development (!JJld 'shalf not be oriented to public l'08d'W8ys. ~culuraf and entertainment uses I , allowed wIIhin the desIfnation resort 8haII be il'ldderdal to the resort itself. AI3 such, these ~ary uses shaD be' permiIlE!lI.onIy W'a "8QaIe euIle<t to eeive " :.:~. 26 " ..."; '. , " LuaA tJ.2OO8..203:.:-, ,00036... ':",", I . " ,. .~'- ~ : , , F . i. ~" t.;: : .L' .: ,-: • • i 1 ... _.............. ..----... _-_..... --_.; !. IviSitors to the resort. Compliance With this requirement shall also be:'1rlcIuded as a cond"ltion of FMP approval. '; .... .' " :: " . " ',' I .' . 14. ...Ap~c;8rit a~it.s~ns Shan do the'folfowtng to ensure ~ai o~~~ . : USeCJto 8StUre the 50% open·space f8qUlreinent of Sedlon 18.113.060 (0) (1»)s • I:' .niaIntained II'"perpebit)t:' . . .:' ..... ,. ~ l SatJsfied. '1 . .,.' . •" B: Satisfied. ... , , " . i . ' .' C.' .,,":·AlI. d~i ~yfng'ali ~~ny:part of the.s~ct pro~shaD /ndude L. ~ " ,'­~ .. '. .·the·foll~ng ~strictIQn:." .' ' ... : .' ." .... ; .. 1J1Is property Is part of the 1l1ornbuIlJh R~and':iS:~ to the p!9v1sfons of the Rnal ~Plan for TI'(.or:nbwgIJ .Reeort and ~ , ~of· CQvenanta .' Condilions' and ReatrJcfiotI "of Thornburgh .". :_..... "', Resort. The _ Maaler.P.1an and the Ded8raIiOn tonlak)'. deIIneatJon . ::. .' of opei\' ~....·that shaH be··maflit8rn$t,I as open ~ce areas in'.;::; .~'~~.'. :.. .'.~<.. '--.-/.. '.:.. <" -:; >".,.': :.:, ..',:"-. . . ~ .. " D.' 'All'apen sp~ ~··shaQ ..be·dearly·deIIrl8ated ancflabeled on the , Final Plat. . . . .,: .',' '~~.:.. ·.·AnY9U~I_;~~·~sPa~·~~~~~<JeeIslon ....:. ." will require a new land use permit ' .. :.. . " , :1:. ~ :: I' •• ', ',~ : s~:, . ' ..:,.:, '. ' ' . 16. All tempo.:&ry sttuCtUreS shdbe Imlted.to a ~m of 18 ~on'the resort . sfte... , .. '. , .' :~.::, .., ," ' ,..., .. '~ :'1' ., " ' 17. AI development witI*l the proposed ~shall meet aU ..fire proteetion. requirements of Itie Redmond Fire Department. FIre protei:tiOn. fBqUlrements .. shall Include aU mf~emefgency fngresslegress roadway ~ments. ' . ~ 18. No development shaH be alloVJed on slopes of 25% or moo;on the ••. . 19: .._ ...~.,~~~ "WiI~,,~..~:p~-ro:. the ....'resort. ~.~.iO:e.c. 15,' 8-29 9f·the CMP'blIidc,wi of proof statement. Prior . ".'to approval of 880tt subdJyision and • plai\i:AppIfcant Shall oOoRJfnate.. lis­ evacuation plana through that development phase with· the Deschutea .~ty Sheriff's omce and the Redmond Fia Depanment. At the same time. Appfk:ant $IlaIl. ~coqrdinate Is plant fOr the movement of. ~ov.(W' major transpOrtation ro.tJte$ wIf!l tho Oregon ~POlice and ~~qn QePartment of f TI1i~n:. ":."": ".:' '::' "'.' .. ''': .. ' .. :: : .. '" ' ...•.'!. :,':-••• , ',"." ""I' , • , " : ;."t',':!' .... ;.., ... ",:. ,:, . I • t",'-.:. . .: 27 . . , . . ,.,,' . LUaA #2OQ&-20s 00037' r \ '. l • • i " " .. ,," -'--..··_'1 . ',,,-,: '" 20~ , The cumUlativ6,density ,of the development at the 'enej of 'any phase'shall not , exceed a maximum c:Iensfty of 0.72 dWelling unfts Per acre (Including residential' dwelling unb and ,excluding visltor-ori~ted overnight I~)•. , 21. 'Each phase of the development shall be constrUcted'such that the n~of . overnight lodging Wllts meets the 150 QV8mlght'1odging u!1lt and 2:1 ratio of ·,tndl*uaUy owned units to overnight lodging. unIt·standan'J8 set oqt In OCC 18.113.060 CA) (1) and' 16.113.060 (0) ~). "Indivldually owned units ~be considered visitor oriented locftjng If they are a~abIe for overnight rental ~by the general Pf:.IbIlc for at least 45 weeks per GaIendar year through one or more l'~: oentraI reservation and chec:k.... services. As ~by ORS 197.445 (4) (b) " , , .-(8), at least t'IO units of ovemighi I~in~b8'co~f~ tile first phase of < :.~ development, prior to _,closure of sale of fttdlvidua' lots or units. q,.. , , ",,,' " ,. :I~'addition to compIyfng wIUi~specifiC r8Quiremeoia ~~18.~13.070 (U), 1:' ~ ,~ 6, ApplICant. lis 8ucoessons and assIgns. shaD at aX fknes nraintaiQ (1) B registry . of the Individually owned units subject to ~restrictlon ~:QCC 18.113.070 ~ • (U) (2), requilfrlg thet~aveJJable,forovemight lodgIng,purJ)OSeSi (2) an offtceln " ; , , a" tocation reasonable convenient to reaort. vIsItoI$ as a rvservatlon and d1eek-in ~ facIlItY at·the l88ort; and (3) a "par~e·l.phone reservallon line and website In ," , " , the name of 'Thornburgh ResOrt"" to.tie, used I?Y ~ber&,of the public to make . , : , " . "reservations.' As ,-an"a1tema~ to or .In' Qdd~,to, (3), AppICant may enter Into ," " .. " ':,! '.. :' an agreement witMl firm .~'agent) 1M( 8~1fze8 in the rental of time­ ~ , , " iharing, of resort .property; prrividirig that Applicant will shere the iofonna(ion In' .' ~ ~::! ' ,'".,;,"; ·the"reglstry reqtJirad,bY (1) and':ccio~~ Witb'the booJdng agent to solicit .. , , l'fJ8efV8tions for available overnight lodgfoo at 100 resort. If App8cant c::ontracbJ ......... '. ), with a bpaklne,. agent ApplIcant and the boOIdng:8gent shall Co~to enstn ~ r comptlanoe wiIh the requhment& of DCC ,~11.3.070 (U) (6), ,by fling 8 report on > I " .January 1 of each yearWllh the ~ute8 Cot,Jnty Planning OMslon. . .) ~ .j., ~ ~ .\ j,t!i. < ...:, ,:'22" ..The fln8i coveoants. -con<rltions and ~adopred by the deve(operand· ~~. ·r~ . :'. 8mendmei1ts thereto shall' conform in all material respects to this .decislon and a~,' .. the requirements of the OCC., ." "::"'~" :,'No perm~~.~use ~'~'Bafr Road as.a.ccess to the Resort 16 giVen or-: F •,', .impJl.ed by this decision.' ' . , ' .. ,"i.;; '.' ,'., . ~ 24. Satisfied. Pc f: &;.: ~. ' , AppIicantlShaH 8UbmIt '8 detalk.d erosion COntrol plan with ~~TentatIVe Plat ~,' , 'or Site plan. whlchevercomea'fitst..' ': :', ,.'" . j, ~~. " LOl'~~"WidIh (fro~e)"cov~. off~t'Paftang a~"~.including: solar setbacks. 8le permitted as described 1rt Applicanfs Exhibit 8, 8-24,8 In the , burden of Proof doct.ttnoot. subje<lt to review dudn,g ,,the, 8U~approval " '. " " ,pr0ce&8'to confinn Ihat there will be safe W.hlde access to each lot· ~ " ,,' . ,with·tf'!e dfmensfonaJ standards shSA be eotifirmed dli:fnQ subdMsicm approval for eadl development phase. NJ muld-family uniis, coinm8rcial Sindwes, and oth« ... ! ; : -resort facilities 8AJ ~from meeUng the solar setback. standards.:" Lt, ,,~....: h' ,,~. f' , "L." , :. : I I t • • Road width m.aB be col1srsiem with t!Je requfrements ..forth in the County's . . ' subdiVisrott ord~nce.·IJ.CC Chap~1'~.36. '. . . .' '. . '" .. .~ , . :', . 28. · . . " .,' . 29:· . Applicant ·.~II abt~ at all times W!U\.the,MOU·witfl COOT. regarding required .' "'imProvements al'!d ContribUtions to' Impr.ovements·. an' OooT administered . . roaCSways'(Agt'eel)'lent Numb9r22759, da\ed 1.0110105)..'" . ." .. '.. . . . • , ...I_ ' . '., ·30:'·,· Satisfied.' , • 32. No ~nnrSslon to instaO helicopter landing zone.(heffpad)·iIt:th& Resort is given Or .', ::im~bythisdecisJon ' , '" ,.:., ,". ' . ...,:.,,:~/ "The'~~~~~' m~·flm·~888.~~'ihe~_:'.',.: :~. <.. :," .',' :"". ~,,' At·~·100"M~~~t8bl~Unft8.for,vI8ftor~ntedlodg~· ....,.. .' . ',' '. '. B.' . VJs«or-oriented e8ting establ!ilhinen18 far at,.1east 100 ~na and " .,', '. .... '., . meeting ~\vfliCh .~e:e.atlng for at least 100~8. , , ...' ...... c: '. ,The aggrag. 0D;It of fJevelopiAfr·1he,.ovemIght k:IdgIng ~\ Ii .....,," , . j. ~,~.' eaUng ~~nts and' meetfr~,.·roorris required in' . .'. '." .': DeC' ~O:11~;OOO. (A) ;(1), and'(2) shall be·at 1east··$2,OOP.OOO [Ul . '; .'<,.' , •• 1984 dollars) . '.. . . . 'f • ...... ':n '-.. ;' '" : ".D~ '··.·At~I~o~.OOO;O~1_d~)~hi.ii:be'~.rtEin~ . teefdentialfacilitfes . . , .. '. ,:' .. ' . . " ',,,' '.' E," '.ll'iit ~1tIes and. ~modafiOns re~by DeC 18:'113.060i. must "be pHysically provided or financlaly' ~purs~ to · DeC ~8,.11~.110 JXi.or:tO. cIoBure of·88Io8.·rentaI or lease Of ~ny · residential~orlOts:· -:. : :,'.' .... c'. "I." ."... .'• '. " <". : ." 34. Where.constructfon disturbs native vegetation In open space arvas that ~..t9 be . .retained in III subst$ntiaIfy natural. condition, .Applicant 1IhaII restore the native' .. ' . ; ..' veg'etatiOn. .'l11b nkiUk'ement shall not. apply to land that Is .Improved for .. recreational uses, such 88 golf courses. hiking or nabn trails or' eques(rlan or blcycfe paths.' . 35. lhe contract with the ~of units that will, be used for overnIght'lodglng by the geaiel8I public 'shan contain' language to,ule foIovylng elfect ,UnIt OWner) $hal make the unit avaUabie to [Thombwgh ResortIbooking agent] for overnight I'8(daI use by 1he ~.pubRp at ...~~per calendar year··through 8 l .: : central r8servatiort'8nd check-In seMoe.~ .... : . _. ~. '; .. '.• · .'. . . " ", ':.' ..... ' ~' :1 .,' .. ..,.,...: . Lt· " ; ...· ·36; . ,:Applcant '~I ~e .~ ~e-Sheriffs.:.Office and Ita designated ::. ,re~ove to ~,~JI.~.safety ~associated wIh·~·resort and , ·.. ,.·.. lhe~~.P.~.:...........,. ';' '. ','.' ..,' , i ' '37.' Satisfte¢.· " .~ .' .,..... ..-..-. ~ i , l :,-".,. .:'.&2......~....M-07-2;,~ · ',' LUBA.tI2OO8-2QS· .:•..~..:.":.:.~' :,,1: •• 00039 o o . '..... '"., .... , ..~ 38. The appUcant shal abide by the April 200S WiIdtife MlttgationPian. the August 2008 StJppIernttnt. and ~with tbe BLM and 'OOFW fpr management of off-site mitJOation eROftB. Comri&tent with the plan. the 'appI~nf chaO submit an ,annual report to the county ~rng mitigation' ac:tiVitie~1' that have occurred over , ~previous wear. The mitigation measures 1ncIude renloval ot: eliCistr.g wefts oil UlIiJ subject property, and coordination with ODFW to model &Imam tempenrtures' inVVhychusC~~, ';.-. - ' . ,, , 39.' 'Ttte applicant shaH provlde.fundlng to ~e a :~n~~project by.th$' < , ./ Thtee'SieteN l~tion"Districfto ~106,aora-teet,of, instteam water to', ',' "mitigate pdtentiaf increase in stream ,~Penrtures "In, Whyc:hu$ Creek. The' ., , appI1cant ehd provide a.QOpv of an agr~t:with the'lrdgatiOll district detailing'f.'!\ 1",( funding agreement pior to the oompJetIon, of P~A. ':.: '. . . ',. '" . , .. " , ­ I ~ '. • I ••' ',:," , Dated ~Jis 6 11 day of October. 2008. t . ~ MaIled tt.is!f!E:.da~of October. 2008. : .... I I , j" £",.', ' ",,;,""" ,~' •• . #'. ~ ...~',' , ..... '1J..n..~,r:': "...... r : '".AnIi~riOOs;~r , " 1 , nilS DECISION 1$ FINAL UNleSs APPEAi..ED il.\t ACGORDAtiq,E ,WITH TN,E PROy1sl0NS, i OF Ot;C TlTLE'22.. ' " ! ' ," " ,,: ,,' " ':"," ',: ",' .'.', ~~: ' ' :. ~. ; , '.,' .. ... I L;, ',' , ~. .'.. r~ ~,: /, t~; . -." ','..' ',' \' .,"" ... ,'.' ' ,~ ••,' I : :. ~:. ; ... ,:.,:,I .. ;," ' I i,;,;-; I " J " j ,; ~~" .... ~:I F : I j ':" ! .,' r, . " . , •Jr "-, " 'i­i ... .', . l . " " .; .' '{ ~ ; I.,~ ~. ' , ' . .) ~, .. 00040 I I ~ f John Kahlie From: John Kahlie Sent Wednesday, June 04,20149:27 AM To: 'david.peterson@tonkon.com' Cc: kameron@bendcable.com Subject Thornburgh Resort Hi David, In response to our conversation regarding the Thornburgh Resort development, we are providing you with the following information. Please feel free to forward this email to Deschutes County in support of your Application for initiation of theCMP. Our firm, Hickman Williams & Associates, represented Thornburgh Resort Company, llC in the development of applications for the Conceptual Master Plan, Final Master Plan and Tentative Plans for the Phase A development starting in the fall of 2004 and continuing well into 2008. All work performed by Hickman, Williams & Associates on the original submitted applications was in accordance with the requirements of Title 17 of the Deschutes County Code. Work performed by us included; road design for both horizontal and vertical alignment, width, and cross section. All design work, including the roads, was based on a detailed aerial topography flown to two foot contour intervals. Additionally, a color coded "slope analysis" was produced by us and used to help insure that no site development was proposed on slopes greater than 25%. Please let me know if you need anything else, John John Kahlie, Principal H W A Engineers. Planners. Surveyors Hickman, Williams & Associates, Inc. 62930 O. B. Riley Road, Suite 100 • Bend, OR 97701 p541.389.9351 c541.480.8680 f541.388.5416 iohnk@hwa-inc.org /1-t A ~m~jUtJnc{ @ cj;l) ( rfIHA s:t Zuz ) 1