Month: February 2021

Why Is “Affordable Housing” So Expensive-cm

Why Is “Affordable Housing” So Expensive?

By Vlad Yurlov

Why is “affordable housing” so expensive? Many politicians, bureaucrats, and affordable housing advocates treat the question as one of life’s many mysteries. But it’s really not that mysterious. Many regulations governing public projects add up, piece by piece, to affordable housing’s staggering price tags.

In 2019, Blue Sky Consulting Group released a detailed analysis of affordable housing construction in Oregon. Researchers studied the construction costs of more than 100 affordable housing projects approved by Oregon Housing and Community Services between 2000 and 2018 and found a median cost per unit of $224,000 (in 2019 dollars). More recently, the City of Portland is building projects that cost an average of $300,000 per unit.

In contrast, apartment appraisal specialists, Barry & Associates, found that the median price of an apartment in the Portland Metro area was just $166,000. How did building affordable housing get so expensive? One reason is that the use of taxpayer money triggers many requirements that private developers don’t have to deal with. One of these is what is known as prevailing wage.

Prevailing wage laws apply to “public works” such as construction, reconstruction, and renovation of projects that “serve the public interest” such as affordable housing. Blue Sky Consulting Group found that using either federal or state prevailing wages adds 9% to the cost of new affordable housing projects in Oregon. Yet, Oregon’s Bureau of Labor & Industries requires construction firms to pay wages that are in line with union wage rates on public construction projects—even if the workers are not represented by a union. These rates tend to be higher than the average wage and can be much higher than non-union wage rates. As construction costs skyrocket closer to union rates, less housing can be built for the same amount of money.

Proponents argue that without a prevailing wage requirement, public spending on construction projects would undercut local wage standards in a “race to the bottom.” But 21 states chose not to create statewide prevailing wages, and higher wages are of no use to workers who have been shut out of a job. Raising the wages that construction firms can pay workers forces minority and low-skilled laborers out of many job opportunities, because high wages push contractors to hire mostly skilled workers. Federal studies state, “[l]ow-skilled working Americans are also more likely to be minorities” and therefore at the highest risk of being cut from a job.

Before prevailing wage laws, white unions complained that African Americans were stealing their business by working for more affordable prices. The Davis-Bacon Act of 1931 tipped the scales by requiring most federally funded projects to pay prevailing wages. This effectively shut out many minority or low-skilled workers from working on federal projects.

Oregon created its own version of the Davis-Bacon Act in 1959. Cities such as Portland must regularly apply these wages to millions of dollars in public construction that goes on each year. For instance, Portland Clean Energy Fund (PCEF) pays prevailing wages, because staff see them as a “… key opportunity to build wealth in communities and groups historically excluded from the clean energy workforce.” Yet, a memo from PCEF staff admits “there are many unknowns” about how many contractors have the capacity to build using prevailing wages. They ask themselves, “[b]y requiring [prevailing wage rates], are we handicapping or locking out smaller, diverse contractors from participating and growing…?” This clearly shows that there likely are harmful consequences to prevailing wage laws that need to be addressed.

When prevailing wages are applied, other state goals—such as equity and affordable housing construction—suffer. Prevailing wage laws limit the ability of minority and low-skilled workers to enter the construction workforce by limiting the pool of contracting firms to those that can afford to bid on projects. Prevailing wage laws don’t protect local markets from deflating wages. They squeeze out young and minority workers from employment on public projects. If Portland elected officials are serious about promoting racial equity and lowering the cost of housing, they should ask the state legislature to repeal Oregon’s Davis-Bacon law.

Vlad Yurlov is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version

Read Blog Detail
Oregon Legislators Should Vote Yes on Nuclear Power-cm

Oregon Legislators Should Vote Yes on Nuclear Power

By Rachel Dawson

Oregon is home to NuScale Power, the nation’s leading small modular nuclear reactor (SMR) developer. However, our state isn’t able to take advantage of NuScale’s innovative technology because it is illegal to site a nuclear plant in Oregon. Three bills being considered in Oregon’s current legislative session could change that.

HB 2332 would repeal current legal provisions requiring that there be a permanent storage site for waste and that voters approve the proposal before a nuclear power plant could be issued a site certificate.

Instead of repealing these provisions, HB 2692 would carve out an exemption for SMRs and would require the Oregon Department of Energy to develop a program to educate the public about the new technology.

SB 360 would also offer an exemption for SMRs. However, cities or counties first would have to approve the siting of SMRs in their jurisdiction before they could be located there.

While HB 2332 would grant the most amount of freedom for siting nuclear plants, any of these three bills would be a step in the right direction for our state.

Recent blackouts in California and Texas demonstrate that the grid needs baseload energy resources capable of backing up renewables when they fail to produce power. If Oregon officials are serious about operating the grid with 100% renewable power, they need to bring SMRs into the discussion. Legislators should vote in favor of these three bills to bring reliable power to Oregon.

Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

Click here for PDF version

Read Blog Detail
Empower Oregon Families Today by Funding Students, Not Systems-cm

Empower Oregon Families Today by Funding Students, Not Systems

By Kathryn Hickok and Helen Doran

Every parent knows a solid education prepares children for life, and that path begins in grade school. Almost a year ago, the COVID-19 pandemic closed school buildings for in-person classroom instruction. But even before the coronavirus upended K-12 school routines, many Oregon students were trapped in schools that didn’t meet their educational needs, with no access to meaningful alternatives.

As schools begin to reopen, state policymakers and legislators should recognize that Oregon families urgently need more options so they can find the right fit for their children to learn effectively and safely. Traditional public schools, charter schools, magnet schools, online learning, private and parochial schools, homeschooling, and tutoring are all paths to success for students. All options should be valued, and parents should be empowered to choose among them to help their children succeed.

Giving families control over a portion of the state’s per-pupil education funding to spend on tuition and other education resources would empower parents to find immediate solutions that match their children’s needs, their work schedules, and their health concerns. More than half the states in the U.S. currently give families flexibility to direct their children’s education through education choice programs like scholarships, tax credits, and Education Savings Accounts.

Education Savings Account programs (ESAs) give parents a kind of “money-back guarantee” if they want to opt out of their zoned public schools for other options. ESA programs currently operating in five states deposit a portion of the state school funding that would be spent for a student in a public school into an account associated with the child’s family. Families can use those funds to pay for tuition or other education expenses. Senate Bill 658, which has been introduced in the 2021 Oregon Legislative Session, would establish an ESA program for Oregon parents.

Many Oregon families already have “school choice.” They move to neighborhoods with public schools they like, enroll their kids in tuition-based schools or public charter schools, or get online classes or tutoring. In response to the loss of in-person learning during the pandemic, parents have formed “pod schools” to teach their kids in small groups. Thousands of Oregonians successfully homeschooled before the pandemic, and many more became their children’s official teachers in 2020.

But other families don’t have the financial resources to “pay twice” for education—once through their taxes and again through tuition or out-of-pocket fees. Or, they don’t have the work or family flexibility to monitor their children’s at-home, public school distance learning programs or to homeschool their kids full-time. Low-income and minority families, especially, are most often stuck with only one option: district schools assigned to them based on their home addresses, and the instruction options those schools provide for them.

All children should be able to attend schools where they can thrive. But those who deserve school choice the most are those at greatest risk of falling behind and not graduating from high school on time—or at all. According to the National Association of Education Progress, only 34% of Oregon fourth-graders tested “proficient” in reading in 2019. Moreover, our state continues to have one of the lowest graduation rates in the country. Changing those outcomes requires a solid early education leading to graduation and employment. Early intervention makes all the difference in a student’s long-term education success.

Parents increasingly support the idea of more education choices for their children, especially when their designated public schools are not meeting their students’ needs. In fact, a RealClear Opinion Poll in late 2020 showed that almost 80% of parents now support the concept of governments sending education funding directly to families and allowing parents to choose how those funds support their child’s education.

As families continue to struggle with virtual programs and uncertain school reopening plans, it is vital that students have access to options that will work for them now and in the future. Giving parents the means to choose which schools or learning options best fit their child’s needs will put the power of education back into the hands of parents, where it belongs. Oregon legislators should enact a school choice law now, to give opportunity to families who need to get—or keep—their kids engaged, learning, and on-track for graduation, in whatever circumstances they find themselves today.

Kathryn Hickok is Executive Vice President at Cascade Policy Institute, Oregon’s free market public policy research organization. She is also director of Cascade’s Children’s Scholarship Fund-Oregon program, which provides partial tuition scholarships to Oregon elementary students from lower-income families. Helen Doran is Program Assistant for External Affairs at Cascade Policy Institute.

Click here for PDF version

Read Blog Detail
SolarWorld factory closure is the latest among government subsidy mistakes-cm

SolarWorld factory closure is the latest among government subsidy mistakes

By Rachel Dawson

Should governments use taxpayer dollars to support select companies of their choice? The recent closure of SolarWorld’s Portland area solar panel factory and the failure of the government-backed SoloPower Systems show why public dollars shouldn’t be spent to subsidize private firms.

SolarWorld opened the nation’s largest solar panel factory in Hillsboro in 2008.[1] It was a major facility in Oregon, employing as many as 1,000 Oregonians in 2010. However, the company soon filed for bankruptcy for the first time in May 2017, and again in March 2018. SolarWorld was then acquired by SunPower Corporation in 2018. The company shrank in size and sold the property in Hillsboro, choosing to lease around 200,000 square feet for just more than 200 workers.

But things did not improve for the solar panel manufacturer. With 170 workers, SolarWorld officially closed its doors for good earlier this year.[2] This is an unfortunate end for the factory’s workers—and for taxpayers. SolarWorld received 19 subsidies from the state, amounting to around $30,385,602 in the form of property tax abatements and tax credits.[3]

This is not the first time a local solar manufacturer has shut down in recent years. The SolarWorld plant closure is reminiscent of SoloPower Systems’ failure in 2017.

SoloPower Systems, a firm that specialized in a thin-film solar power technology, used a large amount of local and state taxes to build a solar panel plant in the city of Portland. It first opened in 2012, but soon closed its doors when the solar market was in upheaval. It opened and shut down again in 2014 “with little evidence that it had ever gained market share or even produced much product,” according to Portland Business Journal.[4] Despite the company’s inability to stay afloat, efforts by federal, state, and local agencies kept SoloPower functioning.

In 2010, the state agency Business Oregon granted SoloPower $20 million in tax credits, and the U.S. Department of Energy loaned SoloPower $10 million. At the same time, the City of Portland agreed to cover half of SoloPower’s debt to the state if it built its factory within Portland city limits. Multnomah County “declared the company’s North Portland factory site to be within an enterprise zone”[5] so it would not have to pay property taxes as long as it met certain job requirements.

One year later in 2011, the federal government offered the company $197 million in loan guarantees, and the California Energy Commission loaned just under $5 million.

SoloPower was not able to break through the market despite the millions of taxpayer dollars government agencies gave it.

The federal government quickly withdrew all $197 million in loan guarantees. Multiple lawsuits were brought against SoloPower: the first from California in 2013 after SoloPower defaulted on its loans, and the second in 2017 by Multnomah County to recuperate back taxes after the company “failed to create the minimum number of jobs needed to qualify for tax breaks.”[6]

However, the Oregon Department of Energy and the City of Portland were not so prudent. SoloPower claimed it simply needed more time and promised to restart successfully at the end of 2017. The Oregon Department of Energy bought the story and paid $640,000 in rent so that Multnomah County could not seize the company’s equipment. A DOE spokesperson told The Portland Tribune that the state did this because “they are banking on the company’s ability to raise the capital that they need to be successful.”[7] The state received no collateral for the payments, and this capital was never raised.

SoloPower’s Portland plant was shut down in 2017, and the City of Portland began paying $119,000 every month to cover its debt to the state. Portland covered the company’s debt until October 2020. Because of Portland’s mistake, the city was wasting $119,000 per month during a pandemic and a recession.

The mistakes made in these two cases are not new. Oregon’s failed Business Energy Tax Credit (BETC) was found to be chock full of similar examples, a third of which were deemed to be “suspicious and worthy of further investigation.”[8]

For example, Cascade Grain Products built an ethanol plant for around $190 million in 2008 with the help of Oregon’s BETC.[9] The plant only operated for about six months before shutting down. In 2009 the company filed for Chapter 11 bankruptcy and was sold for $15 million.[10] The BETC was frequently abused and was eventually terminated by the Oregon legislature due to mounting controversy. Both Democrat and Republican legislators admit that “taxpayer dollars were being wasted in many cases.”[11]

Governments should not be picking winners and losers in the market, and especially should not underwrite debt for a company with a poor financial track record. Agencies should cease all funding of private companies now and in the future and instead allow the marketplace to determine who is successful. This would ensure that Portland and Oregon taxpayers are not on the hook for poorly performing companies.












Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version

Read Blog Detail
Banning Bacon Won’t Heal the Sick-cm

Banning Bacon Won’t Heal the Sick

By Vlad Yurlov

If you thought hospital food was bland now, get ready to hear this. The Oregon Legislature is considering a bill that bans hospitals from serving bacon and every other salted, smoked, or cured meat. Because House Bill 2348 also requires hospitals to make plant-based food available, proponents argue that this is simply about promoting good health. But who’s to say that a room full of legislators knows more than a hospital full of doctors?

Being stuck in a hospital bed is bad enough. Patients need to eat to keep up their strength. And comfort food is one secret that gets people eating and happy to be alive. So if the bedridden want bacon, give them bacon.

Politicians are ready to trade your range of choices for their own agendas, especially if they don’t have to eat the results. So let’s save the health food kick for home. If the “bacon ban” passes, buying comfort food from a hospital will only be harder for those that could really use some comfort.

Vlad Yurlov is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version

Read Blog Detail
To ensure the lights stay on, Oregon needs a robust portfolio of energy resources-cm

To ensure the lights stay on, Oregon needs a robust portfolio of energy resources

By Rachel Dawson

Recent freezing temperatures and power outages in both Oregon and Texas demonstrate why going “all in” on intermittent energy resources like solar and wind power will end up costing utility customers.

Governor Kate Brown declared a state of emergency on Saturday, February 13, due to a snow and ice storm that left up to 300,000 Portland General Electric and Pacific Power customers without power. For those who heat their homes with electricity rather than natural gas, the outage also means being without heat amidst freezing temperatures. The loss of power in the Willamette Valley was caused by 216 miles of damaged transmission lines and around 4,900 downed power lines in neighborhoods.

Texas is also dealing with a cold snap. However, instead of downed power lines, customers are facing rolling blackouts because of failing power resources. Wind turbines and solar panels are frozen over, service power plants unexpectedly went offline, and gas prices increased from an average $25 to $9,000 per megawatt hour. Losing wind power is a major blow to Texas, which made up around 25% of its fuel mix in January, the most wind power of any U.S. state. Around a third of the Electric Reliability Council of Texas’s (ERCOT) power generation, 34,000 megawatts, went offline right as demand began to rise.

This led to rolling blackouts affecting more than four million customers. To increase power supply, the U.S. Department of Energy approved ERCOT’s request to run fossil-fuel power plants at maximum output levels, even if doing so results in exceeding pollution limits. When it comes to ensuring the lights stay on for ratepayers, utilities turn to fossil fuels rather than frozen windmills.

Our region needs a robust portfolio of energy resources, including natural gas and nuclear, so that we have sufficient supply when renewable resources fail to produce electricity. Oregon’s only coal plant, located near Boardman, was shut down by PGE last November. To make up for lost power, PGE has purchased short-term hydropower contracts from Bonneville Power Administration and plans to invest in wind power and battery storage in the future. PGE, however, has no plans of increasing baseload supply or investing in more natural gas.

The more coal plants our region removes from the grid, the more likely we are to experience future blackouts. The Northwest Power and Conservation Council is tasked with running models to determine whether there is enough electricity supply to meet demand in the future during a “worst case scenario.” The Council considers the supply adequate if the Loss of Load Probability (LOLP) is 5% or less. In late 2019, the Council found the LOLP by 2026 to be 26%. This means that more than one out of every four simulations run by the Council shows the region facing a shortage of electricity.

Rotating blackouts experienced by Texas this winter and California last summer demonstrate how important it is to have sufficient baseload power for times when demand is high and intermittent renewable resources can’t be counted on to power the grid. We may not be able to prevent trees from falling on wires; but we can take steps to avoid overreliance on wind, solar, and hydropower.

Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization

Click here for PDF version

Read Blog Detail
Make Oregon the Opportunity State-cm

Make Oregon the Opportunity State

By Eric Fruits, Ph.D.

Oregonians blame Californians for many of our state’s woes. They drive up our housing prices, crowd our roads, and import nanny-state policies like banning plastic bags, plastic straws, and styrofoam cups. Many Oregonians wish they’d just go back home.

But what if the Golden State stopped sending us their residents?

The short answer: We’re toast. Over the past two years, Californians accounted for about half of Oregon’s population growth. Their college degrees hide Oregon’s dismal public education system. The business they bring with them fuels employment growth. And, their incomes provide the tax revenues for Salem’s never-ending expansion.

If all that stopped, Oregon would be done for. But will it stop? It might. Oregon’s a nice place to live, but nice only gets you so far. They’re moving here because California has gotten so bad. If Oregon continues to fall into Golden State levels of dysfunction, Californians looking to leave may decide Texas, Arizona, or Nevada are better places to raise their families and grow their businesses.

I fear that day may come sooner than we’d like. Oregon taxes have skyrocketed, our public schools have stagnated, and the public sector has rolled back crucial services. Oregon lawmakers should enact public policies that promote economic opportunity at all income levels, increase choices in education for Oregon parents, and foster a robust culture of entrepreneurship. That will make our state a great place to visit, live, and work for our current and future residents. If we don’t make Oregon the opportunity state, we’re toast.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version

Read Blog Detail
Take Stock, Then Take Action on Portland’s Homeless Crisis-cm

Take Stock, Then Take Action on Portland’s Homeless Crisis

By Vlad Yurlov

Since 2015, Portland City Council has declared continuous housing emergencies. We’re now into the sixth year, and the City’s housing and homelessness crises are still in full swing. Yet, nobody even knows where or how many shelter beds are available in the metro area. Cascade Policy Institute released a new report that offers straightforward solutions to the growing number of unsheltered homeless in the Portland region. It’s time to get back to the basics. And what is more basic than knowing where homeless people can go?

This means tracking where shelter beds are available and distributing this information to outreach workers and officers. If there really isn’t space, we need to know. But if there are available beds, we must offer every homeless individual a roof over their head.

Cities in both Washington and California use tracking systems to help more people get shelter. Meanwhile, Portland is behind the curve and paying for it. Instead of using shelter space more efficiently, the City Council pushed a housing bond that calls spending nearly $300 thousand per unit “affordable.”

We can’t keep extending emergency declarations and borrowing forever. A shelter tracking system would allow Portland to finally take account of the homelessness crisis.

Vlad Yurlov is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version

Read Blog Detail
Portland Is Ill, but Not Dying-cm

Portland Is Ill, but Not Dying

By Eric Fruits, Ph.D.

A recent column published in Forbes has caused quite a stir. The editorial, by Oregon economist Bill Conerly, asks whether Portland is experiencing the death of a city. For months, the Oregonian, Willamette Week, and the Mercury have run articles reporting on business closures, vandalism, and rising violence. Yet, when Cascade Policy Institute’s chairman comments on these same things, the local media change their tune to “it’s all good, nothing to see here.”

Sure, it’s true much of Portland’s recent malaise was brought on by a worldwide pandemic. But it’s also revealed so much of our town’s failures to live up to its motto as the “City That Works.” We have a city council that views business as a parasite to be managed with new and higher taxes and ever-increasing regulations. We have city policies more focused on avenging past wrongs than in preparing for a future where businesses can prosper and people can flourish. Rather than serving the voters, more and more politicians behave as if we serve them. As if it’s our job to make them look good.

Portland isn’t dying, but it’s got a disease. We’ve got to treat the symptoms, shake the illness, and bring our city back to its status as one of the world’s most livable cities.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version

Read Blog Detail