The Bend City Council approved a roughly $10.6 million tax exemption for the Jackstraw development, a seven-story apartment and commercial building with 313 units of housing being built by the developer of the Box Factory, Killian Pacific.

The council’s 5-1 approval was decisive, especially amid criticism from Killian Pacific’s existing tenants at the Box Factory, general scrutiny of the city’s tax exemption program and potential conflicts of interest among councilors.

While many took sides on the quality of the Jackstraw, the process exposed a multiple unit property tax exemption, or MUPTE, program in need of review.

“My opinion is that projects should not be allowed to submit and apply for our MUPTE program if they’ve begun construction,” said Councilor Mike Riley, the lone opposing vote Wednesday.

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The goal of the program is to encourage multiunit housing development in specific areas of the city like the Core Area, where the Jackstraw is located.

Killian Pacific applied for the program in June after construction had already begun on the property located on NW Lava Lane in April. As a part of the application, the developer had to prove through a third-party economic analysis the project would be unviable without the 10-year property tax exemption and offer at least three public benefits that meet specific criteria. The rest of the councilors determined the Jackstraw met that criteria.

Riley said Killian Pacific’s actions — beginning construction before applying for the tax exemption — spoke louder than the financial statements the company submitted to prove the project needed the exemption.

Killian Pacific, a Portland-based company, claimed to not understand the city’s processes for the program. However, emails obtained by The Bulletin show the city of Bend informed Killian Pacific staff of the approval process.

The tax exemption program requires that taxing district boards that represent a majority of the tax levy approve an exemption, which means Killian Pacific still needs a nod from the Bend-La Pine school district board on Jan. 9.

City councilors’ potential conflicts of interest

At Wednesday’s meeting, Councilor Riley, disclosed that Killian Pacific donated $5,000 to his employer, the Environmental Center, just weeks ago in December.

Chelsea Rooklyn, a Killian Pacific spokesperson, said the company, which frequently donates to nonprofits, didn’t realize Riley was the executive director of the Environmental Center.

“Had we recognized that Mike was also a Bend City Council member, we would not have made a contribution to the Environmental Center,” she wrote in an email.

Councilor Anthony Broadman, who is running for state Senate, recused himself from voting on the project for a similar reason. He cited a potential conflict of interest because he received a $1,000 campaign donation in November from Jackstraw’s project lead, Michi Slick, Killian Pacific’s director of development. Rooklyn said Slick was acting as a private citizen rather than a representative of the company. Though Killian Pacific does occasionally make political donations, the company has never donated to any Bend city councilor, Rooklyn said.

“The Killian Pacific team regrets the timing of any contributions and supports Councilor Broadman’s decision to recuse himself and return the donations,” Rooklyn said.

Both councilors said they returned the money, and both said their respective donations were the first time they had received funds from Killian Pacific or its staff.

Tax-exemption scrutiny

Leading up to Wednesday’s approval, tenants at the Box Factory, chiefly Immersion Brewing, lambasted Killian Pacific for ineffective communication and failing to mitigate the impacts of Jackstraw’s construction. A handful of people testified to that effect at Wednesday’s meeting.

Killian Pacific is reaching out to all 31 Box Factory tenants to resolve any concerns and hear feedback and, in addition, implementing a monthly tenant meeting, Rooklyn said.

“Our success is directly tied to theirs,” she said.

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Roberta Silverman, the land use chair for the Southern Crossing Neighborhood Association, which includes the Jackstraw and the Old Mill District, said that criticism of Killian Pacific was misplaced.

Instead, the requirements of the tax-exemption program are more deserving of a critical look, Silverman said.

One way to improve the program in Silverman’s eyes would include making affordable housing a mandatory public benefit to address Bend’s housing crisis.

“Utilizing MUPTE in this way would be a more strategic approach than just building as much market-rate housing as possible and waiting for it to have a trickle-down effect in lowering housing costs,” Silverman wrote in an email, referring to the multiple unit property tax exemption.

Several city officials agreed the program is in need of review.

That review process will begin during a work session before the council’s next meeting on Jan. 17. City staff and councilors will look holistically at the city’s current and future tax exemption programs, said Matt Stuart, the city’s real estate director.

“It has always been our intent with the adoption of MUPTE to conduct an annual review and evaluation of the program,” Stuart wrote in an email. However, he declined to disclose specifics.

The review will include discussions about two more of the city’s existing tax-exemption programs. One is for low-income rental properties, and one is for nonprofits, which was adopted at the same time as the multiunit program and hasn’t had any applications to date, Stuart said.

The city’s multiunit tax exemption program was created thanks to statewide legislation in August 2022. It has received four applications since adoption, including the Jackstraw.