City council directs staff to draft CET grant agreement for Spark Newberg with conditions on affordability and timelines

Newberg's City Council on Sept. 15 directed city staff to draft a grant agreement for Spark Newberg to receive remaining Construction Excise Tax (CET) revenues, while debating conditions to protect public funds and ensure long-term affordability. Councilors and the city attorney discussed nonprofit status, timelines for site control and spending, and how to measure whether program fees meet the city's definition of "affordable."

City Attorney James Walker told the council his office concluded the anticipated use of the CET funds'design and construction support for Spark'is "defensible under the applicable laws," but urged the council to make the grant track both a developer incentive and an affordable housing program. Walker recommended that, when assessing affordability for units that will house program participants, the city should count fees beyond base occupancy charges'for example utilities and laundry'when calculating whether costs equal 30% of 80% median family income (MFI). "I think it aids the position of it being defensible if ... any other fees that are tied to their use of the space" are included in that affordability calculation, Walker said.

Councilors and staff sought clarity on several protections before the city signs a grant: Spark Newberg must have formal 501(c)(3) tax-exempt recognition; the council asked for documentation showing site control (for example a purchase-and-sale agreement) within 12 months; and staff and most councilors agreed the CET funds should be expended within a three-year window. Council members also discussed the municipal code'which contains a 60-year affordability requirement tied to older CET rules'and whether that requirement should be applied, modified or enforced as a recorded restriction on title. Walker recommended including the strictest availability terms in the draft agreement and then negotiating if they create an obstacle to financing.

Council members repeatedly emphasized accountability and contingencies. One councilor noted that handing over a large sum to a recently formed nonprofit without clear accountability would be unprecedented and urged guardrails such as performance reporting, contingency plans for program dissolution, and clarity on what would happen if the project fails to reach fruition. Mayor Bill Rosacker and other councilors also asked legal staff to include standard indemnity language and to confirm whether payments would be made as up-front grants after conditions are met or on a reimbursement basis. City staff indicated the current draft contemplates payment upon satisfaction of contract conditions rather than reimbursement.

No formal vote to approve disbursement was taken that evening. Instead, the council gave direction: staff should prepare a grant agreement that requires Spark Newberg to achieve 501(c)(3) status (or provide an IRS determination letter), demonstrate site control within roughly 12 months, and use the funds within three years; the draft should also address the 60-year affordability instrument the municipal code contemplates and include options for recorded restrictions or strong contractual alternatives. Spark Newberg was invited to return with detailed budgets and program fee proposals showing how monthly participant costs would meet the "30% of 80% MFI" affordability test described by the city attorney.

Next steps: staff will revise the draft grant agreement to reflect the council's conditions and return the proposal to council in a later meeting for formal action.