McMinnville staff given direction to launch CET funding process; council flags legal review on equity language

McMinnville's city staff outlined the proposed process to begin awarding money from the city's construction excise tax (CET), and the City Council gave direction to finalize application materials and solicit proposals after debate over scoring priorities and legal wording.

Evan Hippas, acting planning manager and housing planner, told the council the goal of the work session was to get council direction on a process that would "allow us to release CET funds for eligible projects and programs." Heather Richards, community development director, summarized the city's existing incentive tools ' SDC exemptions, reduced permit review fees (capped at $75,000 for building), and certificate-of-exemption recordings ' and explained how CET would complement those measures.

Staff reported the city has built a balance of just under $1,250,000 available for distribution. For fiscal year 2026 that amounts to about $652,000 proposed for developer incentives and about $588,000 for affordable-housing programs. For 2027, Richards said staff's recommendation was to route all new CET revenue into the developer-incentive bucket to increase capital support for housing construction while carrying forward approximately $550,000 for programmatic uses.

The Affordable Housing Committee and staff proposed an annual Notice of Funding Availability with a five-to-seven-member selection subcommittee, a 50'50-point baseline scoring matrix and bonus points for priority outcomes such as leveraging local funds to unlock state or federal dollars, deeply affordable units (50% AMI), homeownership opportunities and accessibility design. Staff described a proposed 50'50 split between developer incentives and programmatic awards for residential collections and noted a 15% statutory pass-through to Oregon Housing and Community Services for some residential receipts.

Council debate focused on two topics: whether certain bonus points could create legal exposure, and how to weight leverage and deeply affordable outcomes. "I have deep concerns we're running afoul of the Fourteenth Amendment," Councilor Chris Chenoweth said, arguing that explicitly advantaging particular protected classes could be constitutionally risky. Councilor Sal Peralta urged historical context, noting McMinnville's past housing restrictions and the practical need to address inequitable access to housing. Staff agreed to have the city attorney review the protected-class and "historically marginalized" language and to rework the wording if needed.

Councilors also questioned where bonus categories fit in the scoring. Some members recommended moving the "deeply affordable" (50% AMI) priority into the essential criteria so it carries a defined weight rather than remaining an unweighted bonus. Staff said the AHC wanted to avoid penalizing projects that are not seeking state or federal matching programs while rewarding projects that leverage city funds to unlock larger grants.

On governance, the council directed staff to refine the selection-subcommittee membership rules to reduce conflicts of interest (for example, limiting the number of Affordable Housing Committee members who sit on the subcommittee and excluding any subcommittee member with a direct application). Staff agreed to vet the subcommittee structure with legal counsel.

Next steps: staff will revise the program documents and scoring matrix to reflect council direction (including legal review of equity-related language), finalize selection-subcommittee rules, and plan a solicitation for applications (staff indicated a July timeline). No formal council vote was taken at the work session; the council provided policy direction for staff to complete documents for legal review and to proceed with an annual award cycle if the materials are cleared.

What remains unresolved: how the city will balance developer incentives versus programmatic awards in practice as permit-driven revenues fluctuate, and what exact legal-safe phrasing will replace the AHC's recommended bonus language addressing historically marginalized populations.

The council asked staff to return with finalized materials and an implementation timeline after legal review and any editorial changes requested by councilors.