Silicon Valley investor Bruce Cleveland has teamed up with local investor Dino Vendetti to create a plan to transform Bend’s economy.

As part of the strategy, they intend to build a user-experience design academy — a school for programmers who write code and design the graphic interfaces that generate the overall experience users have with products such as websites, smartphones and computer applications — that will attract techies from around the world.

But first, they have created a competition called the Big Bend Theory to draw Silicon Valley startups and entrepreneurs to Bend.

There are more than 40 software companies in Bend, according to Economic Development for Central Oregon. But Cleveland and Vendetti want to build billion-dollar tech companies that will employ hundreds.

“The idea is to transplant high-growth companies through this contest and create anchor tenants,” Cleveland said. “If we bring in two or three really high-growth companies that then forms the backbone of a high-growth technology community … and then we can attract others.”

Their goal is to diversify and stabilize the local economy currently so reliant on the real estate market and seasonal tourism industry by building a tech hub that will generate high-tech jobs.

Nationally, high-tech industries were more resilient during the recession compared with other service-providing industries, such as retail, leisure and hospitality and construction, Oregon Employment Department Regional Economist Damon Runberg wrote in an email. And high-tech firms tend to provide high-paying and stable jobs for a community, he wrote.

“Most of the technology hubs in the United States tend to be very prosperous regions with unemployment levels lower than the national average and strong job growth,” Runberg wrote, adding that most hubs are in large metro areas. “The question is whether these metro areas are prosperous because of the high-tech industries or if the industry is successful because of the characteristics of these metro areas? It is likely a combination of both, but clearly a region’s workforce, infrastructure, and industry clusters play a huge role in the success of these tech hubs.”

He agreed the addition of high-tech firms would help diversify the Central Oregon economy and limit the effect of large economic shocks, such as the crash of the construction industry in 2008 and the collapse of the timber industry before that. But to make Bend a technology hub, he said it would likely take time to build the reputation, workforce and infrastructure to compete against other regions for startups and other tech firms.

Cleveland said the biggest fear Silicon Valley entrepreneurs have about bringing their startups to Bend is not having a place to work if their companies fold. But by bringing in two or three Silicon Valley companies, it mitigates the risk to smaller startups.

Vendetti recently said he had received around 20 applications for the competition, which is scheduled to take applications through Jan. 31. The top three startups will receive a weekend trip to Bend for the company co-founders and spouses. And if they choose to relocate, he said they will be provided a temporary office space and funding.

“Bruce and I believe that there are many of these folks in Silicon Valley who are fed up with the cost structure down there and want to build their business in a community that offers a high quality of life and yet still has the infrastructure needed for them to build their businesses (active tech community, university, venture capital),” Vendetti wrote in an email. “So the challenge we issued was really an experiment to see if we are right about our assumptions.”

Along with attracting high-growth startups, Cleveland said the next step is to work with Oregon State University-Cascades to create a pipeline of engineers who can form ideas and new high-growth companies in Bend.

And lastly, the duo plans to build the user-experience academy in 2014, where students will live in Bend and work on user-experience code for real companies locally and around the world.

“I think these are the building blocks to enable Bend to transform from its reliance (on) recreation and retirement to a full-time clean, stable economy,” Cleveland said.

— Reporter: 541-617-7818, rrees@bendbulletin.com

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Recovery continues in Central Oregon

Economic index shows growth in housing, tourism

By Joseph Ditzler / The Bulletin

Published Dec 8, 2013 at 12:01AM

Changes to landlord-tenant law in Oregon that take effect in 2014 have something for both renters and landlords.

The Landlord-Tenant Coalition Omnibus Bill, Senate Bill 91, passed by the Legislature in May with near unanimous consent, takes effect Jan. 1. It allows landlords to require tenants to obtain renter’s insurance, with some limitations that effectively exempt low-income renters. The law also gives renters a break for evictions that are five or more years old. And it gives landlords the ability to charge fees to renters who break some terms in their leases.

One important change affecting the rental market does not take effect until July 2014. Landlords will no longer be able to turn away prospective, low-income tenants solely because they rely on government subsidies to help pay their rent, so-called Section 8 vouchers. That change comes with House Bill 2639, a measure introduced by state House Speaker Tina Kotek, D-Portland.

“No landlord will be forced to accept Section 8 under this law,” wrote Jim Straub of Eugene, legislative director for the Oregon Rental Housing Association Inc., in the October newsletter. “But no landlord will be able to refuse to rent to someone solely because their income is a Section 8 voucher.”

Landlord groups in Oregon did not contest Kotek’s bill, however, because she granted concessions. For example, the bill creates a mitigation fund on which landlords may make claims up to $5,000 for property damage by Section 8 tenants, said John Van Landingham, a Lane County attorney, renter advocate and coalition member,

“That was a big part of the bill,” Van Landingham said Tuesday. “All three landlord groups didn’t support it, but they didn’t oppose it. They were neutral.”

SB 91

The General Landlord Tenant Coalition negotiates changes every year to the landlord-tenant law in Oregon. It grew from two people in 1993 to sometimes more than 20 people gathered in the same room, Van Landingham said. “The coalition typically works by compromise and horse trading,” he said.

SB 91 passed both state legislative chambers with only two no votes, cast by state Rep. Kim Thatcher, R-Keizer, and state Sen. Doug Whitsett, R-Klamath Falls, whose district includes parts of Crook and Deschutes counties.

“I don’t believe the state Legislature has any constitutional authority to tell a landowner what he can or can’t do in a rental agreement,” Whitsett said Monday. “We keep getting, it seems, with each passing legislative session, we keep putting more and more restrictions on owners of property, what they can and cannot do with that property.”

After Jan. 1, landlords may require tenants to obtain renters’ insurance to a maximum $100,000 coverage. However, landlords may not impose the insurance requirement on tenants who earn 50 percent or less of the median income in their area. In Deschutes County — including Bend, where the rental vacancy rate has been 1 percent —the median income for 2013 is $59,700 according to the U.S. Department of Housing and Urban Development.

Criminal record

Another change will prohibit landlords from turning away prospective tenants based solely on an eviction elsewhere more than 5 years old, or who were subject to an eviction that was dismissed or resolved in the tenants’ favor.

Landlords may still screen tenants for certain crimes, particularly those involving drugs, sex, violence or financial fraud, for example. But, they may not deny an applicant based on an arrest that did not result in a conviction or a charge that was dismissed.

The law is not as restrictive as it seems. Landlords may still deny an applicant based on a poor reference from a previous landlord.

“A lot of people get arrested and never charged with a crime, especially homeless people,” Van Landingham said. “Our view is that (denials based on arrests) may well be disproportionately impacting on minorities, racial minorities and, especially, homeless people.”

Finally, the omnibus bill allows landlords to charge fees for failing to comply with seven specific lease terms, including two new ones: smoking in a unit and keeping unauthorized pets, according to the legislative summary. In addition, after a first-time warning, landlords may charge a $50 fee for a second violation, according to the Oregon Rental Housing Association. For subsequent violations, landlords may charge $50 plus 5 percent of the monthly rent, according to the association.

But it restricts landlords from deducting fees from rent payments and charging another fee for late rent.

Straub, the association’s legislative director, said landlords in 2009 lost some power to charge noncompliance fees, due in part to abuses by some. Regaining that authority for two more instances is a major gain. He described fees as a “very important tool to deter behavior.”

Likewise, the power to require renter’s insurance protects renters, as well as landlords. An apartment fire, for example, could burden an uninsured client with a financial obligation that derails career plans, Straub said.

Landlords, in general, are wary of the implications of Kotek’s Section 8 bill, he said. But Straub endorsed it Wednesday. The mitigation fund effectively creates a $5,000 security deposit for every Section 8 tenant, he said.

Overall, he said, landlords benefited from the 2013 changes. “Yes, absolutely,” Straub said. “I believe we got more than we gave.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com

Good news on the employment front surfaced Monday from the Oregon Employment Department: a continuing strong surge in hiring across several sectors in Central Oregon.

“The fastest growing industry (in Deschutes County) is construction — 330 jobs over the past year,” said the department’s Regional Economist Damon Runberg. “That industry locally was just devastated, but we’re really starting to see some strong hiring there.”

As a result, skilled workers, particularly finish carpenters and framers, are in high demand, said Tim Knopp, executive vice president of Central Oregon Builders Association. And wages and material costs are rising along with demand for workers and new housing. Construction companies report 15 to 25 percent higher costs, Knopp said Monday.

However, office jobs — the professional and business services sector — has led the Deschutes recovery in sheer numbers hired over the past year with 550. A larger sector, it realized an 8.2 percent increase in hiring against 9.2 percent for construction.

Also, a second look at spring and summer employment figures for Deschutes County showed a stronger picture — 860 more jobs overall — than previously reported by the department, Runberg said.

“All signs in the economy right now point to things being better than previously thought,” he said.

The Bend Metropolitan Statistical Area, which covers all of Deschutes County, also relinquished its spot last month as the Oregon metropolitan area with the highest unemployment rate, out of the six metro areas in the state. Deschutes County’s seasonally adjusted rate in October fell to 9.4 percent. That’s a shade behind the Medford MSA, which moved to the top that month with a 9.5 percent adjusted rate.

In Crook County, hiring posted the second strongest year-over-year growth rate of all Oregon counties, 5.8 percent. Overall, the Crook County unemployment rate stood at 12.1 percent in October, still high, but down from 13.8 percent in October 2012, according to the Employment Department. Construction, along with growth in the transportation, trucking companies, for example, accounted for some of that improvement, Runberg said.

Jefferson County reached its lowest seasonally adjusted unemployment rate since July 2008, 10.4 percent. Manufacturing, retail and tourism-related all showed gains in the past year. Wholesale trade lost 190 jobs, however.

— Reporter: 541-617-7815, jditzler@bendbulletin.com

Pronghorn resort plans to start construction next year on a 105-room hotel on its property northeast of Bend, resort officials announced Tuesday.

Pronghorn’s parent company, Auberge Resorts, is putting $20 million into the project, which will also double the size of Pronghorn’s spa facilities and renovate some existing buildings.

The proposal makes Pronghorn the second Central Oregon resort to announce hotel plans after years of struggling to clear up ownership and development issues. Construction started in April on a 50-room hotel at Tetherow, just west of Bend.

Pronghorn’s plan is to develop the hotel in two phases, General Manager Spencer Schaub said. Construction crews will build 67 of the rooms starting in April, with a tentative opening set for the second quarter of 2015.

The second phase, with 38 rooms, will start after the first phase is complete.

The hotel “was always part of the development requirements for the property,” Schaub said. “It’s an exciting development and an exciting way to showcase Pronghorn and Central Oregon.”

Pronghorn officials are calling the planned hotel The Huntington Lodge, named after a 19th-century wagon trail that ran through Deschutes County. Pronghorn currently has some condo-like lodges available for guest stays, but this would be the first full-scale hotel.

A San Francisco architectural firm that specializes in resorts is working on the hotel design, and Pronghorn is still finalizing some specifics, including its interior design. The hotel is expected to have two varieties of rooms: standard rooms of about 470 square feet; and suites ranging from 940 square feet to 1,430 square feet, Schaub said.

Among a half-dozen resorts

Pronghorn, like more than a half-dozen resorts planned across Central Oregon since 2000, has struggled to meet some of the timelines developers first planned for home and hotel construction around the property.

Oregon and Deschutes County require destination resorts to provide overnight lodging units in addition to homes, golf courses and other amenities. Pronghorn, which opened in 2004, has applied for extensions with the county on the requirements several times since first getting development approval.

The resort includes plans for up to 420 home lots surrounding its two golf courses, clubhouse and recreation center on 640 acres east of U.S. Highway 97 between Bend and Redmond. Just a fraction of the homes have been built.

Still, construction activity and visits to the resort have been on the upswing over the last year, Schaub said.

In February 2012, The Resort Group, a Hawaii development firm, acquired more than $43 million in loans for the property, effectively taking ownership. That company put Auberge Resorts in charge of daily operations in May 2012.

Troubled developments

Pronghorn is hardly the only Central Oregon resort to face financial hardship over the last decade, and it has fared better than most.

Building at Tetherow, a resort located just west of Bend that broke ground in 2004, has also failed to reach the 380 homes and 210 townhomes that developers first envisioned. But after several ownership changes and the near foreclosure of 191 lots last year, Tetherow officials started construction on a 50-room hotel in April and have said they’re seeing more permits for homes around the resort property.

Of the nine destination resorts proposed across Central Oregon between 2000 and 2008, just three — Pronghorn, Tetherow and Brasada Ranch — opened. A hotel management group bought Brasada in 2010.

The others collapsed in the wake of the real estate crash, personal bankruptcies among resort planners and land use decisions restricting development.

— Reporter: 541-617-7820, eglucklich@bendbulletin.com

Bend company Navis seems to constantly be in hiring mode these days.

The tourism-related business added about 40 new workers over the last year, and wants to add 80 more by January, including 60 in its growing call center, which helps vacationers book hotel reservations across the country, said Bill Schlosser, vice president of marketing.

“The economy has certainly helped in the last year,” Schlosser said. “Resort and vacation rental companies’ business is picking up.”

Customer service representatives are in high demand at companies like Navis and across Central Oregon, according to a recently released Oregon Employment Department study.

High Desert employers posted nearly 700 ads seeking customer service representatives through the Employment Department’s online database, more than any other occupation.

The Employment Services Job Order Summary Report analyzed job openings posted to the database between Oct. 1, 2012, and Sept. 30, by employers in Deschutes, Crook and Jefferson counties. It also compared Central Oregon job posts with others across the state, and how many were full-time or part-time.

Its findings highlighted some of the gaps between the local economy and the rest of Oregon, several economists said.

Just 71 percent of Central Oregon job posts were for full-time work, compared with 80 percent for Oregon as a whole. And many occupations in high demand locally were among the lowest-paying jobs available.

Of the roughly 6,000 job posts over the one-year time period, nearly 40 percent were for retail, customer service, food preparation, janitorial services or housekeeping positions.

Last year, Deschutes County retail employees earned an annual average wage of $26,600, gross, according to U.S. Bureau of Labor Statistics data.

Customer service workers took home $32,600 on average.

For food service, janitorial and housekeeping positions, average yearly pay was between $15,100 and $17,800. Deschutes County’s median income for a family of four is $52,962.

To an extent, Central Oregon’s status as a tourism hub attracts retail and hospitality jobs, while its distance from Interstate 5 makes it a tougher draw for many of the state’s higher-wage manufacturing, engineering and financial-service jobs that cluster around the Portland area, said Damon Runberg, a regional economist with the Oregon Employment Department.

“It’s a lot easier to put a manufacturer on the I-5 corridor or along the Columbia River,” Runberg said.

Statewide, manufacturing positions — including management positions at manufacturing companies — came with an average annual pay of $62,000 last year.

But more than 60 percent of the state’s population lives around Portland, Salem and Eugene. For a lot of big regional companies that make and ship products, operating along the I-5 corridor is “cheaper and quicker,” Runberg said. “No matter how you slice it, Highway 97 is not the most conducive trucking route” for moving finished goods.

Some of the state’s highest-paying jobs seem to be passing Central Oregon altogether.

According to the study, employers posted more than 2,000 openings for accountants and financial managers across Oregon, but just 50 of them came from Central Oregon.

There were more than 2,300 posts for software developers, but just five in Central Oregon.

Jobs are created based on demand in an area, said Josh Lehner, senior economist with the Oregon Office of Economic Analysis. Central Oregon’s status as a tourism hub is undeniable, so it makes sense that the area would see more openings for food service and retail work than manufacturing and technology jobs. Lower-wage positions also tend to have higher turnover, as employees leave for other opportunities. More of those jobs are also part-time.

“Bend has obviously had some strong population growth over the years,” Lehner said. “But if you want to support those higher-wage jobs, you need even more growth.”

Expanding Oregon State University-Cascades Campus into a four-year school could help in the long run.

Still, not all of the Central Oregon openings paid low wages. Jobs in the medical field seem to offer the most opportunity for Central Oregon job seekers to earn $40,000 a year or more.

According to the study, Central Oregon employers posted 417 openings for health and social assistance jobs between Oct. 1, 2012, and Sept. 30. Those ran the gamut from nurses and medical assistants to laboratory technicians, pharmacists and emergency medical technicians.

The average health and social assistance job paid $49,800 in Deschutes County last year, Bureau of Labor Statistics data show.

Local health care providers are driving that growth. Bend Memorial Clinic has increased its workforce from 600 to 627 over the last year, said Christy McLeod, the clinic’s chief marketing officer. St. Charles Health System posted about 100 job openings on its website in the month of October.

Bend Memorial’s hires included a new vascular surgeon in July, as well as additional support staff in its cardiology unit.

“There are a lot of people in our area who need medical care,” McLeod said. “We just can’t seem to keep up the pace.”

The developers of a planned apartment complex near Southwest Bond Street and Wilson Avenue, east of the Old Mill District, could start building next spring.

Brad Fraley and Timothy O’Byrne want to build five apartment buildings on the 6-acre former Brooks-Scanlon executive office property, near the Bond and Wilson roundabout. The apartment buildings could include as many as 198 total rental units.

They want to develop in three separate phases, starting with one or two of the buildings, in the area closer to Southwest Bluff Drive.

Late last month, they submitted planning documents to the city of Bend, proposing to split the land into three separate parcels. It’s a step they have to take in order to get bank financing to build, Fraley said.

“We want to phase this in,” he said. The whole 6-acre property is “just too large of a piece (of property) to finance” in a single phase.

He and O’Byrne picked up the land in a property exchange back in 2005. They set to work drawing up plans for a $127 million development, anchored by a luxury hotel and condominiums. The project was dubbed “The Village.”

The 2008 real estate crash halted the project, however. Last year, the bank that financed them looked to foreclose, after saying the developers were delinquent on two loans totaling more than $8 million. Fraley and O’Byrne managed to renegotiate the loan terms, and in October 2012 announced the scaled-back apartment project.

It may not have the eye-popping features or price tag of The Village, but Fraley said the apartment plan could fit a real need for rental housing in the city.

They haven’t settled on an exact number of apartments for the five buildings, or how many bedrooms and bathrooms will make up each unit. But they’re likely to come onto the market in the middle of the city’s price range. A small cafe and private gym are also likely.

The average rent for a two-bedroom Bend apartment was $704 in the first quarter of the year, according to a market survey by the Central Oregon Rental Owners Association.

That survey also put Central Oregon’s rental vacancy rate at just 1 percent, the lowest in six years of surveying by the rental association.

“One thing we’ve noticed is there aren’t really any studio apartments in Bend,” Fraley said, adding they could target some studios in their apartment plan.