Deschutes County has tried for nearly two decades to redirect development from areas of the southern part of the county to a planned neighborhood in La Pine, but a local builder says the program makes it difficult to build inexpensive homes in La Pine.

Vic Russell owns about 52 undeveloped acres in the roughly 600-acre area, often called the “new neighborhood.” He told the Deschutes County Commission this week that a longstanding requirement that builders in the area pay for protecting groundwater in other parts of the south county doesn’t work. That requirement will add about $2.4 million to the cost of building out his land.

“I think for the benefit of La Pine, this program needs to be recognized as a failure,” Russell said.

Development in southern Deschutes County dates back to the ’60s and ’70s, before state land use planning laws that limit development in rural areas took effect, Deschutes County Community Development Director Nick Lelack said.

The 125-square-mile area around what became La Pine was divided into 13,000 lots, most of which contained fewer than 2 acres. The ones that developed were done on septic systems.

Groundwater in southern Deschutes County is closer to the surface than it is in other parts of the county, and that makes it more susceptible to contamination, including from septic systems. A 1982 water study found high nitrate levels in the area, and a 1994 study found that those levels were increasing.

La Pine built a rural sewer in the intervening years, but homes outside of that core area were still being built with septic systems. By 1996, only 7,000 of the original 13,000 lots remained undeveloped.

That year, Deschutes County received a grant of about $150,000 to create a solution to problems with groundwater contamination, fire risk, road quality and wildlife habitat in the southern part of the county. The solution they came up with turned into what was called the “new neighborhood,” also sometimes referred to as the “Newberry Neighborhood.”

The new neighborhood consisted of about 600 acres of mostly county-owned land — the property Russell owns is included because its prior owner opted to be part of the area in exchange for the opportunity to develop the land. Building in the new neighborhood originally depended on developers in other parts of the county giving up their rights to develop their property on septic systems.

Signing away those development rights created a credit, which landowners could then sell to would-be developers in the new neighborhood. Developers then had to turn in 5.5 credits per acre to build in the new neighborhood.

“The idea initially was to decrease development in rural areas and direct it toward this unincorporated La Pine area,” Lelack said.

It was a market-driven approach to reducing development in floodplains, wetlands, areas susceptible to groundwater contamination and mule deer migration corridors, but it had drawbacks, County Commissioner Tony DeBone said.

“We have to remember that these are already privately-­owned bought-and-sold lots,” he said. “One of the conundrums of living there is that it’s easy for someone who’s already built their house and is living there to say ‘Sure, let’s save the lots on either side.’”

In its first few years, the program resulted in Pahlisch Homes building 106 homes on 32 acres in the new neighborhood.

The program was in place until 2006. Then, the county’s focus shifted from preventing new development on septic systems in the rural county to minimizing the nitrogen entering groundwater from existing septic systems.

Now, credits get created when landowners in the southern part of the county upgrade their old septic systems to meet current standards. Developers in the new neighborhood can either purchase those credits or pay more than $40,000 per acre into a fund that other property owners can get loans from to upgrade their septic systems.

That way, money generated from the new neighborhood is paying for rural upgrades, Lelack said.

Only Pahlisch Homes has succeeded in building in the new neighborhood so far.

While the developer received a few additional building permits this year to add to its Crescent Creek subdivision, most of the land sits vacant.

“This whole Newberry Neighborhood is cumbersome,” said Melissa Bethel, interim La Pine city manager. “We did have a developer walk away.”

— Reporter: 541-633-2160; jshumway@bendbulletin.com

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