BEAVERTON CITY COUNCIL
REGULAR MEETING
JUNE 5, 2006

CALL TO ORDER:

The Regular Meeting of the Beaverton City Council was called to order by Mayor Rob Drake in the Forrest C. Soth City Council Chamber, 4755 SW Griffith Drive, Beaverton, Oregon, on Monday, June 5, 2006, at 6:33 p.m.

ROLL CALL:

Present were Mayor Drake, Couns. Catherine Arnold, Betty Bode, Bruce Dalrymple, Dennis Doyle, and Cathy Stanton. Also present were City Attorney Alan Rappleyea, Chief of Staff Linda Adlard, Finance Director Patrick O'Claire, Community Development Director Joe Grillo, Public Works Director Gary Brentano, Library Director Ed House, Human Resources Director Nancy Bates, Police Chief David Bishop and Deputy City Recorder Catherine Jansen.

WORK SESSION:

06092 Regulation of Payday Loan Businesses

Mayor Drake said the work session concerning payday loan businesses (Agenda Bill 06092) would be heard first to accommodate Senator Decker who had another appointment this evening. He invited the State legislators who were present to speak.

State Representative Mark Hass, District 27, said in a special session the Legislature enacted Senate Bill 1105, the Payday Lending Act, to regulate the payday loan industry. He said the City's proposed ordinance would be tied into the State's bill and adopting the ordinance would send a strong signal to the payday loan industry that this is not just a State issue, it is a city issue and the cities are serious about this lending practice. He said he admired the City for proceeding and he was glad that the City's ordinance would become effective almost a year earlier than the State's bill. He said Coun. Arnold had asked him how it happened that the State bill would not be effective until July 2007. He said the deal that was struck before the special session vote was that the bill would be the exact language of the initiative that was in circulation at that time. He said any attempt to move that date forward could have affected the outcome of the vote. He thanked the Council for going forward with this issue.

Mayor Drake said he was sorry to hear Haas had decided to not run for re-election. He asked Haas if he had a concern that State law may be changed at the next session, which occurs six months before the new State law goes into affect.

Hass replied he was optimistic that the law would not be weakened. He said the industry would have to come forward with proposed legislation to weaken the bill. He said he did not think that was a political reality, especially with the cities that now support the regulation. He said the Department of Consumer Business Services was promulgating rules on this legislation now. He said the Department was looking at how to apply the definitions and was also looking at car title lenders. He said he did not believe the law would be weakened with all of this occurring.

Mayor Drake thanked him for his comments.

Senator Ryan Deckert, District 14, said he felt the City was taking an important step because it would send a clear signal to the State that this was important and it would protect the citizens in the State. He said he supported the City's action.

Coun. Doyle thanked the Legislators for passing the bill in the special session. He said it was commendable that both sides were able to come together and get this done. He asked Hass and Deckert to send the “Well Done” message to their colleagues. He said he would watch to see what happens in the next session.

Mayor Drake invited Laura Etherton from OSPIRG to speak. He said she had provided testimony to each of the cities who have adopted similar ordinances.

Laura Etherton, Consumer Advocate, OSPIRG (Oregon State Public Interest Research Group) said OSPIRG was a non-partisan, non-profit public interest organization with statewide membership. She thanked the City for bringing this ordinance forward and for working to protect consumers. She gave detailed background about how the payday loan industry works and how high rates can occur when people were unable to repay the loans on time resulting in rollover loans. She said in addition to high fees, payday loans can be difficult to repay. She said typically the loans have to be paid back in a short period of time (one to two weeks) and have to be paid in full. She said in response to these problems the State Legislature enacted consumer protections regarding payday loans. She said OSPIRG and consumer protection agencies applauded this action.

Etherton said the cities' ordinances complemented the States regulations in several important ways. She said because the State law would not become effective until July 2007, this ordinance would provide Beaverton with adequate stop-gap protections between now and then. She said the ordinance would complement State law by giving consumers additional protections: (1) the right to rescind the loan within 24 hours, (2) the right to a payment plan after the period of rollovers is complete, and (3) a loan design that allows the consumer to pay down 25% of the loan principal with each renewal. She thanked the Council on behalf of OSPIRG and all its members, and asked that the ordinance be adopted as soon as possible.

Mayor Drake asked if other states regulate the payday loan industry. He said he assumed many of these cases were high-risk loans that would partially explain the higher interest rates and loan fees.

Etherton said most states have some regulation and some states ban payday loans. She said other states have enacted regulations similar to Oregon and the industry has been able to comply with the regulations. She said regulation does not mean the industry cannot comply or exist in the state, and it does provide important protections for consumers. She said payday loans were unsecured loans which means there is higher risk. She said because of this the higher interest rate is more reasonable and 36% seems very reasonable in this case. She said while the loan is unsecured, it is somewhat secured by the consumer's own check, so the lender is the first in line to be paid. She said there is a risk that the check might not clear; then there would be a NSF (non-sufficient funds) fee and the lenders can recoup their NSF fees from the consumer and pursue collections.

Coun. Arnold asked Etherton if she knew the size of the loans that are most frequently requested and the length of the loan.

Etherton said the typical payday loan in Oregon was $300.00 and the loan period would be two weeks.

Coun. Arnold asked if there was interest associated with the loan at that time or just the loan fee.

Etherton said a typical loan fee is $20.00 per $100.00 loan; $60.00 fee for a $300.00 loan for a 14 day period. She said the fee to take out the loan can be expressed in annual interest to fairly express the cost of the loan. She said that comes out to about 521% annually.

Coun. Arnold asked if consumers would turn to other sources, such as loan sharks, if this avenue was not available. She said she wondered if the City was taking away an option that would force people to turn elsewhere.

Etherton said they want to be sure that consumers of all income levels have places where they can go for short-term loans. She said the problem with payday lending was that it often leads consumers into a worse position than when they started. She said credit unions are now offering a number of products with lower interest rates for short-term lending.

Coun. Arnold asked what would stop consumers from going to two or more payday loan institutions and does this show up on credit rating reports.

Etherton said payday loans were not part of the credit reporting system, as a credit check is not required to obtain a payday loan. She said currently there was nothing to stop consumers from taking out multiple payday loans. She said a component of the recently-adopted State law, is a signed affidavit by the consumer stating that he is not taking out more than one loan. She said a number of states have enacted a shared database that the payday lenders can access as part of their loan-approval process to see how many loans a consumer may have at one time. She offered to provide this information to Council.

Mayor Drake said he thought the Council would hold a public hearing on this issue in two weeks. He suggested that if she had additional information, she could send it to the City Recorder and it would be part of the public record.

Coun. Stanton said locally apartment managers meet and share information about problem tenants and credit risks. She asked if payday lenders had a similar group that discussed high credit risks. She said from the lenders' perspective it could be a losing proposition if a consumer had several loans; the first lender would get paid, but the other lenders might not.

Etherton said she did not know of a formal information sharing database. She said other states enacted a requirement for such a database to exist. She agreed it was a risky process.

Coun. Stanton said the State legislation limits the loans to two per lender, but there is no limit on going to other lenders. She noted in the correspondence received from Money Mart in Beaverton (in the record) there were customers from Newberg. She said she hoped the State would address this in the future.

Mayor Drake thanked Etherton for her presentation. He asked the City Attorney to give an overview of the proposed ordinance.

City Attorney Alan Rappleyea said he invited Attorney John Junkin, who represented the payday loan industry, to present the industry's point of view but he had not heard back from Junkin.

Luanne Stoltz, Vice President, Community Financial Services Association of Oregon, said this Association represents payday lenders. She said no other states have laws that approach Oregon's law. She said the key provision is the number of days of the loan. She said her business model is based on loans that rollover every 17 days. She said the State law is based on a rollover period of 31 days. She said to her knowledge no payday lender could survive in that model. She said she was currently in the process of closing one of her stores. She said closing this store meant she would layoff three employees, two of whom are the sole source of income for their families. She said these were full-time employees with full medical and dental benefits. She said her two stores were in Portland on 82nd Avenue and Barbur Boulevard and she was closing the 82nd Avenue store. She said the City would need an enforcement process for its ordinance. She said if she were a Beaverton taxpayer, she would not be happy that the City developed an enforcement agency for something that would no longer exist.

Stoltz said it was unusual for consumers who take out payday loans to get into a cycle of debt where they have to file bankruptcy. She said last year she processed 10,000 loans and only 100 people filed for bankruptcy. She said that was a typical across-the-board percentage for bankruptcies across the country. She said they serviced a wide cross section of people and the loans were for a small percentage of their income (10 to 25%) and the vast majority pays off their loans. She said typically these are not the main stream credit customers. She said she has many customers who default in the first week, but eventually they pay the loans off. She said less than one percent of her customers get into a cycle of debt. She said over 700,000 loans were processed last year in Oregon and only seven complaints were filed. She said no other financial product had that low of a complaint rate.

Stoltz urged the Council to be sure it collects accurate information. She said for many people this was their last resort and they work hard to get their loans paid off. She said the customers were grateful for how the lenders worked with them. She asked the Council to consider the unintended consequences that might result from passing any further ordinance.

Mayor Drake said the Legislature gave a strong endorsement. He asked if she testified at the State hearings.

Stoltz replied she did testify at the State level.

Mayor Drake asked Stoltz if she was speaking broadly regarding the impact the State law would have on the industry.

Stoltz said the Association represents 155 payday loan lenders and they have met extensively. She said all of these lenders have said they cannot operate if the State law continues as is. She said they are looking for other products to offer, such as mortgage or consumer lending, and payday lending will not continue.

Coun. Arnold asked if the Association represented the owners or managers of the lending stores.

Stoltz replied she owns two stores and she sits on the Board of Directors of the Association that represents 155 stores. She said it was a professional association. She said there was a database called Teletrack that lenders could use to get information on a potential customer. She said Teletrack will tell them if a customer has multiple payday loans (though it won't give the exact number) and it will show if the customer has defaulted recently on any checks or loans.

Coun. Doyle said it sounded as if regardless of what the City does, it is the State law that affects them. He asked if that was correct.

Stoltz said that was correct. She said she was currently operating under the Portland ordinance and it is possible to operate under that ordinance. She said it is not possible to operate under the new State law.

Coun. Dalrymple asked Stoltz how the long the Association had been in existence.

Stoltz said she had been in business nine years and the Association existed prior to that. She said the annual fee to be a member of the Association was $350.00. She said her first store was on Barbur Boulevard and the 82nd Avenue store had been open for three years.

Coun. Arnold questioned why the State law would kill her business.

Stoltz said the State law has a 31-day minimum for rollovers. She said that was like cutting a person's pay by 40% and then paying them every-other month. She said a business could not take such a large cut in its revenue and continue operating.

Coun. Arnold asked Stoltz what fee she currently charged in her stores.

Stoltz replied she charges $18.00 per $100.00 borrowed.

Mayor Drake asked Stoltz if she thought the representation of the 521% annual interest rate was correct.

Stoltz said if a payday loan could be renewed every two weeks at $20.00 per $100.00, for an entire year (which is not allowed by law), it would come out to 521%. She said current Oregon law only allows three renewals.

Mayor Drake said that would be the same as a credit card; if a payment was missed one month, at 3% it would still come out to 36% annually.

Stoltz said that was correct but one would also have to pay a large late fee and that would skew the interest rate dramatically. She said typically people come to a payday loan store because they suddenly discover they have a check that will bounce. She said the fees for a bounced check are very high; it is more economical to go to the payday lender and pay the loan back out of the next paycheck.

Mayor Drake thanked Stoltz for her comments.

Rappleyea reviewed the proposed ordinance. He said the ordinance establishes a permit process, allows the customer to rescind the loan within a 24-hour period after first taking the loan, allows 25% of the principal of the loan to be repaid before renewing the loan, and limits the amount of rollovers to two (consistent with the new State law). He said the new State law puts a cap on the interest rate at 35%, limits fees at $10.00 per $100.00, and gives 31 days for customers to pay off their loans. He said the Portland ordinance was challenged in Circuit Court and the challenge was denied under pre-emption principals. He said that decision had not been appealed to the Court of Appeals. He said the City of Gresham had entered into an intergovernmental agreement with the City of Portland to do the enforcement for Gresham's payday loan ordinance.

Coun. Arnold asked how Portland would enforce the Gresham ordinance.

Rappleyea said Portland would process the permits and collect the fees. He said the appeals would be handled by Gresham.

Coun. Arnold said there was a section about administrative authority in the other cities' ordinance that was not in Beaverton's proposed ordinance.

Rappleyea said that the other ordinances had provisions for adoption of administrative rules. He said the City of Beaverton has a specific Code section that says the Mayor has the authority to adopt administrative rules. He said he believed the administrative authority section was redundant and not necessary in Beaverton's ordinance.

Mayor Drake asked for direction from the City Council.

Coun. Dalrymple MOVED, SECONDED by Coun. Doyle that Council conduct a public hearing on the adoption of the proposed ordinance for regulation of payday loan businesses, on June 19, 2006, at 6:30 p.m.

Coun. Stanton said she would support the motion. She said she realized the State has adopted legislation that will take effect on July 2007. She said she believed it was incumbent on the Council to provide some regulation sooner than 2007. She said she was pleased that the ordinance complies with all State requirements. She said she felt 31 days was a legitimate period of time to pay off a loan and she was comfortable with that provision.

Coun. Arnold said in the testimony she heard someone make the point that the cost of not having a check covered could be substantial. She said she hoped that people on both sides of the issue would come to the hearing and testify. She encouraged both side to bring information in terms of numbers, as it would be good to hear that information.

Mayor Drake said it would be helpful if the City received the information a week before the hearing, to allow the Council and the public adequate time for review.

Coun. Dalrymple said he made this motion because he wanted to see this played out further. He said he would like to hear from people involved in the business practices and from those who have used the service, so that Council can better unders tand the big picture. He said there were new elements that came to light during this work session and he would like to hear more in an open forum.

Question called on the motion. Couns. Bode, Dalrymple, Doyle and Stanton voting AYE, the MOTION CARRIED unanimously. (5:0)

VISITOR COMMENT PERIOD:

There were none.

PRESENTATIONS:

06085 PGE Presentation and Update

Mayor Drake explained this item was pulled and would be brought back in the future.

06086 Tree City USA Growth Award

Operations Manager Steve Brennan introduced City Arborist Pat Hoff and Eric Perkins from the Oregon Department of Forestry (ODF). He said it was a pleasure to be back before the Council for the twelfth consecutive year of recognition as a Tree City USA. He said the City's Urban Forestry Program's goals were centered on the preservation and enhancement of the urban forest. He reviewed the services that the City provides to enhance and maintain its urban forest. He said annually the City responds to over 800 service requests related to forestry, maintains 5,000 trees on public lands and promotes tree planting programs. He said those activities and a dedicated budget qualifies the City to apply for Tree City USA status.

Forester Eric Perkins, ODF, congratulated the City for being recognized as a 2005 Tree City USA recipient. He said the Tree City USA Program was sponsored by the National Arbor Day Foundation (NADF) and administered by the ODF. He said the purpose of the program was to recognize cities that have developed programs to plan and maintain the trees in their communities. He said only 40 other Oregon cities, and 3,000 cities nation-wide, have received this award. He said this award was an important recognition of cities' commitments to urban forests, to livability in their communities and to a better quality of life. He reviewed the benefits of trees and said that he appreciated that the City of has made this a priority. He said on behalf of the NADF and the ODF he was pleased to present the City with the Tree City USA Award for 2005 and he presented a flag to Mayor Drake.

Mayor Drake thanked Perkins for the award. He said that this community values its trees very much.

Perkins added that this was also the eighth year the City has received the Tree City Growth Award. He said the Growth Award recognizes cities that have gone beyond the basic Tree City USA requirements. He said only eight other Oregon cities received the Growth Award.

Mayor Drake spoke on the staff's and City's dedication to its tree program.

Coun. Doyle asked what the criteria was for the Growth Award.

Perkins replied the Growth Award recognizes environmental improvements and a higher level of tree care in the community as evidenced by significant improvements to the tree program in the last year.

Arborist Pat Hoff said the City received the Tree City Growth Award for going beyond the $2.00 per capita on its tree program. He said this year the City in conjunction with SOLV planted over 1,000 trees and expanded the City-wide leaf recycling program. He said additional projects every year help the City to achieve the Growth Award.

Mayor Drake said the SOLV project involved enhancing creeks and waterways in the community and included community volunteers. He thanked Brennan, Hoff and Perkins for the presentation.

COUNCIL ITEMS:

Coun. Stanton said the turnout at the Neighborhood Cleanup Day on Saturday, June 3, 2006, was very good. She said the process worked very well.

Coun. Stanton said on Monday, June 12, 2006, at the Washington County Public Affairs Forum, Vic Atiyeh would be speaking on "Debunking the Oregon Myth." She added on Tuesday, June 13, the Westside Economic Alliance would host the Westside Transportation Symposium at the Kingstad Center. She said information could be obtained by calling 503-968-3100.

Coun. Arnold said on June 15, 2006, at 7:00 p.m., there would be a presentation on the Urban Rural Issue at the Beaverton City Library. She said she was fortunate to see the play The Laramie Project sponsored by Southridge High School. She said the play was about hate, differing views and how to get to truth and healing. She said she wished she had brought her children to see the play as it was valuable and meaningful.

STAFF ITEMS:

There were none.

CONSENT AGENDA:

Mayor Drake said Agenda Bill 06089 was pulled at the request of Coun. Stanton who has some questions and suggestions. He said this would be brought back at a future Council meeting.

Coun. Stanton MOVED, SECONDED by Coun. Doyle, that the Consent Agenda be approved as follows:

Minutes of the Regular Meeting of May 15 and the Special Meeting of May 25, 2006

06087 Liquor Licenses: New Outlet - Gold Fountain Restaurant & Lounge; Macheezmo Mouse & The Hottest Dog. Change of Ownership - Pizza Pazza. Greater Privilege - Elmer's Breakfast-Lunch-Dinner - Cornell Oaks

06088 Boards and Commissions Appointments - LeRoy O'Brien and Philip Ruban to Citizens with Disabilities Advisory Committee

06089 PULLED - A Resolution Adopting Updated Board of Design Review Bylaws (Resolution No. 3858)

Contract Review Board:

06090 Bid Award – Relocation of 16” Waterline at Beaverton Creek Project

Coun. Stanton said she had minor corrections to the minutes of May 15, 2006.

Coun. Stanton said she pulled Agenda Bill 06089 because she was remembering a conversation two years ago when the Council remanded a zone change decision back to the Planning Commission. She said in that remand there was no noticing to the people who attended the first hearing. She said she was looking to clarify language in Section 10 of the Bylaws regarding remands for the Board of Design Review.

Question called on the motion. Couns. Arnold, Bode, Dalrymple, Doyle, and Stanton voting AYE, the MOTION CARRIED unanimously. (5:0) Coun. Doyle abstained from voting on the minutes of May 15, 2006, as he was not in attendance at that meeting. Couns. Bode and Dalrymple abstained from voting on the minutes of May 25, 2006, as they were not in attendance at that meeting.

PUBLIC HEARINGS:

06091 Proposed Water Consumption Rate and Demand (Meter) Charge Increase for Operating the City’s Water System (Resolution No. 3859)

Finance Director Patrick O’Claire reviewed the proposed rate increases for the water consumption rate and demand (meter) charges as presented in the staff report.

Coun. Stanton said she appreciated the fact that other people think the way the City does business is a good thing. She said it was much easier to do smaller incremental increases each year than larger increases every few years. She asked if the six CCF (100 cubic feet) of water per month average was a legitimate average or a mean or median.

O'Claire said it was a legitimate winter average for single family residential customers, although consumption is driven by the number of people in a household.

Coun. Dalrymple asked, for the benefit of the audience, what the impact would be on the level of service if the City did not approve the increase.

O’Claire said the recommended increase for the consumption rate would produce about $140,000 in additional revenue for the water utility. He said the increase on the demand charges would produce about $53,000 annually. He said that would total over $200,000. He said if the City did not do that, the funds would have to be taken from the Water Utility Reserves and the City would fall behind in the Water Utility Fund. He said the City would then have to enact a bigger increase.

Coun. Dalrymple asked if there was not a functional process that the City could do to limit the cost of service; and that the City had done the best that it could and that was why the increase is requested.

O'Claire said that was correct. He said this was based on the adopted Fiscal Year 2006-07 Budget, that takes into consideration the cost of the water the City procures from the Joint Water Commission and the costs of maintenance and replacement of the water system and reservoirs. He said the costs of the Water Utility Fund cover maintenance and capital infrastructure replacement. He said the projected operating revenue for next year, which includes this rate increase, is $1.1 million in rehabilitation projects for the water system.

Coun. Dalrymple thanked O'Claire and said that would give the citizens a better understanding of why the rates need to be increased.

Mayor Drake opened the public hearing and asked for public testimony.

There was no one present who wished to testify.

Mayor Drake closed the public hearing.

Coun. Doyle MOVED, SECONDED by Coun. Stanton, that the Council adopt Resolution No. 3859, A Resolution Establishing a New Water Consumption Rate for the City of Beaverton and Repealing Resolution 3816, as presented in Agenda Bill 06091. Couns. Arnold, Bode, Dalrymple, Doyle and Stanton voting AYE, the MOTION CARRIED unanimously. (5:0)

ORDINANCES:

Coun. Doyle MOVED, SECONDED by Coun. Stanton, that the rules be suspended, and that the ordinance embodied in Agenda Bill 06093, be read for the first time by title only at this meeting, and for the second time by title only at the next regular meeting of the Council. Couns. Arnold, Bode, Dalrymple, Doyle, and Stanton voting AYE, the MOTION CARRIED unanimously. (5:0)

First Reading:

Rappleyea read the following ordinance for the first time by title only:

06093 An Ordinance Relating to the Building Code Amending Beaverton Code Section 8.02.015(A) (Ordinance No. 4393)

Second Reading:

Rappleyea read the following ordinance for the second time by title only:

06084 TA 2006-0002 (Floodplain Text Amendment) (Ordinance No. 4392)

Coun. Stanton MOVED, SECONDED by Coun. Arnold, that the ordinance embodied in

Agenda Bill 06084 now pass. Roll call vote. Couns. Arnold, Bode, Dalrymple,

Doyle and Stanton voting AYE, the MOTION CARRIED unanimously. (5:0)

ADJOURNMENT

There being no further business to come before the Council at this time, the meeting was adjourned at 7:51 p.m.

APPROVAL:

Approved this 19th day of June, 2006.

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Rob Drake, Mayor