City News, ECONOMY

Deacon gets tax exemption for downtown Salem apartments, faces accusations of ignoring wage theft 

The Salem City Council on Monday approved a 10-year property tax break for a downtown apartment building planned by Portland-based Deacon Development with the caveat that new transparency requirements are put in place to prevent worker exploitation on job sites. 

The 105-unit apartment building, tentatively called “High Street Apartments,” will be at 277 High Street N.E., a vacant lot that was the site of the former Salem City Hall. It will have 16 affordable units.

Councilors unanimously approved the tax break and the new transparency practices. That included Mayor Chris Hoy and Councilors Virginia Stapleton, Linda Nishioka, Deanna Gwyn, Jose Gonzalez, Julie Hoy, Vanessa Nordyke, and Micki Varney. Councilor Trevor Phillips was absent. 

Prior to the vote, unionized carpenters and representatives from the Western States Regional Council of Carpenters, testified before council and alleged unfair labor practices on job sites in Salem.  

“l have talked to workers on Deacon’s projects that haven’t gotten paid in months, including jobs that have been completed last year, and haven’t been paid,” said Jonathan Rodriguez, a member of the carpenters union. “How can they feed their family when they don’t have any money in their pockets?”

Representatives from local contracting firms and the CEO of Deacon Development, Steve Deacon, pushed back in council testimony, saying they were unaware of such issues on their job sites.

“I don’t appreciate being called a cheat and liar and someone who ignores the lack of payment for workers. It is just as important to us that the workers get paid on our projects,” Deacon said. “If we are made aware of any improprieties when it comes to payment, we address them immediately.”

Union representatives said the issue with worker exploitation usually happens on the contractor and subcontractor levels on a given development, and is an epidemic plaguing job sites along much of the West Coast, including Salem.

Deacon recently completed development on another downtown Salem building, the Rivenwood Apartments, which sit on the former Nordstrom lot. The city gave the project a $71,521 annual tax break.  

The mayor said the new transparency requirements are not meant to single out Deacon, but to serve as safeguards to prevent unfair labor practices such as wage theft and worker exploitation in Salem. The transparency requirements were agreed upon after a meeting between the city, Deacon Development and members of the carpenters union, Hoy said.

“My goal is to make sure that we can continue to build housing, but also that workers are treated fairly. Because I don’t like the stories that I heard … in terms of labor brokers and cash payments and people not being paid their wages,” Hoy said. “I am trying to figure out a way to provide safeguards so those things don’t happen and yet this project is still able to go forward. In the future we might put this into our code.” 

Hoy said the new transparency rules would require contractors working on development projects to submit to the city a publicly accessible list of all contractors, subcontractors, and companies doing work on a particular site. The list would also have to include contractor license numbers, state and federal tax identification numbers, and workers’ compensation information. 

Trampas Simmons, a union organizer with the council of carpenters, called out local contractors for contributing to what the union said is a regional epidemic of unfair labor practices.  

“We are discussing an important topic tonight. Whether to give developers tax breaks, even though they… knowingly hire contractors that utilize labor brokers. They pay in cash, if they pay at all,” Simmons said.” By granting tax breaks, we inevitably endorse this behavior perpetuating a cycle of exploitation.”  

Simmons said ensuring fair labor practices among contractors also impacts public safety given contractors’ role in building much of Salem’s local infrastructure projects.

“When developers cut corners, hiring contractors that can’t even follow simple state and federal laws pertaining to payroll, what makes you think they are going to follow your building codes? Tax breaks incentivize cost cutting measures which could lead to unfair wages and poor working conditions for the workers,” Simmons said. 

Deacon said he is in contact with union leaders, and that his company has protocols in place to avoid worker exploitation. He said if such practices were occurring on his job sites, he would address the matter to the best of his ability. 

Leading up to the vote on the tax break for Deacon, Kristin Retherford, the city director of community planning and development, said she was unaware of any claims filed with the Oregon Bureau of Labor & Industries against any Deacon project in Salem, or filed against any other development within the city.

Prior to the vote, Nordyke asked Retherford if she would recommend approving the tax break for the Deacon project, and Retherford said yes. 

The city will forgo about $44,758 in taxes on the first year after the project is built, according to a staff report from Retherford. Those taxes would otherwise go into the downtown urban renewal district, not the city’s general fund, which is facing a severe budget deficit. The development will have 105 units and 29 onsite parking spots. The city can exempt developments from property taxes to incentivize new housing when properties meet city criteria for benefitting the public.

According to Retherford, the Deacon project meets eight of the city’s 19 public benefit requirements, which is enough to qualify for the exemption. They include rental rates “accessible to a broad range of mixed incomes.” The apartments will rent for $1,375-$1,995 a month, the report says. Other benefits include open space in the form of a rooftop deck for gatherings, and developing an underutilized or blighted property.

Ian Lewallen the finance manager for Deacon Development, told Salem Reporter, the 16 units of affordable housing included in the development will cost between $1,280-$1,644 a month which includes utilities.

Contact reporter Joe Siess: [email protected] or 503-335-7790.

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Joe Siess is a reporter for Salem Reporter. Joe joined Salem Reporter in 2024 and primarily covers city and county government but loves surprises. Joe previously reported for the Redmond Spokesman, the Bulletin in Bend, Klamath Falls Herald and News and the Malheur Enterprise. He was born in Independence, MO, where the Oregon Trail officially starts, and grew up in the Kansas City area.