Two and a half years after the Planning Commission approved a conditional use permit for the construction of a Dairy Queen across from Walmart, Community Director Kelly Hart said she still gets asked on a regular basis when the franchise will be built.
The applicant, Dara Dejbakhsh, out of California, said he still plans to put a Dairy Queen at that location, but he’s waiting for construction costs to decline.
“We’re ready to go, but timing is an issue,” he said. “We’ve been ready to go, but unfortunately it has become cost-prohibitive.”
Indeed, Dejbakhsh received his permit from the city right at the time costs skyrocketed. The soaring costs of construction in a mid- to post-COVID economy have been reported across the nation. Bold Construction wrote that costs increased 35% from 2020 to 2022, citing disrupted supply chains, labor shortages, increased demand and decreased supplies as some factors in high costs.
The Washington Post also reported rising gasoline costs (due to Russia invading Ukraine) and drops in immigration (labor pool), and hinted at the “historic levels of government stimulus” (which feeds inflation).
“Cost of construction is so high these days that we’ve had to put it on hold and see if things will change,” Dejbakhsh said. “That’s the unfortunate thing that most everybody’s facing. It’s becoming very expensive to develop these things and it no longer makes sense.”
But Dejbakhsh also noted that the city’s fees are also unsavory to new businesses that want to develop.
“I don’t know if the city’s intention is ‘no new development,’ but they’re making it very expensive. I think the fee’’s almost $200,000. It’s a substantial amount,” he said.
In fact, it’s more than that. Hart shared the system development charges hovering over Dairy Queen’s basket. The parks SDC is $2,004, storm drainage fee is $2,109, sewer fee is $12,149, water fees total $14,434, and street fees is a whopping $216,044.
“This is based on the correlation that fast food restaurants with drive-through windows produce a significant amount of traffic and trips on city streets,” Hart said. “The SDC fees help pay for the system improvements associated with the increase in traffic generation and future projects that will need to be constructed for traffic flow and level of service on city streets.”
Based on a calculation that includes expected growth within the city, the full impact of traffic associated with Dairy Queen is expected to cost the city $800,164, she explained, but the city takes into account that a person’s trip to the restaurant may also include trips to other locations, so a 73% reduction is applied to the fee.
The city allows all SDCs to be financed and paid over a 10-year period, Hart said.
“It is important to note that System Development Charges are an important funding mechanism for the city to be able to pay for infrastructure improvements and a developer’s contribution to the city’s system,” she added.
Dejbakhsh said he has multiple other Dairy Queens and other brands in progress in Oregon and other states, though he’s had to scrap some of them due to costs. While he’s able to afford his current build in Oklahoma, there are a couple Oregon projects he’s waiting on until costs decrease, including Lebanon. The overall message he’s getting from the state of Oregon, he said, is that the state doesn’t want people to develop new businesses.
“If their intention is to stop development, I think they are achieving that,” he said.
Stuck with what he’s given, though, the city fees don’t seem to hold a candle to what he expects construction costs to be. He quickly threw out a $3 million number when explaining it’s not good business sense to build at that cost.
But he owns the land and has the permit, so he waits. Dejbakhsh mentioned he has other brands (he did not identify what those are) he is considering bringing to Lebanon in an effort to somehow share and alleviate costs.
The business owner is starting to see a slight downtick on costs, though, so he plans to get a new bid in the fourth quarter to see where it lands.
“We are going to develop it. The only question is, we’re just waiting for market adjustments in cost of doing this.”