What will rise out of Thunderbird ashes?

To the Interstate 5 commuters who daily pass the riverfront property, the site that for months was buried under the charred remains of Portland’s Thunderbird on the River Hotel now appears ready for redevelopment.

But what commuters don’t see are the numerous financial and political obstacles that stand in the way of rebuilding the 13-acre waterfront tract at the southwest foot of the Interstate Bridge on Hayden Island. Whether the land is developed to serve shoppers, sightseers, or Interstate 5 commuters remains an open question.

The site was the home of a long-shuttered multi-story hotel until much of its central building and five wings were destroyed by a Sept. 2 fire. Work crews recently wrapped up months of property cleanup and hauled away the remains of all but one wing. That structure stands as a shabby reminder of a hotel built in the early 1970s that once received high praise among meeting planners along the West Coast. Closed in 2005, the empty hotel attracted transients and became an eyesore that increasingly stood out against the adjacent Jantzen Beach Mall, now undergoing a $50 million makeover. The mall is a major draw for Clark County shoppers.

The hotel site’s owner, Portland investor Howard Dietrich Jr., purchased the property for more than $21 million in 2004, according to public records. He nearly landed Wal-Mart Stores Inc. to build a store on his riverfront site two years later, but the mega-retailer pulled out in the face of intense opposition on both sides of the river.

With Wal-Mart out of the picture, Hayden Island residents and the Oregon and Washington transportation departments devised new plans that potentially narrowed Dietrich’s options for developing the tract. Then, the fire, still considered suspicious by the city of Portland, eliminated the vacant hotel and raised new questions about the site and its owner.

As things now stand, the site, belonging to Thunderbird Hotel LLC and registered to Dietrich, faces the following complications:

• Fire investigation: The Portland Fire Bureau is continuing its investigation into the cause of the early morning fire.

• Property taxes: Dietrich hasn’t paid taxes on the property for three years and his next payment is due this week.

Property records indicate the site at 1401 N. Hayden Island Drive was assessed at more than $18.8 million for its 2013 property taxes.

• City plans: A Hayden Island plan, developed by the neighborhood and approved by the Portland City Council after the Wal-Mart uproar, designates the Thunderbird site for use as a park.

• Columbia River Crossing: The biggest constraint of all is uncertainty about the $3.4 billion bridge-replacement project that has long tortured Hayden Island landowners. One option calls for potential government acquisition of the entire Thunderbird site for the transportation project.

Despite those obstacles, Dietrich appears to be moving forward with plans to develop the site. He has contracted with a Portland architectural firm to submit plans for a 125,000-square-foot retail development on the site — a store about the size of a Target or Kohl’s. Neither Dietrich nor his architects from Portland-based Baysinger Partners will talk, so it is unclear what retail business is planned for the building.

Some wonder if Dietrich’s development plans are aimed at getting a higher price for the property if it is eventually condemned for highway and park use.

“He’d get insurance dollars for the loss of his building and he’d get the buyout for his land, so it would be a double whammy,” said Jimme Peters, a resident of Hayden Island who formerly served on its neighborhood association.

Meanwhile, theories about the fire are the topic of rumors spreading among the roughly 2,500 residents of the island as the arson investigation drags on.

“There’s always rumors,” said Jeff Geisler, vice board chair of the Hayden Island Neighborhood Network. “But most of them don’t pan out.”

At this point, investigators are sharing very little with the public, beyond the time of the blaze, which broke out shortly before 3 a.m.

Fire officials aren’t saying much because the matter is sensitive and involves millions of dollars related to the destroyed 325-room hotel and its contents, said Rich Chatman, the bureau’s public information officer.

“Unfortunately, with cases of this level, they’re just not able to release much until they can get the case into the courtroom,” he said.

The sheer size of the fire adds to the complexity of the investigation — being conducted by local and federal officials, Chatman said.

“Being able to locate the source when you have this much damage is not easy,” he said.

Taxes due May 15

Meanwhile, Dietrich hasn’t paid taxes on the property since 2009 and now owes $1.07 million in property taxes for 2010, 2011 and 2012. He has just about hit the deadline in which Multnomah County could begin foreclosure proceedings. According to the county’s website, the foreclosure process begins if the taxes are three years past due. The payment due date is May 15.

Reasons behind the delinquency are unclear, as phone calls to Dietrich were not returned. However, the Portland landowner remains current on the property taxes for another nearby hotel that he also owns, which is occupied by the Red Lion Hotel on the River. The 14-acre waterfront site at the southeast foot of the Interstate Bridge houses a fully operational hotel and convention center that opened with fanfare in 1978. Parts of the Red Lion site also are earmarked for potential property acquisition and displacement for the proposed $3.4 billion Columbia River Crossing project to build a new Interstate 5 bridge. Optimistically planned to break ground in late 2014, the project would rely on bistate and federal funding to replace the bridge, extend light rail into Vancouver and rebuild freeway interchanges on both sides of the Columbia River.

But construction would only affect an unoccupied narrow strip of the Red Lion Hotel site, according to Mandy Putney, a spokeswoman for the CRC.

The project would, however, require full acquisition of the former Thunderbird Hotel site, “identified as a potential construction staging site,” Putney said in a written statement. “(The site) is needed for a portion of the new river crossing structure and for potential stormwater treatment facilities.”

Nevertheless, Dietrich appears to be taking the necessary steps to build a big-box store, although no retail chain has stepped forward to claim the location. He’s already moving his plans through Portland’s review system. Dietrich’s big-box proposal “was compliant with building codes,” said Andy Peterson, plan review manager for Portland’s development services department. Peterson said the development next would undergo phased reviewing with permits issued for different aspects of the project.

The ongoing arson investigation likely won’t have any bearing on the review, Peterson said.

“It wouldn’t influence the requirements for the building permit,” he said. “It may have some influence on whether those agencies would allow them to do work on the site.”

Fair market price

The possibility that the state might want the land for a highway would not block development, either. Being listed as a potential imminent domain acquisition for the CRC project cannot influence approval for site redevelopment one way or another, said Tim Ramis, a Portland attorney with Vancouver offices who specializes in areas of land development and municipal law.

“Under Oregon law, the government is not permitted to limit your use of the property just because they’re thinking about acquiring it,” he said. “If they do that, they’d be guilty of condemnation blight.”

Once the state gets around to acquiring sites for the massive CRC project, it will be compelled to offer a fair market price, said Don Hamilton, a spokesman for the Oregon Department of Transportation.

“ODOT will do a full and complete appraisal and present that as an offer,” he said. “The property owner then has the opportunity to respond and seek their own appraisal.”

He added that the department has no eminent domain proceedings tied to the CRC project under way at the moment.

Meanwhile, owners of properties on the list of potential acquisitions have known their sites were listed since the CRC published the roster in September 2011, said Ron Schmidt, a Hayden Island resident and retired commercial insurance agent.

He is skeptical of the motive behind Dietrich’s redevelopment plan for the former Thunderbird Hotel site. Schmidt noted that Buena Hayden LLC, a group that owns a strip of recently upgraded commercial properties on Hayden Island, recently built a new structure for a Starbucks on North Center Avenue, very close to the I-5 offramp on Jantzen Beach. The site also is on the list of potential acquisitions for CRC.

In both cases, “are they trying to maximize the value of their property through the condemnation process?” Schmidt asked.

The Thunderbird site also was earmarked in the Hayden Island Plan to become a waterfront park. The redevelopment blueprint was approved by the Portland City Council in 2009.

Whether the site ultimately is used in part for highway and in part as a park, Schmidt suspects Dietrich is merely seeking a return on his original investment. He has spent an unknown sum getting the site cleared and ready for redevelopment since the fire, and has moved forward with his development plans, despite the property’s designation for CRC acquisition.

“He’s spent over $40,000 getting those permits,” Schmidt said. “That’s a signal he’s serious.”