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This page contains a single entry from the blog posted on April 25, 2005 3:25 PM. The previous post in this blog was She hap'nin. The next post in this blog is There he goes again. Many more can be found on the main index page or by looking through the archives.



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Monday, April 25, 2005

Lambs to the slaughter

The other day I remarked about the city's plan to spend $7.5 million more on lawyers alone in its quixotic attempt to buy Portland General Electric (PGE). I suggested that if the deal doesn't close, that fee will wind up being paid by the city's taxpayers.

Not so, answered Commissioner "Fireman Randy" Leonard. He wrote: "If we do not reach a deal with Enron to sell PGE, our legal fees to this firm are capped at $650,000."

Ah, but as Bill Clinton might have put it, it depends on what your definition of "reach a deal" is. A review of a press release now available (pdf) at Mayor Tom Potter's pages on the city website reveals that the Miami, Fla.-based law firm's fee is divided into three segments -- a $650,000 meter drop, another $2.35 million more "[i]f it strikes an agreement" with PGE, and "an additional $4.5 million, if the deal closes and regional ownership of the utility is established."

That's $7.5 million all together. Of which $3 million could very well be due and owing even if the deal never closes.

The $650,000 ceiling is in effect unless and until the firm "strikes an agreement" between PGE and the city, according to the mayor. One wonders exactly what that phrase means. A letter of intent? A mutually signed "term sheet"? And even if it means a fully integrated agreement, there's a lot that can go wrong with a deal this complex and nasty between the "striking" of an agreement and its actual closing.

So it's $3 million potentially down the tubes. Just on lawyers. Not counting what's been spent already. As of November 2003, the last time it was reported, the out-of-pocket-to-date was more than $800,000. Wonder what the tally is today. Such a deal.

And you wonder how the lawyers are going to withstand the obvious pressures when there's a $4.5 million bonus waiting for them on the other side that closing table. What if one of the attorneys discovers a deal-breaker between the time the "agreement" is "struck" and the closing? Will the law firm be vigorous in advising the city to back away from the transaction? Will the firm be as zealous in keeping the city out of a bad deal as it would have been if it were being paid simply by the hour?

It's bad enough that the investment banker weasels are going to be working on commission. They've been known to push bad deals through because their rule has always been, if it doesn't close, they don't get paid. Now the attorneys will be largely in the same position -- more than half their fee is on the come. Great.

Oh, and by the way, Kevin Mannix weighed in against the city takeover today. Finally, something he, Neil, and I can agree on.

Comments (14)

way to think small, Jack! Nothing good can ever come of this, so it's senseless to contemplate spending any money whatsoever.

On what grounds do you label the drive "quixotic," by the by?

'Cause it will never work. It either won't close, or it will close and be a financial disaster. Just like the Convention Center, PGE Park, etc., etc. You've got a $2 billion-plus deal being done by a retired cop, a retired fireman, and a guy who's never had a real job other than being a local politician. Being advised by the Wall Street Masters of the Universe, who created the whole Enron debacle to begin with.

Meanwhile, let's close all the muni pools, and to heck with a fully staffed police bureau.

If this is such a good idea, of course, we could put it up for a public vote. Think it would pass? Don't worry, you'll never find out.

ExSqueeze me, torridjoe. I just can't imagine why anyone would think that Portland has any business trying to buy and run an electric utility. They can't fix the streets, because they're too busy playing with trains to noplace. Is it just my imagination, or are we paying the second highest water/sewer bills in the nation (and soon to take top billing, from the look of things)?

The Portland city council just doesn't get it.

I don't know about you, but if I cost my employer a few million dollars as part of a gigantic screwup, I'd be on the bricks. In a sense, Sten was, as the water bureau was taken away from him and given to Dan "let's spend millions more to cover the reservoirs" Saltzman.

To paraphrase the late Sen. Everette Dirksen from Illinois: "A million here, a million there, and pretty soon you're talking real money."

That's our money.

Yep, only now it's up to a billion here, a billion there. And not a penny left for core government functions like parks.

Core things like parks won't be used if the current break-ins continue. My Hollywood-area neighbor had has garage burgled a few mornings ago. My car's been hit twice in 6 months - by the same guy. And the same gang of kids has been seen casing cars in the neighborhood 2 weeks in a row.

Don't worry Jack, luxuries like parks are going to be low on the list of things we'll miss.

I don't agree with your assessment of the attempted buyout, but I sure feel good knowing you're around to track every penny. Thanks for the info Jack.

Pretty lame when your city is posting information about a $3 million legal fee the same night that the school board approves a budget that will cut 248 staff positions.

Seriously, what the hell.

Most of them teachers. Go, Portland! Think of all the money we'll save not having to light those classrooms. Or those kids' bedrooms as they all move away.

And don't forget the aerial tram!

1) A tram will look neat on a postcard.

2) When was the last time you saw a postcard of an elementary school?

Sadly, that's the thinking that seems to guide city budgets these days.

Someone please educate me. As my recent tax returns show, us schlups in Multnomah County are paying just a teensy, teensy bit of extra lovin' to help the schools with their "budget crisis". For me, that extra lovin' equaled about $1400 for the past 2 years. Which, coincidently, is about $1600 more than I have to spare. :-) Anyway, so how is the school district again "in crisis"? And didn't we all just get a neat little pamphlet in the mail a couple weeks ago that showed how the ITAX was saving teacher positions in the schools? Is something wrong here, or is my midwestern, country-bumpkin common sense failing me?

Someone please educate me. As my recent tax returns show, us schlups in Multnomah County are paying just a teensy, teensy bit of extra lovin' to help the schools with their "budget crisis". For me, that extra lovin' equaled about $1400 for the past 2 years. Which, coincidently, is about $1600 more than I have to spare. :-) Anyway, so how is the school district again "in crisis"? And didn't we all just get a neat little pamphlet in the mail a couple weeks ago that showed how the ITAX was saving teacher positions in the schools? Is something wrong here, or is my midwestern, country-bumpkin common sense failing me?

The Multnomah County I-Tax was one of the biggest con jobs ever perpetrated on the local tax payers. If you go back and look at the original ballot measure and read the arguments in favor you will find that none of the promises have been kept. Among other things, they said the I-Tax would prevent early release of criminals, maintain senior health services and mental health services. Most folks don't know that Vera and Diane had already hedged their bets on school funding by retroactively increasing the local business taxes (without any vote). Then, after it was voted in, they "discovered" that folks on PERS and FERS retirements were exempt.

Regarding the PGE deal, how can this be a legitimate exercise of government power? Perhaps you could make the argument for the city to provide electricity if we didn't have it. Perhaps you could make the argument if the service we had were of Baghdadian quality. But none of these are the case.

It seems the principal argument in favor of the takeover is that PGE isn't paying adequate taxes. Maybe I'm just dumb, but shouldn't that be a matter either of tax law (if the taxes are legally avoided) or civil action (if illegally avoided)? Further, after a city takeover, there will be NO taxes paid.

Or maybe the argument has to do with non-local ownership. If that's such an issue, why isn't the city trying to take over the cable and phone companies?

Really, I don't get it. Somebody please explain why city ownership is a superior solution to changes in tax law, or why the cable and phone utilities aren't takeover targets too.

I am still working on my wording for a mock, April fools style, initiative. The first feature is to cancel and/or prohibit all Portland dealings with PGE, either limited to the city's own purchases for its own needs or for resale to folks within the jurisdiction. This is pegged to be diametrically opposite that of the events that would enable the law firm to get its 4.5 million dollar bonus. The next feature is that I would build in a public payment to me of 4.5 million dollars, but only if I get the signatures and the initiative passes. If the payment of a lobbyist is an OK thing for Tommy then it can also be placed within the initiative itself. I'm sure that I could actually find a financial backer for 500 hundred grand or even a million dollars if we could split the difference between initiative related costs and the 4.5 million dollar payoff. (Legal fees versus straight commission. Hum?)

My theoretical backers, of course, would be left with an uncollectible bill of perhaps 650 grand. They would even consider this actual cost thing as a wash along with the lost 4.5 bonus in the event that the proposal fails. Such are the ways of lobbying and free speech in the city that trumpets Clean Money.


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