Garbage time
When they write the history of how Portland went to pot in the early 2000's -- from a unique, livable, family-friendly city to a crowded, overpriced New York wannabe where the California Lexus SUVs go to die -- the South Waterfront concrete tower jungle will be front and center. And in that chapter, tomorrow's an important day.
The City Council is going to pass another tax abatement for a huge apartment tower, but this time, it will be for a building of 300-plus rental units, not condos. The building will pay no property taxes whatsoever for 10 years. The justification for this is that it's a reward to the developer, Trammell Crow, for including low-income housing in the building, but the low-income housing turns out to be laughable. It's 48 studio apartments, at a tiny 480 square feet each, which will rent out at "only" $850 a month.
The rest of the building is going to be way pricier and hella toney. As the Trammell Crow website puts it: "Combining luxury with convenience is what the Alexan brand is all about."
The official estimate of how much this is costing the city's taxpayers is $7.5 million over the 10 years, but that number is so thoroughly cooked that it looks like somebody misprogrammed the microwave. At what I'm told is the going rate of 2.14 percent, that's what the taxes would be on a $35 million building. But the developer says this project's going to cost $70 million to build, and so the property taxes on it should look more like $15 million, or nearly a million and a half bucks a year. (And that's without factoring in the 3 percent annual increase that us mere peons pay.)
How much is the developer losing by including the "bargain" rent units in the plan? How much more rent could it charge on those floors? I'll tell you what, it's a lot less than a million bucks a year. Probably more on the order of a couple of hundred thousand. What a scam.
Fireman Randy's on the case, though, folks. He's already given out a couple of press quotes delicately questioning the deal. I'm sure he'll make his hard-guy face and a little speech about it tomorrow -- maybe even vote against it. But he knows it's going to pass, 4 to 1, or 3 to 1. So he can afford to make a little political hay. It's reminiscent of Damon Stoudamire, the ex-Trail Blazer who knows how to pad his average by racking up statistics during "garbage time." These are games that are already hopeless blowouts, with neither team really playing any more because the outcome is sealed. Stoudamire frequently breaks out of his pot-induced stupor and puts in stellar performances in that setting. "When it doesn't count," a friend of mine is wont to say, "you can count on Damon." So it is with Fireman Randy's "principled stand" on tax abatements.
They're calling this building the "Alexan." That's Greek for "not speaking." It's a fitting name for the project, because the handout it's getting from the City Council is truly unspeakable. I'd love to have been a fly on the wall when Don Mazziotti, Matt Hennessee and the other luminaries at the Portland Development Commission put their contaminated stamp of approval on this one. I'm sure the fine wine flowed that night.
And of course, speaking of the nefarious, no one dare mention the name of the True Visionary who turned a big buck getting this horribly misguided pig greased and slipped through the Porkland system. I'll give you a hint, though: he had trouble abating one thing.
| Posted at 1:21 PM | Permalink |
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Comments (15)
How good a deal the developer is getting with the proposed tax abatement for the Alexan?
Using numbers from the tribune article, I looked at the deal four ways and all were, shall we say, very good for the developer
1. The abatement is enough to totally pay for a penthouse apartment for each “affordable” unit.
2. The monthly rent for the “affordable” unit is only $0.14, per square foot, less than a penthouse apartment.
3. The landlord’s actual income per square foot for those “affordable” units is about $6.33 per sq foot, over three times that of a penthouse unit. (counting the abatement as income)
4. For giving up $39,318 in rent, the landlord gets a $1,200,000 abatement.
There is a name for the entity on the other side of this kind of deal: SUCKER!!
Thanks
JK
Posted by jim karlock | August 16, 2005 3:59 PM
The future is even brighter for Tramwell Crow, what they are doing is delaying their big money. Don't kid yourself, it will be convereted at great profit to a condo palace just like McCormick Peir (originally built with HUD funding for low income) was as soon as the "incentive" has expired. That's when the real money will be made, after the building has been depreciated so minimal City business taxes are paid and the true financials should be what the building rental profits plus what the condo sale price will yeild or ROI over the time that TC owns the property.
Posted by Future | August 17, 2005 5:00 AM
"The rest of the building is going to be way pricier and hella toney."
I'm guessing I'm in the very small minority of your regular readers who recognize - and love - the Cartman reference. Well done!
Posted by J-Dub | August 17, 2005 7:17 AM
Using PDC's figures cited by BoJack ($7.5 million over 10 years and 48 units, and a 3% annual increase), that amounts to over $18,000 per unit per year in tax breaks.
That's $38 per square foot, folks!
Add that to the $21 per square foot in rent, and you've got a real nice $59 per square foot place.
Ouch!
Posted by Garage Wine | August 17, 2005 7:30 AM
How is it that the city allowed the towers to be nearly twice as big as previously zoned and are now considering paying the developers to make them bigger.
In what fiscal world does this make sense.
I can see compensating a restriction but in this "total" picture the city is about to compensate de-restriction.
Clearly the property owner/developers have reaped millions from the zoning changes and added building sizes.
In addition to all of the tax funded infrastucture for their development.
Does the council recognize this?
I don't hear or read any of them acknowledging it.
Will this even be mentioned in today's hearing?
Posted by steve schopp | August 17, 2005 9:08 AM
This is a great project.
But it's a terrible tax abatement and a terrible deal for the city.
And, of course Jack, you would be all for this project if there weren't any tax abatements involved, right?
Posted by Gordo | August 17, 2005 10:14 AM
Most of the tax abatement deals going on in Portland are bad news. The developers get even richer, while we "little people" scramble to make up th difference in the lost tax dollars for the general fund. This tax abatement crap as played here in Portland is wrong wrong wrong and should be discontinued immediately, except for developing and encouraging people to move into "marginal areas".
Posted by Lily | August 17, 2005 11:24 AM
Having attended today's hearing I can say the council knows full well the city and public will not ge getting what it wants for this tax abatement.
Unfortunatly Sten made it clear he will be voting for the abatement anyway simply because they created the policy a year ago. ?(%#@! Come on Erik. Wise up. Potter too.
48 little studio apartments renting for $870.00/month and only for the 10 years of the abatement is not a good deal for anyone but the developer.
Trammel Crow revealed their insurance company invester is only interested in an apartment tower as a long term income property.
Not condo's. They also stated their concerns about the condo market being flooded.
Meaning the apartment tower will be built without the abatement. Fewer studio's of course but higher value and more property tax revenue than the speculation suggests.
There seems to be an emerging concensus that the revenue will be more like $15 million during th ten years if they decline the abatement.
That's some real money for other ways to provide affordable housing.
The council should definetly deny the applicant and watch the tower be built and revenue flow.
It's a no brainer Erik.
At the same time the city is discovering the outcome of NO they can fine tune their policy to fit their newly learned realitites.
Posted by steve schopp | August 17, 2005 1:18 PM
I love it that the developers "need" tax abatements in order to convince them to build, and then when the units go up for sale, they sell out in about 10 minutes, thus proving that the site was top-notch real estate, and that nobody needed financial incentive to build.
Second, in what crazy world is a 450 sq. foot studio (for $850/mo) "affordable"? That's not affordable housing, that's small housing for rich, single members of the "creative class." Nobody with one kid, much less a spouse and several kids, is going to want a studio with 450 sq. ft., no matter what the cost.
Posted by Dave J. | August 17, 2005 1:18 PM
How many of you actually go to Council meetings? or PDC meetings?
This is not meant as a *snark* comment, because these people (council and PDC) are supposed to be looking out for the interest of all taxpayers and the welfare of the entire city - not just the real-estate developers. But those developers attend those meetings and meet with the council folks and PDC folks on their own time, too.
No wonder that even the well-informed citizen that objects to such deals doesn't have a chance.
Posted by Jennifer | August 17, 2005 2:07 PM
Great post but it is useless without legal reform.
The problem is the lack of judicial oversight. If graft is conducted in Pioneer Square with a megaphone so as to provide "transparency" then anything goes.
The economics of Affordable Housing and Economic Development are all upside down. They are the happy-face PR phrases for strategic corruption.
Resource allocation decisions in the Soviet Union were made by typical politicians that were accountable to their preferred clients. Japan has a habit of rewarding preferred clients too. That is, criticism is not dependent upon some theoretical notions of economic thought but just drab measurements of economic inefficiency and waste that reach some threshold beyond the tolerance level of the locals, regardless of their political system.
I would prefer incremental restrictions on individual decisions rather than racing to a point where the only solution is some sort of wholesale house cleaning.
Posted by Ron Ledbury | August 17, 2005 8:10 PM
The objective and responsibility of the council and PDC should be to make sure the city's and taxpayer's position "pencils out" not Trammel Crow's.
Unfortunately the PDC acts like the Portland "Developers" Commission
If they want to provide affordable housing for families to live in SoWa I have an idea.
Instead of giving TC millions for 10 years of little or nothing.
Deny the tax abatemtent.
Thay'll build the apartment tower and pay the property taxes. More than the $7.5 million too.
Take that money and build a 48, two bedroom unit, low rise in SoWa. It will cost less than the $7.5 million.
Take applications in a lottery from moderate to low income earners.
Give away the units to the qualified 48 lucky ones.
They will own the units and pay property taxes but pay zero rent or house payments. That's affordable and good housing.
I am not seriously proposing this free housing,
but this demonstrates how ludicrous the tax abatement is.
Posted by Steve Schopp | August 18, 2005 8:14 PM
The policy of providing tax breaks for so-called middle income people, you know, people who want and can afford a $800 studio, comes from the Portland Business Alliance. They fought for it for years, with some success. Unfortunately the man who knows the most about the policy passed away recently at an unnatural age, God rest his soul.
Most affordable housing diehards are pushing for help for the truly needy, like people who live on less than a grand a month.
The PBA didn't show up to defend their policy, basically leaving the developer to twist in the wind. Without the PBA, who will advocate for tax breaks for the upwardly mobile?
These deals take more than a month to put together, and the proposal was based on the rules in place at the time.
What probably will happen, and should happen, is that the tax abatement policy will be scaled back so that it only applies to the truly affordable units that the market could never provide on its own.
Posted by Portland Publius | August 19, 2005 12:14 AM
""truly affordable units that the market could never provide on its own.""
The way it stands now the proposed tax abatement of $7.5 million could do more if the city simply spent that amount buying 48 of the cheapest condos in the other towers.
48 @ $156,000.00 is $7.5 million
The current abatement will expire in 10 years leaving no remaining tax break an no subsidized
units at all.
In year 11 the city is out $7.5 million and will have nothing to show for it.
Smart move.
Posted by Steve Schopp | August 19, 2005 8:14 AM
""When it doesn't count," a friend of mine is wont to say, "you can count on Damon." So it is with Fireman Randy's "principled stand" on tax abatements."
As of tonight, the abatement will fail 3-2 tomorrow.
Posted by Randy Leonard | August 23, 2005 6:56 PM