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This page contains a single entry from the blog posted on September 19, 2005 12:17 AM. The previous post in this blog was Jackpot. The next post in this blog is Buzz kill. Many more can be found on the main index page or by looking through the archives.



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Monday, September 19, 2005

Of sweeps and rugs

The old boys of Portland sure do seem anxious to get back to business over at the Portland Development Commission. Last week, John Russell and Bob Walsh, two developers who have previously served as chairmen of the PDC, published an op-ed piece in The 0 loudly announcing that, with a new sheriff in town, it's time to hurry up and resume covering the city with tax-subsidized high-rise junk:

The recent election of Eric Parsons, chief executive at Standard Insurance Co., as chairman of the Portland Development Commission completes a clean sweep of the three positions most important to its success: We now have a new mayor and the PDC has a new chairman and new executive director.
Now I'll admit there's been a "sweep" of sorts over there, but I think the jury is still out on the "clean" part. Parsons, the new PDC chair, has been on the PDC board since November 2003, when he was appointed by then-Mayor Vera Katz. He has been a board member throughout all of the PDC hijinks of the last year and a half, and he's been in the majority on every wrong-headed vote that came down the PDC pike during that time under former chair Matt Hennessee. The new board secretary, Doug Blomgren, is in an even more intriguing position, having been appointed to the board by Katz (reportedly at the behest of City Commissioner Erik Sten and then-City Commissioner Jim Francesconi) in September 1997!

What concerns some of us is that the "sweep" to which Russell and Walsh referred may be just another under the very large PDC rug. Until the new crew shows tangible signs of improvement, I think it would behoove that agency and the City Council to do the exact opposite of what Russell and Walsh want. They're urging the city to throw caution to the wind now that the bad old days are over. Not so fast, fellows.

One of their arguments for having the PDC crank up an ambitious and accelerated agenda really cracked me up:

However, with a payroll of more than 200 talented employees, the development commission needs to constantly "do deals" to show a return on the staff investment. So caution and timidity need to be mixed with a healthy dose of impatience.
Since we've got such a bloated staff, we need to do more deals! That's interesting. There's another option, guys: fewer deals and some pink slips.

If the PDC wanted to show us that a new era of openness and accountability has suddenly dawned, the latest on the Convention Center hotel project is an interesting way to do it. Never mind the fact that the public has never been asked -- and never will -- whether it thinks spending a couple of hundred million tax dollars to build the hotel is worth it. (And I hear there's going to be a 30-year property tax abatement, and so in present-value terms, it's like a permanent 77 percent tax cut for the hotel.) If that's good money after bad, we all just have to shut up and like it.

But now let's talk about who the developer is going to be. According to a preliminary PDC committee recommendation, it's Ashforth Pacific, a local firm whose CEO, Hank Ashforth, is, among other things, on the board of directors of the Portland Family of Funds. PFF is the investment bank that the PDC created and then simply handed off to private owners. The same PFF that's into the PDC for around $1 million in loans, with no idea when it will be able to pay them back. The same PFF that could very well be bestowing federal tax credits on the hotel development.

"Development can be a small, small world," chuckled the headline on the 0 article about this on Thursday -- the same day that the Russell-Walsh rah-rah opinion piece ran. Oh yes, so humorous.

Meanwhile, the audit that was forced after some truly scandalous PDC doings were uncovered earlier this year has produced some startling findings. According to the audit, employees at the PDC don't bother to follow the agency's contracting policies fully one third of the time, including (according to The 0) "contracts for everything from studies to construction."

Of course, the spin machine at The 0 buried the significance of this. The headline was "Audits say PDC rules OK, follow-through lacking." Sure. And naturally, as is their wont, the folks at The 0 resumed their eternal game of "Who Had the Pickle?" Somebody bought beer, some employees booked rooms at the Benson for themselves one night, some forms weren't signed, blah blah blah.

Hey, kids. Stop trying to snow us with the trivia. We want to know about the "studies and construction." Which contracting policies were violated in those categories, for how much, and in whose favor?

Anyone who thinks that suddenly the public is going to forget about the many problems at the PDC is making a "high-definition" mistake.

Comments (7)

I went to the PDC site and pulled the PDF (it is 10M if you have a FTP site) for Ashforth's proposal (actually fait accompli) and the assumptions are:
1) Cost of Hotel $180M
2) Bonds issued $177M TaxExempt Series A
3) Hotel will not pay property taxes
4) City has an obligation to pay up to 50% of debt service in event that hotel NOI and occupancy taxes were "insufficient"
5) Asset mgr (180K) and Admin Exp (100K) both growing at 3% are paid before debt service.

If I am wrong, please correct me, but everyone in the Portland Visitor Association is visiting every blog to flog this thing.

This is really going to be a clinker, especially when you look at the StLouis attempt at a CC hotel (Forbes - Feb 05 article.) For some reason, CoP doesn't seem to realize these dont work and it will not magically transform MLK into Disneyland Main Street USA.

So sum/substance Ashforth borrows $180M to build the hotel, keeps the prop taxes and overhead and if they don't make enough profit only pays half of the debt. Can I get CoP and PDC as my bankers?

Oh now people. Not to worry.
We have been told to toss all of the contrarian evidence as the viability of this new adventure is solid because the Hotel will be just the right size at 400 rooms.

As if no other municipality played that ludicrous game with their taxpayers.

It's a full court press to keep the PDC the Portland 'Developers' Commission.

With the two prominent and affluent PDC clients, Russell and Walsh, warning the city council not to rock the boat, (openly in the O), one has to wonder if they and the PDC are nearing desperation.

Of course much of the PDC operations resemble the bogus yet defeated Alexan tax abatement so more of the shenanigans (big cost-low benefit-long term commitments) will be revealed as the fiscal crisis mounts.

When the increased skimming of basic services budgets reaches critical mass perhaps the PPS will finally jump into the vanguard too.

I forgot - said hotel gets to keep the room occupancy taxes also.

I was at least happy to see that the new 21 story Metropolitan building going up in the Pearl at 10th and Lovejoy is getting no tax abatements. Unfortunately the average price of the units is expected to be $800k.

The Metropolitan gets offset by the Sitka which offers 2bd apts (w/ free high-speed internet access) for $650-700/month.

just to clarify, there were actually two audits. One, the city auditor's, is the "find the pickle" audit, and is pretty accurately reported on by the O, imo. Even the incidents raised are directly taken from the only incidents reported on in the audit. The O does take it a step further than the city auditor, and actually snifs out the explanation for the pickle pickle. Whose pocket, and how soggy it got...

The only thing of importance I think their coverage missed was the issue of who the PDC internal auditor reports to, and the lack of specificity in ethics procedures, for employees who see something they question. This came near the "back of the bus" in the report, so the significance in terms of company culture and accountability was perhaps overlooked.

(This, btw, is not something only PDC is weak on. The entire city is vulnerable in this regard. There is an effort to address this at the next CC meetng, but while "thou shalt do notting" in heaped on aplenty on the city staff, it fails to provide clear procedures for staff to follow if they have a concern - how to report, who to report to, or to specify the manager's responsibility to report back to the concerned staff as to the disposition of their concern... Such procedures are critical if you really want staff to report stuff.)


The stats that Jack is interested in, and which I agree get far more to the heart of the issues that citizens wanted explored, are from another audit entirely. One done by a private firm, not by the city auditor.

I'm not sure why the O's reporting was more superficial in regard to this second audit. Certainly it sounds much more interesting and informative in scope than the city auditor's. However, I have not seen it yet, though I've read the City Auditor's rather thin report. (Don't be shy, give it a read, it'll take you all of a good steady 15 minutes.)

So it may be the other report doesn't have much to it. Anyone else had a goggle at it? Has it got a bit more meat to it than the O's reporting might suggest? Got a link? I'd be interested in reading it.

I read with interest your comments on PDC and in particular the comment that you wanted to know which contract policies were violated for how much and in whose favor? I am not sure whether or not this is relevant, but when I spoke to the Real Estate Commissioner of our Great State he informed me that contracts are written all the time in someone's favor and because the real estate moguls control the lobby that it wasn't likely to change anytime soon. So, my being outraged at a non-disclosed conflict of interest, in a personal real estate deal was of little interest to him.

But if that is the attitude of the regulators what else can you expect.


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