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Friday, December 1, 2006

A hideous stench

The dirt in that Portland Development Commission "linchpin" scam involving the Police Headquarters block is getting more interesting. Now it turns out that the PDC let the developer who wanted to acquire the property dictate how the appraiser hired by the PDC was going to appraise it -- all the way down to telling him which appraisal methodology to use. Here's how the O plays it today:

The documents released Wednesday show that Trammell Crow's Tom DiChiara drafted "appraisal instructions" for the public-private deal in May 2005. Those instructions included taking a project-specific "land residual" approach that resulted in the negative appraisal. Development commission officials edited the instructions and sent them to appraiser John Ingle, then of PGP Valuation.
The PDC might as well have forgone the appraisal altogether, and just let Trammell Crow name its price. To let the buyer determine the appraisal technique is preposterous -- if it isn't criminal, it ought to be.
But development commission officials said that working with the developer to reach agreement on the appraisal instructions is routine in public-private deals.
Wow. There's an interesting ethical system. "We do it all the time, so there can't be anything wrong with it."

And any appraiser who would let the client or the client's buyer tell him which appraisal method should be used is a... well, let's put it this way: That appraiser should go stand under a red light.

Just more evidence that the PDC should be converted into a regular city agency, where we can all keep a closer eye on it. Even if they make nicey-nicey for a while as a result of this scandal, it's just a matter of time before they revert to their old ways. It's called human nature. And Portland "urban renewal" is a huge but dangerously obscure pot of public money waiting to be stolen.

Comments (22)

I am pretty sure there are currently three votes on the council to put PDC reform on the ballot. I think council approval of the PDC budget is one of their goals, but I would like to see it go further than that. The PDC's original mission to restore economic vitality to blighted areas was a worthy endeavor... but greed and corruption have turned it into an organization that plunders tax dollars for core city services to line the pockets of the wealthy. Time to slay this beast.

Sam, Randy and Erik... let's get going on this!

Talk about your moral quandaries - we appeal to the Portland City Council as an agent for more responsive and responsible use of our tax dollars!


Interestingly, the most recent SWNI News reported that the West Portland Park Neighborhood Association adopted a resolution regarding city property dispositions that could prevent, at at least cut down on, shennagins like this.

The West Portland Neighborhood Association, in the context of supporting the Mt. Tabor Neighborhood Association, with respect to the sweetheart deal the city was getting ready to give Warner Pacific for the Mt. Tabor Yards property, adopted a resolution that asked the City Council to establsh a policy that in any sale, lease or other dispsition of real property the city require public bidding for all property dispositions, and that in any transaction the city get three separate appraisals, with the disposition price having to meet at least the average of the three apprasals.

A neighbrhood association is small potatoes in the world of the Scone and his friends and clients, but its nice to see that at the grass roots level parts of the usually blind and complacent west side are even beginning to pay attention. Interesting, too, to see a small westside neighborhood joining up with the concerns of an east side neighborhood. Then again, West Portland Park is sort of the Cully of the west side.

The neighborhood association's idea may be a little cumbersome, but an effective way to cut down on PDC shennagins.

Abolishing the PDC, now, is the best solution to the PDC land deals. Though, as the proposed Mt. Tabor deal shows, city government's capacity for cupidity and stupidity is not limited to the PDC.


Ha Ha... you're right... it is a little ironic. But the thing is three votes on the council can put a charter change on the ballot. The only other way to do it is through an initiative referendum. Much, much tougher to make it happen.

The mayor's been asking them to hold off pending the results of the charter review commission... but that turkey is DOA.

Another example of subsidies for high density, which is un-economic without subsidies.

Just one way the PDC shoves desnity down our throats and destroys neighborhoods.


Kudos to WesPoPark folks.

I think the key is that people are seeing unsavory activities occurring with nary a peep and can see that if the trend continues...well, it won't be in the public interest. And they are the public.

I appreciate the acknowledgement that neighborhood associations can be source of valid and useful criticism, verily steeped in concern.

Having the buyer dictate methodolgy may be a violation of appraisal ethics. If you can find the name of the appraiser, you could report them to the Oregon Appraiser Certification and Licensure Board.

Click here for the form:


"...any appraiser who would let the client or the client's buyer tell him which appraisal method should be used is a... well, let's put it this way: That appraiser should go stand under a red light." I couldn't agree more. This has conflict of interest written all over it. Sounds like a basis for a complaint to the appraisers licensing body.

The use of the word "linchpin" in the Big O's story this week brought about an audible giggle from me because I can no longer see that word without thinking "underpants." (See many earlier posts/comments on Bojack regarding the use of the word linchpin in reference to SoWhat). Thanks goes out to Bill McDonald I believed thought up the idea of replacing linchpin with underpants.

Now go back and read the title and opening sentence of Bojack's post and see if you don't at least guffaw. "Hideous stench" indeed.

I'm wondering if the term "appraisal methodology" used by the O is really what they're referring to. Seems to me there is a difference between "methodology" and telling the appraiser what requirements will be imposed on the property. Is this purely market value (i.e., what would it sell for on the open market)? Or is it the value if we impose x, y, and z requirements on the developer? Those values should be different.

What stinks about this deal is that the developer was involved in any way, and that PDC was looking for a low appraisal so they could give it away and get around any fair wage rules. If PDC was really operating like a business, they would want the property to be valued as highly as possible -- even with the requirements they are imposing. That's the surest sign that this decades-long PDC experiment is failing. . . and it's a direct result of no public accountability.

One other point that's getting lost amidst the questions of impropriety is the lack of a cost/benefit analysis indicating that PDC's requirements are a good idea. If you have a piece of land valued at $1.9 million, but your development requirements make it worth negative $1.9 million, your requirements have a $3.8 million cost. Where's the PDC analysis showing that the public would get at least $3.8 million in benefits?

In BoJacks yesterdays "linch pin scam" I posted about the PDC stench that filters from block 49 and 33 in North Macadam. The Portland Police block definately has quantifiable stench. But lets relate the money measurements of just Block 49 (Homer's Block).

It was bought by Homer for $1.2M one year before PDC recently purchased it for $5.7M(even the price jump in one year is stench) with all kinds of favorable conditions thrown in to benefit Homer. Like exclusive building rights-no bidding, we will pay whatever you demand; public pays for any toxic clean-up; taxbreaks for the affordable housing units; 50 free parking spaces; free commercial spaces on the ground floors, etc. Now,lets do some comparisions appraisel analysis like Portland Police block.

Also recently the Parks Bureau paid $7.1M for the NM park which is two blocks and one 60 ft street vacation in size: two and a third larger than Homers Block. Wouldn't you think that Homers Block should have cost the taxpayers of Portland (PDC) only $3.5M based on parks property across the street? Can't believe I am using the word "ONLY".

Not to belittle the Portland Police Block, but the stench is even higher for Block 49

The "stench" is getting to be too much, and we are also finding it in so many agencies. If we had "hit and miss" corruption, some sane people would say that is what we have to accept as a society. But it is not "hit and miss".

Major PDC reform must happen and consideration of its dismissal needs to be considered because these incidents have been going on a long time. As a long time active citizen in neighborhood politics, and even serving on the NM URAC, I wouldn't mind eliminating my job with PDC when it is dissolved.

Like Randy Leonard did yesterday in calling for his vote on the Iraq issue, even though City Council does not make national policy, I applaud our West Portland Park for taking a stand on property disposition concerning Mt. Tabor and outside of their "territory". Several times in the past 30 years SWNI has "warned" our "mealy-mouse" nieghborhood associations to "stay on course" with our own particular agendas. (City of Portland ONI even threatens taking funds away) I think the city-wide neigborhood assns. need to take on the PDC and corruptions in other agencies.

Comparing West Portland Park's opinion on East Portland to Randy Leonard's opinion on Iraq is a poor analogy.

Leonard's view on the Iraq War is more akin to West Portland Park's perspective on how maple syrup should be harvested in Maine. West Portlanders don't know anything about maple syrup, and (even if they did have something meaningful to say) it seems unlikely that Maine's maple tree farmers would give a rats-a$$ about West Portland Park's opinion.

Arrest the criminals, pave the streets, put out the fires, and clean the parks.
Leave the FBI and the DoD alone: they don't give a sh!t what Randy Leonard thinks...

Bruce, maybe I am not good as making analogies. I did not make an opinion if I personally thought Leonard's initiative was correct. I only met to say that even when an issue like "stench" that "hit and misses" our city in various forms, time period; we need to collectively say the "stench" is too much.

I would say for neighborhoods to speak up about "stench" collectively is much less a reach that Council's Iraq reach.

The West Portland Park Neighborhood Association's motion was in the context of my report from the Citywide Parks Team monthly meeting of parks volunteers, at which members of the Mt Tabor Neighborhood Association had alerted activists of the issue of the possible sale of part of Mt Tabor Park. WPP Board members and meeting participants agreed that any sale of public property anywhere in the city without proper appraisals and due process would set a bad precedent for all our public parkland. Credit is due to Jim McLaughlin, WPP NA Board member, for moving and crafting the language of the parks property motion.

WPP NA passed a similar motion regarding sale of school district property, but limiting that one to commenting on potential sales our own neighborhood, since that was the request from the SW Neighborhoods Schools Committee.

Hilsy, I too laughed when reading "linchpin" in the original Oregonian article.

I'm wondering if the term "appraisal methodology" used by the O is really what they're referring to. Seems to me there is a difference between "methodology" and telling the appraiser what requirements will be imposed on the property.

Miles, go blow your smoke elsewhere. The O clearly states that the appraiser was instructed to use a "land residual" approach to valuation. That is a valuation methodology by any definition, and this was a clear case of a cooked appraisal.

the appraiser was instructed to use a "land residual" approach to valuation

Reminds me of the "valuation" methodology that leaves the Zidell's with assessed values of $95,000 --and property taxes of less than $2,000-- for their 29 plus acres of property in South Waterfront.

The stink don't stop at PDC's doorstep...

Jerry: no offense intended. I think it's wonderful that westside residents care about what's happening on the eastside vis-a-vis city shennanigans.

If Commissioner Leonard spent more time listening to neighborhood associations (rather than grandstanding with his Big Issues/Deep Thinker reelection strategy), the CoP would be a better place to live.

Land Residual Procedure: Calculates land value by first estimating net income earned by a property and then subtracting income that can be attributed to the improvements, leaving a residual value attributable to the land.

from: http://www.co.pinal.az.us/Assessor/Land/

Another souce describes this as a less desirable method. Using comp sales is considered better.


Why fight a good thing?

Accept the "independent" appraisal at face value . . . but then apply the standards the fed would apply to a bank when assessing the bank's financial soundness.

SO -- you say your assets have negative value (at least this one and maybe many more). OK then -- this means that your capital reserve requirements are not met and we must therefore immediately seek to shut you down or facilitate an overnight transfer (just as with the Resolution Trust Corporation dealings with S&L's) to a more sound entity such as Bank of America.

But given that the asset valuation is negative then it is clear that the government would not have to be on the hook to guarantee the "value" of the assets that are transferred as part of the overnight transfer.

Oh happy day.

This reveals as much about the skill and knowledge our present auditor as anything. I'll just pick my preferred methodology for my own audit. Would the appraiser then attack me as unethical? The ENTIRE Public-Private partnership thing is unethical, where the notion that a gift to any private entity so as to assure them profitability is by definition inherently impossible to square with the affirmative duty and loyalty of public officials to the public interest and thus fits the definition of absurd.

Suppose the PDC were to be enjoined from engaging in any activities that are typical of a financial institution, such as lending and investment. Would there be anything left of the PDC, other than as a non-binding advisory board with powers that are little more than that of a neighborhood association or a private citizen land use committee? That is, by way of exclusion of other descriptions of features of what the PDC is, it is in reality more like a bank than anything else.

One of the exceptions to the feds getting in the nose of the (public) PDC when offering banking services (or investment services) is itself premised on the absence of fraud. Karen and the FBI could send in SWAT teams to preserve documents from shedding machines and hard disk self-destruct routines as a precautionary measure as she brings the full power of the federal government down upon the heads of the local mob.

(Like Gilda -- Oh, "never mind.")

Ron Public-Private partnership
JK: If this is truly a partnership, where are the city's ownership papers? Stock certificates?


Phony appraisals are common in the public sector and the primary reason I voted against Metro's $200M bond measure to buy more open space land. Public officials simply can't resist the temptation to help their supporters and friends, and in the case of land purchase (or sale) transactions, they do this by having their bureaucrats tamper with the appraisal process. When buying land, public agencies have the appraisers come up with a higher than market value by dictating the use of unrealistic comps and assumptions, and when selling land, the agencies order the appraisers to use the same tactics to ensure appraisal reports come up with a lower than market value.

This PDC deal is peanuts compared to the potential shenanigans that Metro could perpetrate as it buys $250-300 million worth of land using the open spaces bond measure funds. And there is a history of abuse of appraisals at Metro, according to a report issued by its own auditor in 2000 or 2001. Metro officials never took action on some key recommendations in that audit report that would help prevent appraisal abuses.

The West Portland Park Neighbohood Association seems to be right on top of the local government land games if "Amanda's" report is correct.

The PPS Board, on November 30, 2006, cablecast a long board meeting. One item on that cablecast was a "resolution" growing out of a "conversation" with the Lincoln cluster folks about overcroding at Lincoln and boundaries for elementary and middle schools within the Lincoln cluster.

One of the PPS board members (guy with goatee ???), while discussing he "tesolution" opined that Lincoln was a suburban campus beng operated within a downtown city. He suggested that it was time to look at selling off or otherwise developing part of the Lincoiln site for commercial uses, and building more classrooms at Lincoln.

Here come the PDC style deals for developers with school property.

Markham, Stephenson and Jackson on the west side are also ripe for some idiots carving out and selling off chunks. So, too is Rieke.

Then again, at Rieke, a too small building with a too small population, in a system with room for 60,000+ students and a populaion of less than 45,000, the PPS board has committed to build more classrooms (portables) at Rieke.

Yeah, too much capacity, not enough funds,and not enough kids to fill the seats they already have yet PPS wants to add classrooms in multiple schools. Sounds like the finance genuises at General Motors.

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