Here in Portland, the fix has been in for Merritt Paulson's pending $100 million sports stadiums boondoggle for a while. The City Council is performing the traditional kabuki that it puts on for these things, but there is little doubt that it's a go. The powerful construction contractors, architects, and labor unions all want the public pork that this exercise in foolishness represents. Not to mention Little Lord Paulson himself, who has captivated Mayor Creepy and Fireman Randy with his New York city-slicker talk, much the way Mayor Vera fell in love with Homer Williams over Pimm's Cups at Paley's Place a decade ago.
As ever, there are lots of informed and concerned souls among the public who can see through the deal for the fiasco that it is, and they are straining to make themselves heard as the city fathers plow on toward another bankrupt Big Idea. And right on cue, Paulson -- with coaching from former Portland Development Commission boss Don Mazziotti, who oversaw all the Katz administration's ill-advised real estate misadventures -- is starting to parrot the buzzwords that in the past have put stinker projects over the top at various junctures.
This week, the Paulson camp is flying the twin flags of "guarantee" and "general fund" as part of the latest phase of its dubious sales pitch. These are words that Portlanders have heard before -- in the last PGE Park re-do earlier this decade, and in the atrocities known as the OHSU aerial tram [rim shot] and the SoWhat district [gong], to name just a few instances. The words have their usual ring to them, but when you stop to consider what they mean, it's pretty clear they seek to divert listeners' ears from the unmistakable rumble of Financial Disaster Ahead for the city's residents.
Let's start with the "guarantee." Paulson is now on record telling the world that somebody's contract with somebody is going to be "guaranteed" by him and his wealthy dad (the Bush Treasury secretary and bailout-meister). What exactly does that mean? If it means that the Paulsons are going to guarantee that the rent paid to the city from the two new stadiums will be sufficient to pay all the principal and interest on the bonds, that would be great. But that's certainly not what they'll be promising.
Perhaps they're going to guarantee to the bondholders that if stadium rents, property taxes, ticket taxes, income taxes, and other taxes and fees that the city and state are supposed to throw at this deal don't amount to the bond payments, he and Dad will pungle up the rest rather than see the city default on the bonds. That's wonderful for the bondholders, but what does it do for the taxpayers? For taxpayers, it would be a decent deal only if the taxes that the bonds are going to siphon off are really new revenues that wouldn't be collected without the two new stadiums and the upgrade from "minor league" to "major league" (by U.S. standards) soccer. And that seems a bogus hypothesis.
At last report, the plan was to declare a huge swath of the inner west side of Portland -- from NW Thurman Street to Portland State -- an "urban renewal" zone, and take any increase in property taxes from that area over the next 25 or 30 years to pay the stadium bonds. The technical name for this is "tax increment financing." Where I come from, it is also known as grand theft. The slight upgrade in soccer quality and the subtraction of the Beavers baseball team and many other events from the renovated "soccer only" stadium would hardly be the cause of any significant property value increase in that area. Yet the Paulson stadium would in effect be taking credit for every single penny of additional property value there, for decades.
No, the Paulson family "guarantee" isn't going to help taxpayers much unless it guarantees revenue to the taxpayers as well as to the bondholders. Just telling the bondholders that the Paulsons will make them whole if the taxpayers can't does nothing for the general public.
On to the "general fund." This was one of Vera Katz's favorite catchphrases during aerial tram and SoWhat time. The cheerleaders at the Oregonian editorial board loved it, too. "The bonds won't ever have to be paid out of the city's general fund," they'll tell you. Which is true on its face, but economically, it's meaningless. The bonds absolutely will have to be paid out of funds that would have been in the general fund except that the City Council is going to divert them away from the general fund before they ever get there.
The "general fund" is a figment of a bookkeeper's imagination. It's just a box where taxes go if the City Council wants them to, and don't go if the City Council doesn't want them to. The simple reality here is that the "urban renewal" part of these bonds is going to be paid out of property taxes, including yours and mine (or your landlord's, if you are renter in Portland). Look on your property tax bill: If you live in Portland, about a quarter out of every dollar you pay the city in property taxes goes to something called "urban renewal." A bunch of the Paulson stadium bonds are going to say "urban renewal" right on them. That's you and me and money that we all would rather spend on schools and police and parks and paving over potholes and a hundred other more worthy, truly public, purposes than pro soccer. That money could go into the general fund if the City Council would just let it.
Much of the rest of the bonds is supposedly going to be paid out of state income taxes, ticket taxes, user fees, yada yada yada -- but the operative word there, once again, is taxes. Rent from the stadium won't be enough to pay off the debt -- it won't even come close. I've already explained here that the debt payments on these bonds are going to be more than $6.1 million a year for 30 years. Paulson admits that his soccer team will bring in only $4.4 million of ticket revenue after the rickety league takes its cut. He'll have a payroll of around $2 million, and all sorts of other expenses. There's no way that money coming out of private pockets will be sufficient to pay these bonds. There's nothing else to pay them with but taxes.
I don't care if you run it through the "general" fund, the special fund, the slush fund, the office donut fund, the March Madness pool, petty cash, or the tip jar in the men's room. If it's property tax revenue, it ought to be used for something that the residents of the city really need. A slight upgrade in the quality of the Euro-fantasy known as pro soccer does not fit that bill.
If there's a bright side to this hornswoggle, it's that folks in Salem are taking notice. Even "progressive" Portland-area lefties are drafting bills that would curb some of the excesses of the city's "urban renewal" juggernaut. Under one bill, all future "urban renewal" districts would be submitted to an up-or-down vote by the local county commissioners, who when last heard from were holding bake sales to pay jail deputies. It doesn't take a genius pollster to see how such a vote would go on the Paulson proposal in this day and age.
With the stadiums deal, Fireman Randy, the mayor and the rest of the City Council are issuing a big dare to the taxpayers of the city, and to the rest of the state. Wouldn't it be sweet if it brought the whole game to a grinding, permanent halt? One can only hope. Maybe Merritt Paulson will turn out to be a local hero after all.