Paulson contract: clear as mud
When the politicians start rushing nine-figure projects through the pipeline before anyone gets a good look at them, it's not a good sign. Even if there's nothing going on under the table, fast deals often mean big mistakes. Portland has made more than its share of these over the past decade or two, and under the current reckless, narcissist mayor it's only going to get worse.
The warp speed at which the Paulson stadiums deal is travelling through the City of Portland's legal processes is troublesome in the extreme. At every turn, sensible safeguards are being overridden, and tax money has already begun gushing every which way without a decent idea of how the transaction is going to work -- or if it will work at all.
As an example, consider the action that the City Council is planning to take this week. For one thing, the ordinance purports to exempt from competitive bidding the operating agreement for the new stadiums -- an agreement of which the council does not have even so much as a draft at this point. Until one knows what will be in a contract, how can one determine that it shouldn't be put out for bid, as the law ordinarily requires?
Meanwhile, and more worrisome, it's not clear from the "predevelopment agreement" that the city's going to sign now, just what the city is and isn't obligated to do by way of funding the project. In the contract, the city promises to do the following things, among many others:
Identify and use commercially reasonable efforts to implement a bond offering strategy, following approval of an eighteenth amendment to the OCC and the lapse of any time periods for appeal of such amendment, and, if possible, sell the OCC TIF bonds through traditional sources and/or private placements through Peregrine [an entity identified with the Paulson family];Lots of weasel words there, to be sure. "[U]se commercially reasonable efforts to implement a bond offering strategy, and, if possible, sell the OCC TIF bonds through traditional sources and/or private placements through Peregrine"? "Endeavor to maximize the capacity of the Spectator Facilities Fund backed bonds through innovative means"? "Identify and implement a strategy to secure the $15,000,000 in revenue"? Lawsuits waiting to happen -- every one.
Endeavor to maximize the capacity of the Spectator Facilities Fund backed bonds through innovative means, including, but not limited to, the use of a tax-exempt bond structure and/or the cost-effective refinancing of existing PGE Park bonds;
Identify and implement a strategy to secure the $15,000,000 in revenue whose source was to be determined under the preliminary finance plan included in the Proposed Transaction;... and
Use commercially reasonable efforts to identify all Project funding sources by August 1, 2009 and, if possible, secure the funding sources by September 1, 2009.
The last quoted clause is particularly ambiguous: "Use commercially reasonable efforts to identify all Project funding sources by August 1, 2009 and, if possible, secure the funding sources by September 1, 2009." Is the verb "secure" modified by the phrase "use commercially reasonable efforts to"? Or is it an absolute promise to get something done? And only "if possible"? At what interest rate does a financing become impossible? 10 percent a year? 15 percent? 20 percent? 25 percent?
It may not matter what these words mean, however, as the termination clause appears to let everybody walk away at any time over the summer, with no further commitment:
This Agreement may be terminated by a Party delivering written notice of such termination to the other Party at any time for any or no reason. The termination will be effective upon receipt of the termination notice by the non-terminating Party. Except as set forth in Section 9 [relating to predevelopment costs], termination is the sole and exclusive remedy available to the Parties hereunder.Just as with the resolution that they passed last month, the members of the City Council don't know exactly what this agreement requires the city to do. Nobody does. All the politicians know is that the Paulsons and the construction companies and the unions have said "Jump." As ever, the Portland government's response is "How high?"