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Monday, April 13, 2009

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];

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.

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.

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?"

Comments (16)

Paulson's whole plan is to get fools like Randy to say they'll make it happen while they never ask how it is going to happen.

Paulson has not signed one thing and won't until CoP makes a commit, digs the symbolic shoveful of dirt and then says it is too late to stop.

Paulson will then go into hardball negotiations and make Randy and Sam wet their pants at the idea of not having a MSL franchise. Meanwhile, taxpayers will get screwed like they did 7 years ago with PGE Park and Sam will shove his CC Hotel into the Mem Coliseuam rebuild (look at both charettes - it is there.)

Is there any way we can stretch this out while the recall process is going on?

Again, who are the local cheer leaders for this project, who aren't in City Hall?
I would assume some of them will be at the City Council meeting this week, when this contract is considered.

"Lots of weasel words there, to be sure."
How true, how true. Nice line, Jack.

How can I describe the language in that agreement? If these 4 paragraphs were a bowel movement, just imagine the dump it would be.

Sorry, that was crude, but we're the rabble here - it's to be expected.

I brought up the idea of the concierge before and it was immediately hijacked into some bizarre sex thing. When the unwashed masses speak, things can get crude. I accept that.

But let me go to the servant metaphor again. See, I was a waiter for quite a while. For me, there was something empowering about it in the sense that I never felt the least bit inferior socially to the powerful. Maybe it's an American thing.

I could be shy in person even with old friends but being designated as a servant brought out the defiance in me and I could chat with the President of the United States without feeling any insecurity. It was fun. As a banquet waiter I could kid around with people who would intimidate me when they came on television. I would give advice to Senators. What did I care?

That's why the super-wealthy sometimes seemed to enjoy the waiters' company more than they enjoyed people like Sam and Randy, who were valets and bellhops of a different sort - but who just didn't get it.

Henry Merritt Paulson III has seen Sam and Randy-types all his life. They're the butler, the tennis instructor, the valet, and the chauffeur. He saw these guys coming a mile away.

It must be awkward as hell having to pretend they're on his level. I'm sure he goes home and shakes his head and says, "God, when will this hideous process be over?" It's the phoniness of pretending you're all chums working together - that's what is so stifling - so unpleasant for the rich. Keeping up the charade as these unpolished bumpkins pretend they should be talking to you? It's positively gauche.

I remember one banquet where Arlene Schnitzer just hung out with the waiters after everyone went home. I know she's a building to most of you, but there's a nice person there - quite down to earth really - and I could see she enjoyed our company, too. She was very relaxed around us. I think it was because we knew who we were and we had achieved equality through other means. We were real and that allowed her to be. That's my theory.

Henry Merritt Paulson III is not going to be calling Dad and saying, "These two sharp local guys are really negotiating the hell out of this thing. This Randy guy - he's one of us. And this Sam guy? Brilliant. What a mind! We must have them at the next trustee meeting."

No, I bet the feeling is, "I've made contact with 2 local politicians. Yeah, they're going to make this happen for us. Here's the cute part: They don't even know they're bellhops yet."

Or footmen.

City Council don't know exactly what this agreement requires the city to do. Nobody does.

Nobody? I believe that Steve Janik would have some idea. But at the end of the day, what does it really matter? If it all goes south - and history tells us it will - the intent of the agreement, not the letter, is what counts, because city council will be made to believe they are too far into it and will have to renegotiate.

And we know how that process will come out. It will be Paulson and Janik versus a new city council that blames their predecessors on the mess on hand, and believes they are only avoiding lawsuits and cutting their losses.

This so reminds me of "trout tickling."

Trout tickling is the art of rubbing the underbelly of a trout using fingers. If done properly, the trout will go into a trance-like state after a minute or so, and can then easily be thrown onto the nearest bit of dry land. The technique was a common practice used by boys, poachers and working men in times of economic stress. Poachers using the method required no nets, rods or lines or any other incriminating equipment if apprehended by the police or gamekeepers.

One guess as to who the trout are in this scenario.

I'll take it a little further in a new direction.
It seems like there is something else also at play here. In addition to the
influence peddling and arm twisting.
I suspect that some of the more influential fat cats in Portland are essentially blackmailing city officials. Their knowledge of, and participation in prior underhanded deals, such as the Tram funding schemes, has them holding a big weapon in advancing more schemes.
It would be easy to suggest a difficult outcome if the Mayor and Commissioners don't play ball.
Let's face it, these boondoggle profiteers know more than we can probably imagine occurs in this city.

Are they not smart enough to use what they know?

"exempt from competitive bidding" is a red flag that leans heavily in the direction of my theory.
This is essentially rigging a contract the municipal "legal" way and was perfected locally when Bechtel was given a no bid contract for Airport MAX.
Bechtel is similar to Haliburton for you left leaning pals of mine.
And the local officials in bed with them for that 200 milion project were the local version of Bush, Cheney and Rumsfeld.
Katz, Hales, Thorne, Burton and Hansen.
SoWa happened because the schemes at Cascade Station-Airport MAX were so easily perpetrated. They found a way to channel millions with no one facing any consequences.
And now, here we go again.

What an awful day when citizens have to mobilize to protect things like regional parks and the Coliseum from their elected officials.

Good analysis Ben. It will be interesting if anyone on the Council (not including SammyRandy) begins to question the no-bid elements, then do something about it. One would think that even the Unions would find this abhorrent when fair bidding isn't allowed amongst their contractor members, let alone their subcontractors.

There was some legislation circulating recently to forbid these no bid contracts. The Portland Daily Journal of Commerce wrote about it. It appeared in the DJC on april 8th and 9th. I think the bill got shelved. Hope you can look into it.

As long as we're getting conspiratorial, I wonder if there's any connection whatsoever between this deal and the TARP or subsequent bailout packages?
I'd prefer if the media answered these questions rather than just throwing them out there, but the media is...well... you know where that's at now.
All we have is various Internet things we read.
I read that the AIG bailout was used to funnel money back to Goldman Sachs. Where else did the money go? There's plenty of secrecy here and virtually no oversight. There's money going to banks overseas. There's massive money going God knows where.
How much is this a legit Goldman Sachs thing and how much is it something else?
Could some of these dollars floating around in this franchise deal be from the taxpayers?
When Paulson says he's very confident that he can swing the financial side, where's that coming from? They talk about soccer as the international language, but there's another international language: Corruption.

The City of Chicago has an Office of the Inspector General which is "an independent office dedicated to ensuring honesty and integrity in City government by rooting out corruption, fraud, other misconduct and waste.


When you've stopped laughing, check out this recent post. Mayor Daley's son and nephew have lawyered up for a joint investigation [city and feds] into their investment in a sewer-cleaning company which won millions of dollars in no-bid contact extensions from City Hall."


This office probably pays for itself by detecting and preventing corruption, fraud and waste.

Can we do this in Portland by initiative or referendum?

If we could depose Neil, we'd have answers to questions we hadn't even thought of and save money spent for a referendum.

It is really to bad that many of us (me included) are not so inclined to speak out for fear of retribution by the powers that be in and of the City of Portland.
Who wants to take a chance that one's investments in business or real estate will be compromised with various fire and building inspections, review of OSHA rules, or other reviews of previous building occupancy inspections.
I am not that paranoid but I have had this happen in the past. One has to choose the battles very carefully and you have to be one of the many, not the leader of the pack.
Bill M, you nailed it.

Well shite man, isn't it about time Portland exercise that termination clause, before more "development" fees are incurred? Oh yeah, I forgot, it's the jobs lynchpin. Oh, and the entertainment. Can't wait to sit through my first 0-0 tie. Go Albatrosses or is it Albatri?

I'm surprised Mayor Creepy, Pele Randy, et al didn't decide to build the Timber's stadium over in Clark County by the ampitheater. The Red Bull New York play in Giants stadium in NEW JERSEY! Why not have the Timber's play in Clark County? It would be a sure fire way to get light rail over into the Couv. They could all reduce their carbon footprints by riding the Maxx North to the games. Heck, why stop there, put it next to the new casino in Ridgefield where we could bet the over/under for attendance at each game. You know Mayor Creepy won't miss a chance to see young men in wet jerseys.

One more thing, why is Mayor Creepy making fudiciary decisions while currently being under investigation?

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