PDC loans: better, but still loosey-goosey
The City of Portland auditor has taken a look at the tens of millions of dollars in sweetheart loans that the Portland Development Commission has been doling out in recent years. And although its administration of all that money has improved since the last audit, which was abysmal, the PDC still is not exactly running a tight ship.
As an example, the auditor pointed to $18 million of loans that the PDC made to the mysterious Portland Family of Funds, a private, nonprofit "public benefit" company that was somehow "spun off" from the PDC years ago. (The PFF board includes Don "The Don" Mazziotti, former PDC honcho and architect of the failed SoWhat District.) According to the audit report, PFF never made the quarterly reports that it was supposed to make to the PDC about the small business loan program to which the PDC funds were applied:
The small business loan program was defined in an agreement between PDC and PFF. Loans were to be approved by a loan committee consisting of a PDC manager, PFF legal counsel, and community members, and loans were to be serviced by PFF. PFF was charged with reporting quarterly to the PDC on the effectiveness of the small business loan fund and technical assistance activities for the seven-year tax credit compliance period. However, no quarterly reports were provided by PFF, and PDC’s involvement with the small business loan and technical assistance programs appears to have lapsed shortly after the PDC loan was made....
Based on the limited information provided, and without the required monitoring and quarterly reporting, it would be difficult for PDC to evaluate whether the program met the initial goals of benefiting small businesses.
Although the PDC was supposed to be the managing member of the joint venture with PFF for making loans and handing out tax credits to bankers who made additional loans, in fact it stopped playing that role. The PDC response to the audit explains:
Since the joint PDC/PFF NMTC allocation in 2003, the NMTC regulations have changed to require that the Controlling Entity and the Managing Member be one in the same. PDC is no longer able to participate directly in the NMTC program given the need for the Managing Member to hold equity and the State prohibition of governmental entities holding equity. In the case where an unrelated party is providing a NMTC allocation to the developer as part of a project that is receiving PDC funding, this information is covered in the documentation provided to [the PDC board finance committee] and the subsequent Board documents if Board approval is required.
In addition to the quietly changed deal, it's interesting that the PDC says it can't own equity in private firms. Lately it's been handing out seed money to startup companies, buying stock as an investor in this private fund -- apparently that's kosher, but when it comes to keeping tabs on PFF, it walks away, citing state law.
Anyway, that giant sloshing sound you hear is tax revenue flowing and swirling and splashing into and out of the PDC. Probably no one can honestly tell you where a lot of it goes. But if you see any of it actually improving the city's moribund economy, please let us know.