PDC; Out of Control

Randy Leonard

An editorial in today’s Oregonian goes after “electricians, plumbers and many other workers” for “padding their paychecks” when working on public works projects and receiving the “prevailing wage”

Basically, the test of whether prevailing wage is required on a project is
1- Are there any public dollars involved? AND
2- Does the public agency (in this case, PDC) decide and control what is being constructed?

The editorial uses Central City Concern (CCC), a local non-profit that provides housing and treatment to recovering alcoholics and addicts, as a potential victim of having to pay higher construction costs because of the prevailing wage requirement. CCC often receives taxpayer dollars provided them by the Portland Development Commission when CCC constructs or rehabilitates buildings for their clients.

Interestingly, they use the following quote from me in the editorial from a story that appeared last Sunday in the Oregonian regarding PDC’s approach generally to the prevailing wage;

"It seems like they ignore the rules to provide some comfort to the income classes".

The editorial used that quote in order to argue that CCC serves the most downtrodden in our city, is not rich and thus I must not know what the hell I am talking about (again).

The problem for the Oregonian editorial writers was that I personally negotiated on behalf of CCC with the Bureau of Labor for an exemption to the prevailing wage requirement on CCC's latest housing project the Oregonian editorial board was alluding to.

In fact, I used the CCC project and my advocacy on their behalf to the editorial board (in writing) as an example of where I thought there was a middle ground in applying the prevailing wage on some projects.

However, it appears the editorial board thought it was more tantalizing to readers if I was advocating that altruistic, non-profit organizations such as CCC were being forced by me to pay higher wages for construction projects than what they can afford.

Apparently the editorial board believed my advocacy for CCC did not help their (and PDC's) argument so they ignored it.

They also ignored the example of PDC's overly cozy relationship with a developer that I gave them (again...in writing) that prompted my criticism of PDC that was accurately quoted.

Let me explain for you the example I gave the editorial board that I believe best illustrates PDC's improper assistance to some of the most wealthy in our city...at the expense of the working class.

The PDC was interested in acquiring the old Police Bureau property on the corner of SW 3rd and Oak in 2002. They had an appraisal done that indicated the property was worth $850,000. The PDC promptly paid $1.2 million for the property and then spent another $500,000 removing the building and cleaning up contamination to make the property "shovel ready" for a developer.

PDC then had the very same appraisal firm do another appraisal in 2006. The second appraisal now indicated the property was worth negative $2.7 million.

Yes, you read that right. NEGATIVE $2.7 million dollars. And yes, that property is in downtown Portland.

But wait. There’s more.

Then the PDC commission voted to give the property to a private developer to construct a 168 unit condominium project on the condition that 15% of the condominiums initially be affordable for people earning 120% of median family income, which is about 40% higher than the nearest threshold for City Council approval. After nine months, the development proposal says, any units not sold can be sold to people of any income level.

At a time when we have senior citizens who are in poverty on multi-year waiting lists to get into decent housing, the PDC constructed a deal on the SW 3rd and Oak property that benefits upper income Portlander’s with a huge taxpayer subsidy.

And for the icing on the cake, the PDC communicated to the private developer that the project would not be prevailing wage because prevailing wage law is triggered by a government subsidy, and since the property on SW 3rd and Oak had a negative value it did not amount to a subsidy, and would not trigger prevailing wage.

The Oregonian editorial board's use of convenient facts, and utter disregard for all other facts in this discussion is disappointing. Further, they endorse the PDC's overt circumvention of prevailing wage law and City Council policy, which includes the gift of public property to a developer who will build high-end housing downtown.

The public deserves better. It seems both of these public institutions have forgotten their responsibility to the public.

Fortunately, this is not the end of the story on the SW 3rd and Oak property. I have filed a resolution that will be heard this Wednesday morning that will require an independent audit be conducted of the PDC’s entire transaction history with the SW 3rd and Oak property.

The editorial today characterizes PDC’s current strategy to avoid paying prevailing wage and circumvent City Council oversite as “shrewd”.

I say it smells. And PDC, with it’s overly cute tactics, is fast approaching its day of accountability.

  • John Capardoe (unverified)

    I agree Randy, the irony is the greed of these developers, I couldn't believe the Oregonian misrepresentation of fair wages plastered on thier front page.

    Most of these guys don't work year round but are laid off during the winter months, at least 3-5 months so the annual figure in the Oregonian table was bogus. Also most of them have to travel to jobsites, if they want to keep their family from being uprooted ever 9-18 months, as they follow the work.

    In the Portland area that can mean as much as a 2 hour commute each way. There is no public transit when these guys have to be on the job, and many times they are asked to work 6x10 during the high construction season.

    What we need is the profit capped on PDC projects using city money. It is absurd we are enabling Millions in profit for these condo builders in South Waterfront, by taxing the established neigbohoods and spending it on infrastructure to support this new development, and then are granting tax abatements and making those established neighborhoods suffer again as their basic services budgets are cut for the 7th strait year and police fire and parks are asked to do things like form a special TRAM rescue unit with biannual exercises, and Bigger sewer and water systems need to be upsized to accommodate high density development, and Showcase Parks are built requiring six figure maintenance budgets.


  • (Show?)

    I disagree that PDC is only in it for the wealthy developers and not the commonwealth. The SW 3rd and Oak property is only one of dozens of projects that PDC funds. For example, their TIF money in South Waterfront. I see the Strand development everyday and there are union worker placards everywhere. My assumption is that where there are unions there is prevailing wage.

    City Councils appears unfortunately to have a myopic view of andwhat development really is - creating value. Escpecially in creating a common good like affordable housing, City Council suspended use of the new multi unit housing tax abatement program because of a false notion if you build "family housing" the families will come flies in the face of demographic and market realities, which is where investment dollars flow.

    Until City Council and certain Commissioners can get out of their dreamworld, professional public administration for the betterment of Portland citizens will continue to die a slow, painful death.

  • (Show?)

    Gee, Randy, there's no reason for the FBI to investigate local government around here, is there? How about another funny audio clip?

  • Randy Leonard (unverified)

    I do not think the PDC is corrupt per se.

    I do think the SW 3rd and Oak example illustrates PDC's "creative ways" in circumventing Oregon's prevailing wage statute and the City Council's clear policy of not using taxpayer dollars to subsidize upper income housing.

    And I only make audio tapes when I think something is intrinsically humorous.

    I find no humor in PDC's behavior.

  • Jennifer W. (unverified)

    Of course the PDC is corrupt. They were created for that very purpose: the politicians needed an "arms-length" relationship between themselves and their benefactors in order to maintain plausible deniability.

    Hey Randy,

    What makes you think the Bureau of Development Services has the brainpower and/or staffing to enforce the Boutique Fuels Ordinance? Just because they inspect buildings and enforce zoning requirements doesn't mean they know squat about bio-diesel or ethanol. Don't you see the potential for selective enforcement and "inspector incentivized" compliance (Ben Franklin said this fuel complies).

    Where there is money, there will always be corruption.

  • Randy Leonard (unverified)

    I'm just curious, is it Jennifer, Mike Austin or Frank?

    Give your real name and a question appropriate to the post and you will get a real answer.

  • Jennifer W. (unverified)


    I'll give you two hints.

    1. I don't work for the City.

    2. I used to work for the County.

  • James (unverified)

    I will give you one hint.

    Grow up.

  • Randy Leonard (unverified)

    Whatever you say, Frank.

  • Grateful Taxpayer (unverified)

    Thank you for requesting the audit, Randy! Excellent! This deal is the perfect example of why PDC needs to be put on a short, and official, leash to the Council. These giveaways to private developers have got to come to a screaming halt.

    While you are at it, I don't think anybody should be afraid to call what they've been up to corruption. It is plundering the public coffers for private benefit, regardless of what it gets called. Most important, you need to stop them from describing tax increment dollars as if they are free or belong to the developer. Every one of those dollars represents a dollar's worth of service those of us in the rest of the City are giving up so the developer can enjoy better service levels than we get for free.

    Don't worry about the Oregonian. Their foam-at-the-mouth anti-union rants are nothing new. I think it is time for a "progressives don't read the Oregonian" organizing drive. I'm going to start by writing three of their advertisers telling them I don't read it and why. Shop union, read union!

    Don't let up. You are doing the right thing.

  • (Show?)

    Whatever you say, Frank.

    "Frank" is hardly a unique moniker, Commissioner, but I want some reassurance you're not talking about me. :-)

    But as long as we're on the subject of PDC, I totally agree they need to be turned inside out and have their mission --and transactions-- thoroughly investigated.

  • (Show?)

    I am an avid reader on BlueOregon even though I am not living in Portland right now, I hope to be back next year.

    It something isn't right about the siutation and I'm glad that Commissioner Leonard is willing to look into it. I don't understand how a property has a negative assessment after origonally being assessed at $850,000 four years ago. This is a diffrence of $3.5 million dollars in assessment value (-$2,700,000-$850,000).

    Also I'd like to know why the city is giving property away to developers with the only condition being that they make 25 of the 168 condos available (someone might want to check my math on that one) for people that have an income at 120% of medium income (not sure what the medium income is in Portland, if someone knows please post it)? Is this really good policy?

    The next question is, what would this property have fetched if it was sold to a developer (assuming that the property was "shovel ready"?

  • Cab (unverified)

    I always thought the PDC was created to run like a business. You get a bunch of bankers together and let them have at it. Whats the problem? This is standard business practices. Is actually seeing how business workd the real issue? We seem a bit naive of the practices of private businesses. I really don't have an answer, but the 3rd and Oak building is going to really help an area that needs a kick start. Please lets not kill a good thing because its not perfect and we are uncomfortable seeing how the real world works.

  • John Capardoe (unverified)

    Good Point David, there was also a weird deal like that in South Waterfront where the private developers bought two blocks of land for some amount and turned around 9 months later and sold back one of the blocks to the city for "affordable houseing" for a large profit I believe in the millions.

    I was also watching streaming video of a City council meeing last fall when the supposed ban on Tax Abatements was and I think still is supposed to be on, though with both councilmen were elected I suspect will soon disappear, when a Transit Area Tax Abatement was granted for a Gateway Condo.

    Bless Randy's heart he was a a real tiger, as it required so many condos at an affordable price, and it is for folks less than the median income, not more than it.

    They were supposed to report back, and it should be about now, to confirm that those Gateway condos were indeed priced affordably and sold to real people who were going to occupy them not investors who were going to hold and sell.

    Randy did you do that and what was the outcome, or when are you scheduled to follow up on that as you said in Council, you should post a report on your website.

  • John Capardoe (unverified)


    The problem is that you have no one in government, that has the background to protect the public interest in these deals. You have these business folks all making six figures on the one side, and look at what happened at South Waterfront, we find that there was a planner already on the developers payroll while he was still on the City's, and the former City Engineer, also on that same developers payroll, as a consultant in a consuting firm set up and half owned by the developer making all the key decisions.

    No business person in the world would have committed the funds like the City on a questionable cost estimate (remember the $15.5 million vs the $55 I believe approaching $60 million now), Even the Art Museum is suing the AIA when they have thier 30% cost overrun, why isn't this the case on the TRAM.

    I have seen some people try and help the City, but have very little influence in conterbalancing the more saavy business interests, the one or two who did run some interference to this were either left in frustration, were reorganized, or hired by the developers like Mr. Brown.

  • Randy Leonard (unverified)

    Cab- PDC is not a business. It is a publicly funded economic development agency that is supposed to cause developments to occur that otherwise may not.

    For an example, the PDC high rise project in the Pearl that supply's housing to senior citizens with a median income between O% and 30% would never be built with exclusive funding in the private sector...there is just no money in it.

    The Central City Concern high rise on the corner of the Park Blocks and W Burnside also needed PDC funds to be constructed...again, because it is not a money maker.

    However, I think you do have a point. I think PDC does think of itself more the way you believe it should operate it than do what most taxpayers do.

    Thus, the root of it's current problems.

  • Randy Leonard (unverified)

    John- I will look into the Gatway project to find the answer you asked. Thanks.

  • John Capardoe (unverified)

    Thanks Randy,

    There is something else I have wondered about.

    As noted in the previous post even though there was Eric Sten's well reported "ban" on property tax abatements after the South Waterfront Alexian Fiasco, I was surprised to see this one come up under the label of Transit development.

    1. Is there any accounting of the lost tax income to the City, County and School Districts from these Transit Abatements?

    2. Are there any other type of abatements, I know there are the historical ones, maybe sustainable credits for green roofs I could see in Portland, is there any accounting of the totals of lost revenue on that?

    I know like many other folks I was disappointed at the Sun Schools decision at the county. I think it helped a lot of kids, and allowed for positive interaction between different demographics of kids. Something we need more of.

    You see a lot of rhetoric by folks on these blogs and you don't know what to believe.

  • Chris Andersen (unverified)

    I caught a distinct whif of focus-group-tested spin in that Oregonian's editorial when they continually used the term "premium wage" instead of "prevailing wage". "Premium wage" makes it sound like the program is designed to give public works employees a higher salary then the average worker gets when "prevailing wage" laws are designed (as I understand it) to make public projects be competitive (no less, no more) than privsate projects.

    Was I the only one that noticed that?

  • John Capardoe (unverified)


    Your observation is right on target.

    The other thing is that the process and qualifications to be come a journeyman electrician are as stringent as any four year college degree, perhaps even moreso because these tradespersons can't simply memorize and spit back answers like the traditional higher education regime, they have to make things actually work and function in the real world.

    There is a four year training a classroom regime, with a one in four acceptance rate into the apprentice programs, and as Rodney Dangerfield puts it, there is very little respect for the "blue collar" workers.

    BTW before anyone asks I am white collar not blue, but have had the good fortune to work with these folks off and on in my career before giving up construction and travel, I have a tremedous amount of respect and many relatives that work in construction. These guys earn their money. I would invite doubters to visit a construction site, and see them hanging off the high iron, or in a trench fixing a burst sewer line.

  • David Wright (unverified)

    Interesting note on the different connotation between "premium wages" and "prevailing wages".

    Certainly words have emotional meaning beyond the dictionary definition, hence the "value" of spin. "Premium wages" could be either a good or a bad thing, depending on your point of view.

    It is a revealing and almost certainly intentional choice of words, but it is not inaccurate.

    The laws only affect those projects where wages could otherwise be lower than the "prevailing wage". They require the project to cost more than it otherwise would need to. Thus, the project must literally pay a premium (as in, per the dictionary, "A sum of money or bonus paid in addition to a regular price, salary, or other amount") for labor.

    If I could offer the lowest bid for a job at, say, $15/hour average labor cost, but you must according to the prevailing wage law pay $18/hour, then you are paying a $3/hour premium. Again, maybe good, maybe bad -- but it is a premium.

  • boikin (unverified)

    The PDC is another work of politicians who think their job is to reinvent Portland according to some grand vision that only a city elite could understand. Now you're wrapped up in its minutia. Save the vision..we can't afford it.

    Yours should be a boring job. Try fixing potholes and properly funding the jails, police and fire. Try protecting downtown businesses from criminals. Or are those things lacking in vision?

  • Bob Tiernan (unverified)

    Mr. Randy Leonard: PDC is not a business. It is a publicly funded economic development agency that is supposed to cause developments to occur that otherwise may not.

    But why?

    Bob Tiernan

  • Bob Tiernan (unverified)

    Jennifer W: Of course the PDC is corrupt. They were created for that very purpose: the politicians needed an "arms-length" relationship between themselves and their benefactors in order to maintain plausible deniability.

    Exactly! The PDC is an example of the kind of unaccountable (to the public) and undemocratic agency (full of appointed bureaucrats) that Clint Bolick wrote about in his book, "Grassroots Tyranny: The Limits of Federalism".

    It shouldn't exist, period.

    Bob Tiernan

  • Bob Tiernan (unverified)

    <b<boikin:< b=""> Yours should be a boring job. Try fixing potholes and properly funding the jails, police and fire. Try protecting downtown businesses from criminals. Or are those things lacking in vision?

    Excellent! But keep in mind that the above items don't come with ribbon-cutting ceremonies, complete with nonsesne like that over-sized scissors Sen Mark "Pork Barrel" Hatfield used when the Blue Line MAX opened.

    Bob Tiernan

  • Bob Tiernan (unverified)

    John Capardoe: Good Point David, there was also a weird deal like that in South Waterfront where the private developers bought two blocks of land for some amount and turned around 9 months later and sold back one of the blocks to the city for "affordable houseing" for a large profit I believe in the millions.

    Well, what would you expect when the government gets to pick winners and losers, and with other people's money? These Fat Cats wouldn't be getting these profits of the government wasn't involved. Will you guys ever learn?

    New Urbanism, SmartGrowth (so-called), etc is all about corporate welfare, plain and simple.

    Bob Tiernan

  • Dan Gardner (unverified)

    Randy someone asked on third and oak how it could go from 1.7 million spent on the property to a negative 2.7 million on the appraisal given to BOLI the answer is by guarenteeing the dewveloper and his investors a 25% profit margin

  • Steve (unverified)

    How about a fix like the thing we are voting on to "fix" PFDR? Heck that will have the whole problem solved in about (according to the Oregonian), oh say 31 years of property tax increases. This PDC thing is too much pot calling the kettle black - PDC is a straw man to divert people with.

  • Aaron Johnson (unverified)


    PDC provided us with a memo on May 6, 2006 detailing the sales prices as of that date. At the time the sales prices for the 1 Bedroom units ranged between $99,000 and $124,000 and the 2 Bedroom units ranged between $157,000 and $184,000, representing a 6% average increase over the price estimates originally presented by the developers. According to the projects website (www.gatewaytowers.net), the 1 Bedroom units are now priced between $115,000 and $131,000 and the 2 Bedroom units are between $164,000 and $204,000, representing an average increase of 19% over the original proposal. Despite the increase in prices, the units still meet the requirements of PDCs TOD tax exemption program.

    Aaron H Johnson Policy Advisor Office of Commissioner Randy Leonard 503-823-4686 For News & Updates, see Randy's website @ www.portlandonline.com/leonard


connect with blueoregon