Shining a light on PDC

Randy Leonard


An editorial in today's Oregonian entitled "Don't weaken city's redevelopment agency; Maneuvering by the Portland City Council jeopardizes the PDC's independence, which is its greatest strength " requires a response.

The editorial argues that the efforts by three of us on the Portland city council to have the PDC be more accountable as to how it budgets and spends tax payer dollars will undermine the effectiveness of the Portland Development Commission (PDC).

It also is written from the premise that if the elected city council had budget oversight of the PDC that none of the great developments PDC has been associated with in the past could have been accomplished.

I do not believe either of those premises to be true.

It is unfortunate that the Oregonian editorial board continues to ignore some of PDC's behavior that undermines the confidence that both the city council and the public must have when literally hundreds of millions of dollars are being leveraged by the city's most powerful economic development arm.

As an example, let's update what has been going on with a piece of property the Portland Development Commission acquired on SW 3rd and Oak in 2002.

The following is an excerpt from a BlueOregon article I wrote last July 2nd, entitled "PDC; Out of Control";

'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.'

Since that article was written, I have introduced and the council adopted the resolution calling for the audit of the entire 3rd and Oak transaction. Unfortunately, PDC's behavior in reaction to the passage of that resolution last July could not have been more telling as to their need for more accountability.

As part of the report the resolution called for, another appraisal done by the council's appraiser found the property was worth $1.86 million, not negative $2.7 million as the PDC's appraiser suggests. In fact, our appraiser said that PDC's appraisal should never have been used to determine the value of the 3rd and Oak property.

The new appraisal, however, was only part of what the resolution required. The PDC was also required to turn over any emails or documents relating to the 3rd and Oak transaction.

However, the PDC informed the City Attorney that they would not turn over any documents because they considered the communications to be protected by 'attorney/client' privilege.


Based on that response, I filed another resolution in early November subpoenaing all of the documents that related to the SW 3rd and Oak deal.

That's when things got really interesting.

Various PDC officials told me and the press that they did not know why I had filed the resolution. The city attorney was, they insisted, wrong. The PDC did, they said, comply with the resolution.

I was mystified. I try always to be very, very careful in doing my research before I take a public position on any position.

As it turned out, the city attorney and I were not wrong. The PDC, once again, had decided on a strategy to mislead the council and the public. They had in fact not produced a single document and had determined not to -- notwithstanding their very public statements to the contrary.

During a regularly scheduled meeting with the PDC, nearly a month after I filed the resolution to subpoena the PDC documents, I expressed frustration that even as of that date, November 29th, the City Attorney had yet to receive a single requested document that the original July resolution demanded.

That afternoon, finally, the PDC released the documents.

However, it soon became clear why the PDC was fighting the council's efforts to see all of its emails on the deal.

In an Oregonian article published on December 1st, reporter Scott Learn wrote of an email from the developer that was to receive the SW 3rd and Oak property from the PDC for free;

"The documents released Wednesday show that Trammell Crow's Tom DiChiara drafted "appraisal instructions" for the public-private deal in May 2005. Those instructions included taking a project-specific "land residual" approach that resulted in the negative appraisal. Development commission officials edited the instructions and sent them to appraiser John Ingle, then of PGP Valuation.

Critics have long said the development commission is too cozy with builders. Among those critics is Portland City Commissioner Randy Leonard, who said Thursday that the developer's involvement in the appraisal preliminaries was 'inappropriate for a public agency.' "

It is entirely inappropriate for a public agency to allow the benefactor of a piece of public property to develop the criteria by which a piece a property is going to be valued.

Finally, since I was first elected to the city council in November, 2002, the PDC has refused to allow the city council to look at its line item annual budget during the city councils annual budgeting process. There is to this date no accountability to any elected official as to how and why PDC spends its money. That is wrong and needs to be corrected.

What the Oregonian editorial did not point out in today's piece is that the city attorney advised the citizen Charter Review Commission it could not recommend giving the city council authority over the PDC budget without the state legislature amending state law using precisely the language Commissioner Sten has proposed.

In four years on the council, I can honestly say I have underestimated the effort required to make city government more accountable to the citizens of Portland. The defenders of the status quo are powerful and have a ferocious determination to keep things just the way they are.

I think it is fair to say that is going to change.

However, a majority of the city council believes that a better PDC will result from our current efforts to make it more accountable. I believe we can have development and transparency without sacrificing good economic development.

Stay tuned.

  • (Show?)

    Randy, perhaps you can help educate me a little bit. I'm confused by the coverage in the press about the PDC item on the City's legislative agenda.

    As I understand it, the question is whether the City Council can declare itself to be the City's urban renewal agency (as it is in many other communities in the state).

    My understanding is that PDC's separate status arises from the City Charter. Why would we go to the legislature to undo something that the citizens of Portland established in the charter? Isn't this a local policy question? Or is there some other dimension of state law that I'm not appreciating?


  • Randy Leonard (unverified)

    As I wrote in the piece, Linda Meng, the City Attorney, has advised the Charter Reform Commission and the City Council that a Portland charter change allowing council to oversee the PDC's budget first requires an amendment to the state statute that authorizes development agencies in cities within Oregon.

    For more information contact Commssioner Sten's office. He has studied this aspect a lot.

  • Kevin (unverified)

    I have no idea what "land residual" means in real estate appraisal terms, not being an appraiser. But on the face of it I don't understand how any rational being could accept the notion, barring horrendous toxic contamination or something of that order, that any piece of property could be valued at negative $2.7 million, much less one in a prime real estate market like downtown Portland. It makes no sense at all.

  • jim karlock (unverified)

    Hi Randy! I want to take this opportunity to thank you for shining some light into the dark hole of Portland.

    Please consider the following:

    • I am led to believe that the tram going from 8 million to 56 million, is just the start of, headline grabbing , cost over runs in the SoWhat. Better to stop it now than later when the bill gets even bigger.

    • There are rumors that the tram is over budget again.

    • Taxpayers in Portland’s urban renewal districts are currently paying $65 million annually that is going to benefit residents and developers of these urban renewal districts, while the general public has to make up the difference and pay for their basic services.

    • The 1/4 billion slated for the SoWhat is solely to develop the land the way the city wanted. The original land owners wanted to develop it differently and without tax breaks or significant subsidies. Had the city let them, we would be collecting property taxes from a whole neighborhood by now, instead of looking a, probably, ½ BILLION, including interest, of lost city revenue stretching as far as 40 years into the future. Although it was the city’s decision (as far as I know), the PDC was the implementing organization. As long as such an organization exists, the abuses will continue - the temptation is just too great for the developers to pocket millions and for the politicians to get campaign donations. (Please don’t give me that polluted industrial wasteland stuff - the important part is that the original owners wanted to develop without subsidies, were stopped by the city and that that neighborhood would be paying taxes by now.)

    • Why don’t we give equal opportunity to all neighborhoods in Portland: Have the city issue bonds to pay for each neighborhood to upgrade its streets, improve the street lighting, lay tracks for a streetcar, add or rebuild the sewers, parks and store fronts. Then let the people make payments on the bonds instead of property taxes. Isn’t this a pretty accurate description of PDC’s specialty: UR? Obviously we can’t - that is the point - it is unfair to pick some neighborhoods to receive tax money from others, including from some people that have to choose between food and property tax.

    But I want to encourage you to go further and work to shut down the PDC and urban renewal entirely. It had been perverted into a way to funnel hundreds of millions to favored developers.

    Thanks JK

  • jim karlock (unverified)

    One more comment:

    If you want to make the city more accountable, just fire anyone who blocks, delays or screws with public records requests.

    For instance, I asked to be placed on, without posting privileges, the email list for the peak oil task force and was refused. I was told to file public records requests instead. At this point, I think the very existence of such an email list is probable a violations of the public meetings law by being a place to conduct business out of public view. (A blog would probably be the legal way to do it - with posting being restricted to members only)

    Thanks JK

  • dyspeptic (unverified)

    Randy, Thanks for taking the time to answer the Oregonian's outrageous editorial defending the corrupt and highhanded activities of the PDC. I can't wait for the next time the O tries to strike the pose of chief local champion of fiscal conservatism and honest government. One will only need to mail them a copy of this editorial in which they try to preserve the organ of the biggest and most blatant raids on the public coffers in Portland's history from the norms of transparent, honest management and accounting.

    Please keep up the good work on this, by which I mean the effort to bring PDC completely under the control of Council. I am so happy that something is finally being done about this. Just wish the barn door had gotten closed before some of these other boondoggles got out. Have no idea who Potter is listening to on this, but would not have voted for him if I'd known he was going to be so easily played by the good old boys.

  • Dave Lister (unverified)

    The struggle over the PDC is arguable the biggest fight in Portland politics since 1958 when it was founded. Both Randy and Erik were kind enough to give me interview comments on this topic which will appear in my column in the January issue of Brainstorm NW magazine.

  • urbanplanningoverlord (unverified)

    The whole srructure of quasi-independent agancies such as the PDC is based upon the reforms of the early 20th century. These reforms were based upon the premise, entirely reasonable at the time, that quasi-independent agencies would be less corrupt and more efficient than the outrageous activities of corrupt city governments and the vote-pandering stupidities of elected officials.

    It's time to rethink the whole concept.

    Local governments have, for the most part, eliminated the kind of graft and corruption that infected such bodies 100 years ago. The record isn't perfect, obviously, but at this point I don't think local elected officials would be more corrupt than the PDC has proven to be.

    Local governments are still prone to making stupid financially irresponsible decisions to troll for votes, something the PDC and other agencies don't have to do. But maybe trolling for votes isn't such a bad thing after all - another way of putting it is "serving the will of the people."

    Finally, quasi-independent governing bodies, almost as soon as they became popular, became their own special interest, and have tended to represent the interests of the wealthy and powerful over the interests of the general populace. Arguably, the PDC has done just that (and I speak as less of a critic of specific PDC policies as Councilor Leonard, and heaven forbid, J Karlock). This tendency is such quasi-independent agencies was devastatingly documented in Robert Caro's expose of Robert Moses' baleful influence on New York over several decades, through the use of such agencies to avoid the popular will and pursue destructive and foolish policies without a check.

    So by all means bring the PDC back into city government. Don't expect a better set of decisions, they may even be worse. But they will be made by persons directly accountable for their decisions to the electorate.

  • Frank Ray (unverified)

    Randy - Thanks for your good work on holding PDC accountable for their decisions.

    If the City Council wishes to have more oversight, a simple solution would be to dismiss some members of the current Board, and appoint the City Commissioners as Chair & Board Members. Actually, I think that is how most cities in Oregon operate their UR agencies. I believe this requires no legislative action.

    Am I missing something?


  • (Show?)

    Local governments have, for the most part, eliminated the kind of graft and corruption that infected such bodies 100 years ago. The record isn't perfect, obviously, but at this point I don't think local elected officials would be more corrupt than the PDC has proven to be.

    Does it occur to anyone that graft and corruption are less now because the system is less vulnerable to it not because people have fundamentally changed in that time? When you make the potential gain from graft and corruption much less, you attract fewer candidates whose primary interest in engaging in graft and corruption.

    I have as many questions and concerns about how PDC has operated as anyone does. I'm glad Commissioner Leonard et al are tackling the issue. However, I am concerned that we could jump out of the frying pan into the fire on this one.

    PDC has it's quasi-independence for good reason. When the people making the development decisions are the same people who make all the other decisions for the city the opportunities for collusion skyrocket. I'm not worried about our present city council, I'm worried about the city councils that will be elected in the future. I think it is naive to think that we are immune to graft and corruption here just because we've done pretty well lately.

    I urge Commissioner Leonard and his colleagues to continue to find ways to require PDC to be more transparent and accountable. However, I have grave concerns that merely transferring major decision-making to the city council will not have that effect in the long run and might prove to be a serious step backward.

  • raul (unverified)

    I would like to see PDC money equally allocated to neighborhoods and areas in Portland. In SE, we opened a small coffee shop by borrowing against our home equity. The SBA is almost impossible to navigate, and you actually have had to be in your business for two years to get a small business loan. Clear as mud?

    After cleaning up this storefront, we have attracted other small businesses ( also locally owned ) to the area. The owners of these businesses also borrowed against their homes. Could their maybe be a PDC section that works with micro businesses that require 50K or less?

    Our neighborhood is improving, and it no longer looks like a ghost town across from the Mt Scott rec center. All for less than the price of a fat cat's condo.

  • Fred Heutte (unverified)

    Hi Randy... whatever you do, don't give up on stopping the SW 3rd & Oak giveaway. My office is exactly one block away so I am very familiar with the property and its history.

    By the way, should construction actually commence in the next two years it will be an interesting problem trying to accomplish that on a quarter-block adjoining the new temporary bus mall routes on 3rd. This probably means the closure of at least one lane of Oak going westward, which would create chaotic traffic problems for blocks nearby.

    This is only one partial block, but it illuminates PDC's high-handed approach and the kind of absurd self-adulation that only five decades of unchecked bureaucratic operation can engender.

    I'm not a big fan of South Waterfront, an out-of-scale blot that overuses its footprint and is deliberately disconnected from the rest of the city. The soulless Pearl and River Districts pass all the tests of density and coordinated development while creating a street level dead zone where the high rises crowd on each other. Living in Buckman, I can only shake my head at the likely course of Central Eastside development, the only advantage there being the snail's pace of formal progress in district planning which has allowed a vibrant if somewhat disjointed revival to occur which we can enjoy for another decade or so before PDC's sterile "vision" kills that off too.

    3rd & Oak only reproduces in miniature the tendency toward gigantism that afflicts self-important and unaccountable bureaucracies with control of substantial money and development leverage.

    It's never too late to change that, but I think you have correctly focused on the resistance of the status quo, and Erik was right to say that getting a handle on PDC is a much higher priority than taking yet another swing dismantling Portland's so-called archaic council government system, which somehow, by accident I suppose, keeps producing better results than other cities when someone cares enough to make it work. It tends to work when city commissioners and the mayor take their jobs seriously in terms of serving the whole city, rather than bowing to downtown developer demands.

  • skeptic (unverified)

    This is a power grab by the Council and by two members who are positioning themselves for a mayoral run.

    Increase oversight of the PDC. But watch out if the Council gets their hand on that source of patronage and graft.

  • skeptic (unverified)

    It's never too late to change that, but I think you have correctly focused on the resistance of the status quo, and Erik was right to say that getting a handle on PDC is a much higher priority than taking yet another swing dismantling Portland's so-called archaic council government system, which somehow, by accident I suppose, keeps producing better results than other cities when someone cares enough to make it work.

    True? Ot was it the independent agencies--TriMet for transportation, PDC for development (we do credit them for the Pearl, right? And Randy, Erik, and Sam are all big supporters of SoWa)--and Metro for the UGB? Is it true that the city is really governed all that well and can we expect them to do any better than PDC has done for the past few decades?

  • skeptic my ass (unverified)

    Don't ya just love these anonymous PDC employees posting?

    You are way transparent.

  • lin qiao (unverified)

    Does it occur to anyone that graft and corruption are less now because the system is less vulnerable to it not because people have fundamentally changed in that time? When you make the potential gain from graft and corruption much less, you attract fewer candidates whose primary interest in engaging in graft and corruption.

    I kind of suspect outright graft and bribes are pretty minimal here in Portland, but allow me to give one little example of collusion among agencies and power-mongering. This is something I know about first-hand.

    We the citizens of Multnomah County approved bonds for library renovation and construction in the around 1998, I believe. In late 1999/early 2000, I attended meetings at the Hollywood branch library to discuss plans for replacing that very heavily used branch. The developer and the then-head of the library system waltzed into these meetings to decree that the new library building would be of such-and-such size exceeding zoning allowances. Word got around the neighborhood. At one subsequent meeting, county commissioner Serena Cruz showed up to tell those assembled that she was way smarter than the rest of us and we should just sit down and shut up. My spouse overhead the head of the library system telling the developer that he should just "tell people what they want to hear". It became glaringly obvious that the fix was in. The only way the building plan was scaled back was by several hundred people showing up at a city council meeting, where one person after another testified against the zoning variance (which was of course something that the city, not the county, had to approve).

    So no, I don't think there was any outright graft, but there was cetainly a lot of swaggering display by public officials who ought to have known better, because, well, they were convinced they did know better than the rest of us, whom they just treated as NIMBYs. Judging by Ms. Cruz' subsequent behavior on the county council, she certainly hasn't changed her tune....

  • (Show?)

    Go get 'em Randy. While I like the idea of an independent PDC in principle, this bunch of corrupt hooligans have demonstrated themselves to be, beyond any doubt, unworthy of the public trust.

  • lin qiao (unverified)

    PDC's appraisal methodology is clearly explained here

  • (Show?)

    I kind of suspect outright graft and bribes are pretty minimal here in Portland...

    Yes, but that was not always the case. Check out the subject of the Oregonian's second Pulitzer or Phil Stanford's book rehash of same.

  • Fred Heutte (unverified)

    Apparently some here don't read carefully. I certainly did not advocate for the city to take direct control of PDC. I'm not there yet.

    I have yet to get up to speed on the full range of positions, but I think more accountability in some form, and effective accountability rather than a bunch of hand-waving such as useless "oversight task forces," is in order for PDC. Decades overdue, in fact.

    The legislative and council processes are there precisely to surface all positions and then find a good approach and actually enact it. The Trib's smash story this week about the council's on-again-off-again approach to transparency was a good reminder of the importance of that process working openly. It doesn't always produce great results, but it produces better ones than "tap hearings" in the legislature (not Karen Minnis' innovation to be sure, but one of many barriers to transparency she institutionalized) or pre-announced vote positions by council members before the public has even had a chance to have a say.

    So look at it this way: bringing PDC to heel is a gut check for both the solons of Salem and the council critters of Portland. As someone said a long time ago: "It's time to move. It's time to get down with it. And what I want to know is, are you ready to testify?"

  • flowerbells (unverified)

    I love you, Randy! You are always right there with plain English. You are one politician who does not talk through both sides of his mouth.

    One of the things I wrote and called Tom Potter about during his campaign -- before he was elected -- was to take over the PDC and make it answer to the City Council. Looks like it will be mainly you who actually gets this to happen! You GO, guy! You ROCK.

  • Steve (unverified)

    Great, let's let City Council oversee PDC $350M a year in funds - sorry, same henhouse different foxes.

    Each member on the City Council has been able to blow money in unique and differnet ways from Erik's computers to Sam's parking lot shuttle for OHSU.

    Once they get their hands on PDC money, it will be one more pot to dig into. Look at the wonderful planning Mr Leonard did setting up PFDR. No one on the CIty COuncil has shown any financial acumen or restraint when it comes to spending for the public good.

    <h2>Why not just have an INDEPENDENT and NON-BENEFICIARY put some clamps on PDC spending?</h2>

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