"This is just politics at its worst!"

Randy Leonard

In today’s Oregonian, reporter Randy Gragg defends the PDC’s negative $2.7 million dollar appraisal of the publicly owned SW 3rd and Oak property and gifting it to private developer Trammell Crow as a “… rather routine real estate technique…”.

Mr. Gragg criticizes city council questions of the PDC’s negative appraisal -the credibility of which was questioned by an independent analysis conducted by the city attorneys office last fall- by observing that questions of the PDC’s conduct “is hardly worthy of a city commissioner’s worry, much less an argument for major reform.”

More to his thesis, Mr. Gragg observes “Randy Leonard thinks PDC is too cozy with developers and not cozy enough with labor unions.”

In Friday’s Portland Tribune, developer Homer Williams was quoted as saying “This is just politics at its worst. The City Council should just leave the PDC alone… the required subsidies might be higher because of the new wage requirements.”

First, if the PDC allowing the developer that is going to financially benefit from the transaction to write the appraisal instructions is a “…rather routine real estate technique…”, then that practice needs to no longer be “rather routine”. In fact, an independent appraiser hired by the city attorney to analyze the PDC’s negative appraisal determined that their appraisal should have never been used as a basis to establish the value of the SW 3rd and Oak property.

And as far as what I choose to focus my efforts on, I cannot disagree more that this transaction is not worthy of my time and effort. In my view, a public agency that clearly manipulates an appraisal to justify gifting it to a developer in order to avoid prevailing wage and affordable housing requirements calls into question the credibility of all government operations.

Mr. Gragg’s snarky observation that “Randy Leonard thinks PDC is too cozy with developers and not cozy enough with labor unions” is apparently based on his mistaken understanding that Oregon’s prevailing wage statute applies to only unionized work forces.

It is true that I do believe one of the major motivations for PDC and their development partners is to avoid paying prevailing wages on large public development projects. However, prevailing wages are determined by a survey of actual wages and benefits paid to all workers in a given geographic region- be they union or not.

The comment by Homer Williams that “This is just politics at its worst. The City Council should just leave the PDC alone…the required subsidies might be higher because of the new wage requirements” is a hand-in-hand argument with Randy Gragg’s. Both are really back door criticisms of paying family wages and benefits to workers on these large projects.

While Mr. Gragg and Mr. Williams both attempt to distract the focus from workers being paid living wages with such diversionary -albeit “sexy”- comments such as “the politics are dangerous” (Randy Gragg) and “this is just politics at its worst” (Homer Williams), the fact remains that this is a struggle that working class men and women should not be unfamiliar with.

While apparently it is over the top for the council to question the gifting of a valuable piece of publicly owned property to a private developer, it is equally disturbing, to both Randy Gragg and Homer Williams, that the council would have the temerity to require that the PDC pay the workers on those same development projects family wages and benefits.

Further, prevailing wage requirements do not mandate that public projects be built by unionized workers. In fact, many large development projects are built using non-union labor. However, the prevailing wage statute does require that all workers on the project be paid at a rate that the prevailing wage survey indicates is the standard wage in that particular region paid to various construction workers whether those workers belong to a union or not.

In addition to avoiding paying prevailing wages, I have also consistently said the SW 3rd and Oak deal was an obvious attempt by PDC to avoid the city’s affordable housing policies. If a piece of publicly owned property given to a developer had “no value” then, just as in prevailing wage requirements, the requirement to build a minimum number of housing units that working class men and women could afford would not be mandated.

There is a certain “elitism” that permeates much of this debate. I often attempt to ignore it and stick to the issue. However, Friday’s Tribune and today’s Oregonian are really over the top examples of how out of touch some are of the needs of average working class men and women.

While some may think the council’s attempted oversight of PDC is “politics at its worst”, for others, especially working class men and women, the city council holding the PDC accountable is government at its best.

  • jami (unverified)

    who reads the oregonian in portland? i read about this in the willamette week and the mercury and cheered you all the way. i hope you do get to the bottom of why the pdc went out of its way to give valuable public land away for $0, and thanks for applying the brakes in the mean time.

  • lin qiao (unverified)

    My Gawd, he actually used the words "working class". "Class"--can you believe it? How dare he write this!!

    I think it's fantastic that Commissioner Leonard so clearly worries about people who don't live in the Pearl District, who carry a union card, who haven't got "connections".

    You're damn straight there's elitism involved in way the PDC cozies up to developers. The fact that out local newspapers support this nonsense is disgusting.

    As for Mr. Gragg, has he ever seen a subsidy developers that he didn't like?

  • EB (unverified)

    Mr. Leonard, I would re-read the article and not focus on just the comments about you.

    The goal if the article is to show that the PDC, given the right leadership, direction and independence can have a powerful and positive influence on developement in Portland. He clearly states that he does not disagree with Eric Sten's position, just his methods. Sten needs to direct his efforts strengthening PDC to achieve his long term goals of providing affordable housing.

  • (Show?)

    Randy, the only thing I might say about your piece is that regardless of how above board the city attorney's office might be in selecting and then not interfering with a third party appraisal, the fact that the City is paying for it means it's not "independent," IMO. Even though I definitely trust that third party analysis more on an implicit basis, surely you recognize that what's up for consideration are differing appraisals by two differing parties. Insinuating that the City's version should be accepted uncritically as "independent" doesn't wash.

    That said, you've got my support on this one--anybody who tries to claim that PDC reform is solely about this one incident is either full-on batty, or just hasn't been paying attention the last few years.

  • Jon (unverified)

    I dunno about the "living wage" argument. When I was in construction (just a few years ago), most field workers' wages were in the $15-$20/hour range, certainly "family wage" earnings. "Prevailing wage" for us on public projects meant we made what the public sector construction workers made...sometimes as high as $30 per hour! So I can understand a developer's argument. However, if Homer doesnt like the rules, then he shouldnt be working on public projects. But I guess then he wouldnt be a millionaire.

  • Jon (unverified)

    Seems prevailing wage can be as much as $40/hr now in Mult. Co. depending on your specialty:


  • (Show?)

    I am all for Commisioner Leonard and the other commisioners checking on the activities of the PDC. There may have been a time to keep the 'dirty' pols away from development activities in our city--but I believe that time and place is in the past. If our elected city officials do not track how the PDC gives millions and millions in incentives and our tax $$$ , who will?

  • politicallogic (unverified)

    Doesn't it seem fair to say there is something that we feel in our gut is unethical about what the PDC did?

    This vividly illustrates my point on another thread about what Courtney and Brown should be focusing on if they are serious about bringing a new era of ethical government to our state. They first need to understand why anyone with a non-pathological personality recognizes there is something inherently unethical in actions like this by governmental and quasi-governmental agencies, and then focus on drafting ethics legislation to properly address this kind of unethical behavior by holding the individuals responsible criminally and civilly liable.

    Commissioner Leonard, you and your allies on the PDX Council could really start the ball rolling by addressing your concerns about what has gone terribly wrong with the PDC to the state legislature as examples to study for ideas for ethics reform.

  • urban planning overlord (unverified)

    Wow, the outrage. I guess the "wrong Randy" (as piler on Jack Bog tags him) hit a nerve.

    I don't see any substantive rejoinder from "right Randy" Leonard to the specific claims of "wrong Randy" that the 3rd & Oak site had, indeed, a negative value. Any specific response, Commissioner Leonard?

    As for the "prevailing wage" stuff, any response to the claim made by an earlier poster that public sector prevailing wages are way out of line and do nothing more than unjustly enrich well-connected labor union members at the public's expense?

    Finally, politics. Commissioner's Leonard's vindictive purge of the Planning Department when he was in charge over there is one of the best arguments for keeping the PDC out of the mitts of the Portland City Council.

  • Randy Leonard (unverified)

    The rejoinder to the PDC negative appraisal, as I said in the post, is the independent appraisal contracted by the city attorneys office last fall that said the actual value of the 3rd and Oak property is $1.86 million...not negative $2.7 million as PDC's appraiser found.

    The independent appraiser also sharply criticized the PDC's appraisal methodology.

    Also, I have never been in charge of the planning department.

  • Vidictive, Moi? (unverified)

    UPOL (who must get a shorter name).

    I actually thought that bad Randy had some good points. I'm a bit perplexed by the good Randy's (and others) intentions actions here...and truth be told, a bit suspicious. If PDC now is Ying, Randy seems to want Yang...and it seems to me that we need something in the middle, which to my ear Randy G was suggesting.

    I know that it is popular to pile on the PDC and developers at the moment (and sometimes for good reason)...but freakin take a minute to look around Portland. Some very good work has been done.

  • urban planning overlord (unverified)

    Correction, the reign of terror occurred at the Bureau of Development Services. Or so I've heard.


  • Randy Leonard (unverified)

    If you consider transparent transactions involving publicly held property to be "the middle", we are in agreement.

    I probably would have disagreed that publicly subsidizing market rate condominiums was good policy, but had PDC transferred the 3rd and Oak property to a private developer while acknowledging its true $1 million dollar plus value, I certainly would have never questioned the integrity of PDC's processes.

    The PDC is a public agency. As such, it must conduct all of its transactions in a manner this is above reproach.

    No serious thinking person can argue the 3rd and Oak deal was handled properly.

    Unfortunately, whether it is attempting to review their budget or asking questions about various PDC policies, the 3rd and Oak deal is more of an insight into the PDC culture than it is an aberration of their processes.

  • Vindictive (unverified)

    So Randy, were your dealings with the Police and Firefighter's disability funds alwasys transparent?

    No. And there may be good reason for that. Does that suggest a culture in your office or at the council level that needs to be rooted out?

    The 3rd and Oak deal stinks. Fine. Let's not get on our high horses unless we have reason.

  • Randy Leonard (unverified)

    "So Randy, were your dealings with the Police and Firefighter's disability funds alwasys transparent?"


  • Cough (unverified)


  • (Show?)

    The rejoinder to the PDC negative appraisal, as I said in the post, is the independent appraisal contracted by the city attorneys office last fall that said the actual value of the 3rd and Oak property is $1.86 million...not negative $2.7 million as PDC's appraiser found.

    The independent appraiser also sharply criticized the PDC's appraisal methodology.

    Guess you don't agree with me on the whole "paid-for-can't-be-independent" thing, huh? :)

  • Randy Leonard (unverified)

    TJ- Ordinarily I would. However, the appraiser's own findings and language make clear their independence of undue influence.

    In fact, PDC has reacted to requests from the city attorney as they have from any outside entity. It was an email from Linda Meng on that subject to the entire council that prompted me to file the subpoena of PDC emails and documents this past November.

    The city attorney's office has been in a very tough political situation. However, Linda Meng has led the review of the 3rd and Oak transaction with integrity and professionalism.

    I cannot imagine getting any more impartial work than what they have produced so far.

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    I don't see any substantive rejoinder from "right Randy" Leonard to the specific claims of "wrong Randy" that the 3rd & Oak site had, indeed, a negative value.

    I can't speak for anyone but myself, but isn't it kind of remarkable that the "negative value" stems from a "lease agreement" for a parking garage from a company that no longer exists? Even the newest appraisal doesn't mention that SKB-LaNoue, LLC, who offered this amazing lease of a garage for 99 years, at $1 per year, is dissolved and no longer has any interest in the property.

    I'll repeat, how is a lease agreement between a limited liability corporation created for this property sale and dissolved after the property is sold to PDC, able to create a lease obligation for 297 years?

    If you no longer own a piece of property --in, fact, if you don't exist, as this Limited Liability Corporation doesn't-- how can you lease that property? Who is the $1 per year being paid to?

    So it bothers me that even the new appraisal, while referencing this lease as an "encumbrance," doesn't mention that the lessor is a dissolved LLC. LLCs are created precisely so that liabilities are, uh, limited.

    The second encumbrance on the property --for an easement for ingress and egress-- "becomes effective only if and when the lease described (above) is terminated."

    I'm no attorney, but if I bought a piece of property, I'd sure wonder how the now dissolved corporation who sold me it obligated me to do anything. And, bottome line, even if somehow it did, that obligation was known when I bought the property. That PDC paid market value for a property, and almost double what the seller paid just a few years before, then suggests a few years later the property has negative value because of obligations existing when they bought it...that's one heck of a way to do business with public money.

  • Zak J. (unverified)

    Here's what WW had to say about this: A Suite Deal.

    Elsewhere, the contracted company, Trammell Crow, is reviewed unfavorably in at least one study as a literal text-book example of the how services and wages both go down as a result of outsourcing services (maintenance in this case): See Appendix A here: Outsourcing, its Discontents, and some Solutions.

    Quoted from the article: "The union members remained Penn employees throughout the life of the contract. But there have been wholesale changes among the supervisors, who were Trammell Crow employees. There has been a 70 percent turnover in the personnel managing building operations and maintenance crews over two years."

    From what I can gather from both the U Penn and Harvard studies (see Appendix B, same paper), Trammell Crow is an established "services" vendor (in addition to a being a developer) and that it makes money off of its service contracts by depressing wages and benefits.

    Is this a partner we want for Portland?

  • Ross Williams (unverified)

    "Seems prevailing wage can be as much as $40/hr now in Mult. Co. depending on your specialty:"

    Which is a reasonable amount in many cases. I think most consultants charge at least that much per hour. High hourly wages go with the territory of irregular work. And a lot of specialized construction work is irregular.

    You can argue there shouldn't be prevailing wage laws, but there are. And until that changes the PDC should, as a public agency with public employees, be supporting them regardless of the personal opinions of the staff or its board. The same goes for the affordable housing requirements.

  • Zak J. (unverified)

    P.S. The larger point I meant to make is that apparent attempt to be excused from using union labor or paying prevailing wages seems to be larger than this single project--it seems to be a basic tenet of Trammell Crow's business plan.

  • politicallogic (unverified)

    Thanks Frank Dufay and Zak for bringing forward what I find to be very pertinent information about the deal and Trammell Crow.

    I'm wondering, Commissioner Leonard, if your skirmish with UPOL over the mainly political (who controls whom and what) signals your disinterest in taking up the deeper ethical dimension as the way to get governance back on track in PDX and Oregon?

    UPOL is an example of what is so wrong with that contingent of NW and Oregon proponents of what he/she mistakenly believes is "urban planning". His/her focus on banal aesthetics and on "planning" that really is about facilitating his or her personal lifestyle choices is far removed the long and deep intellectual and moral history of urban planning. He is another example of that ugly creature that Web 2.0 has thrust upon us: A person who desires to be heard in a public forum is not deterred by the thought he/she really doesn't know what he or she doesn't know. Kind of the modern variant of Descarte's dictum: "I believe and want, therefore you must agree I have something important to say".

    I have one question for UPOL: What is your system of personal values that subordinates ethics and condones the systemized corruption PDC represents to your own personal banal aesthetic sense and your belief that the urban commons should be structured to best facilitate your own chosen lifestyle?

    Now if you want to debate WHY your banal aesthetics and lifestyle are superior, that is a different matter. I think that is precisely the debate Commissioner Leonard has implicitly taken up in his concern about the ethics of what the PDC has done in their role as (supposed) defender of the public trust. Whether or not he actually follows through on that question of values remains to be seen.

    (I also happen to believe that Sten's view of the PDC, in the form EB imputes that Gragg imputes, is naive in the extreme and quite frankly is symptomatic of why urban planning doesn't actually work well at all in the NW and Oregon. We got the excesses Measure 37 because of the arrogance and ajbect political ineptitude of the host of planning proponents, most notably 1000 Friends of Oregon, nothing more or nothing less.)

  • Jon (unverified)

    And a lot of specialized construction work is irregular.

    We're not talking "specialized", its $35/hr for a basic ironworker. Thats $15/hr more than the norm, just because its a public project. And $40/hr or more for an electrician or a pipefitter? It is a bit much for some contractors. So the big guys are the only ones that get those lucrative public contracts. And of course, because they have to cover those big paychecks, the projects cost us taxpayers way more than they have to.

  • jim (unverified)

    It's unreal that Randy is taking heat for questioning this BS deal. There may be reasons that giving away public land to developers is in the public's best interest, but the PDC's cover-up suggests that individual PDC employees were focusing on their own interests, at the public's expense.

    I'd like to know more about the parking lot leases. Doesn't it just look like PDC employees got the PDC overpay for the land, planning all along to give it away in the future? What is the relationship between the lessees and Trammell Crow? Did any PDC employees, their friends, or their families get a kickback or high-paying job from anyone involved for going along with this?

  • Need More Info (unverified)

    UPOL -

    What is "just a basic ironworker"?

    Since you claim to be some sort of construction wotrker, you must be able to tell us. Also, what is the difference between hiring, for instance, a large firm, who contracts with journeyman labor or your neighbor who operates out of a van with some day laborers, to work on something of great public use?

    Could there be a difference in quality between well-resourced, well paid work and the "cheaper" solution?

    Not to mention what happens in terms of delays and major accidents in the worksite.

    So, in the end is the hourly rate the only way to judge the expense of a project over time? (check back with your employer's association and let us know the answer)...

  • Need More Info (unverified)

    I meant to ask Jon about that...whoops...

  • Urban Planning Overlord (unverified)

    Need more info: Perhaps you are confusing me with another poster (unless another poster can also be acronymed as UPOL?). I think your question is aimed at "Jon."

    As for politicallogic, I can't make heads or tails of his (or her) demagogic rant, so I'll just leave it alone.

    Remember a little historical perspective folks: Quasi-independent governmental agencies such as PDC were set up because it was believed that direct political control over such activities had led to a swath of corruption and inefficiency. As I have stated on my own blog (www.urbanplanningoverlord.blogspot.com), I don't necessarily buy this logic, because quasi-independent agencies themselves have spawned their own culture of corruption.

    However, I couldn't resist savoring "the bad Randy's" smackdown of "the good Randy," who seems to want to control PDC for less than lofty ends, IMHO. And Randy's verbally violent rejoinder on this blog sort of makes the case, doesn't it?

  • questioningeverything (unverified)

    I would be interested to hear the sequence of ownership of the 3rd and Oak property. It was owned by the City/Police Bureau originally. Who granted an easement for the sub market rate parking spots to the adjacent property, in exchange for what?

  • Jon (unverified)

    I see a "basic ironworker" as a person who works at the jobsite, erecting steel. Fits up parts, bolts them together, etc. But not specialized like a welder or a pipefitter. Im not a "construction worker", but I worked in the construction field, as a drafter in the design dept. I worked with construction workers regarding parts I designed. The company I worked for would also send out a field crew to help erect our steel. When our guys went to a "public" project, the company had to pay our guys based on "prevailing wage" for all the time they were physically on the jobsite. These are guys that already made journeyman wages. They are all professional workers. But prevailing wage for public projects just forces companies to pay a lot more, regardless of worker's skills. (pretty much like union work in general.)

    As for working with your "neighbor" with guys out a van on projects such as this...unions dont let that happen.

  • PDX Planner (unverified)

    "Verbally violent rejoinder..."

    Are we reading the same post or are you confusing your comments with the post?

    Sounds to me like Urban Planning Overload :) has an axe to grind. Maybe a PDC persona or beneficiary lashing out as the screws are being tightened?

  • (Show?)

    Who granted an easement for the sub market rate parking spots to the adjacent property?

    There's no "easement" for parking spots. There's a lease agreement (the appraisal calls this Exception 15) between Lessor SKB-LaNoue LLC and Lessee RG Investments. SKB-LaNoue bought the 3rd & Oak property from RG Investments, and then sold it to PDC. SKB-LaNoue was administratively dissolved on 8/9/2002, it's last payment to the State of Oregon for a business license was 5/17/2001. This is easily accessible public information.

    Despite the fact that a dissolved Limited Liability Corporation cannot lease property they no longer own, the latest appraisal fails to note this LLC's dissolution several years before.

    There is an easement for "basement ingress and egress" (Exception 16) and an easement for "trash and recycling containers" (Exception 17) but nothing in these easements require parking spaces.

    Exception 18 has RG Investments as Lessor, and SKB-Lanoue LLC as Lessee, with RG investments "intending to operate the space as a parking garage." Interestingly (I think) this Lease Agreement requires RG Investments to pay for "insurance, utilities, maintenance, and real property taxes attributable to the premises." There is no "easement" and, again, you've got a lease agreement with a dissolved Limited Liability Corporation, so where's the encumbrance? There isn't one. Besides, RG Investments hasn't paid a dime of property taxes, maintenance, or anything after PDC took over this property.

    If there's anything, anywhere, that requires PDC --or a subsequent buyer-- to provide 32 parking spaces to RG Investments for $1 a year, for 297 years...I don't see it.

    All this information about the lease agreement and easements is in the Day Appriasal Company report, pages 27 though 29.

    PDC's own "Report 06-130", dated Dec 13, 2006, on the "Third and Oak Appriasal Status" simply says: "Under a Parking Lease dated December 12, 1997, RG Investments, LLC, leases the garage that existed under the Property for $1.00 per year for 99 years beginning in 1997 with two 99-year renewal options." You'll note PDC does not report who the lease agreement was with and, nowhere in their report will you find mention of SKB-LaNoue LLC, or the fact they this LLC is dissolved, therefore rendering any lease agreement with them void and meaningless.

  • Dan Gardner (unverified)

    Randy You are Right However lets get the dollars and cents right 1) pdc prior to buying the property had an apparaisal done even witht he conditions like the parking garage windows ect. The value was $850,000 PDC in its wisdom spent $1.2 Million on the purchase of the property. 2) PDC then spent approx. $500,000 improving yhe property including knocking down an old building on the site. 3) they tell BOLI with a bogus appraisal itw woth negative $2.7 Million. Now you may ask how did the appraisal come up with that figure?

    The answer is by a promise of a 25% profit margin for investors in the property. (not a bad profit).

    4) The new appraisal says the value of the property even with the underground garage conditions is $2.1 Million.

    Wow what a deal a promise of 25% profit margin for investors But the developer and PDC cnat afford to pay healthcare and retirement for construction worker when it is normal in the industry.

    And PDC wonders why they are accused of being to cozy with developers.

    Finaly for those who think construction workers make to much money consider a couple of things. It is seasonal work , you have no paid vacation paid holidays or even sick leave. It is by profession the most dangerous in the country.

    And I have one challenge show me one rich electrician or plumber. I do know several wealth contractors and developers I dont begrudge them thier profit stop trying to take away healthcare and retirement from workers.

  • Fred Heutte (unverified)

    I have very high regard for Randy Gragg but on this one he's way off base. Randy G is an architectural critic -- a great one, in my opinion -- but not an expert in appraisal and real estate finance.

    In my view, Randy Leonard should keep going on exactly the course you're taking. It's about time PDC was held up to real public scrutiny and let the chips fall where they may.

  • Ross Williams (unverified)

    thats $15/hr more than the norm

    No. Prevailing wage is the "norm". Its may be $15/hour more than non-union workers get. But that is a different story. Afterall, the whole point of unions is to use collective bargaining to get workers higher wages and better benefits. There are plenty of people who are anti-union and think that is wrong. But prevailing wage laws are designed to protect people who employ union workers from being undercut on public projects by low-balling non-union employers.

  • (Show?)
    <h2>$35/hr. is about $70K/year, if you get paid for 8 hours a day, 52 weeks a year. A lot of people in Portland make that kind of money doing technology work. Certainly, you're not going to be able to afford to live in one of those nice condos the ironworkers are building in central Portland if you're making much less than $70K. And since construction can be an on/off business, even with overtime you're not assured of getting a full year's worth of pay. Last I heard, ironworkers have kids who go to college and stuff, too. So I'm not exactly sure what the reasoning is for construction jobs to pay less than, say, Web programmers.</h2>

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