Basic HTML Version
The Portland Tribune
Thursday, April 11, 2013
A4
NEWS
to generate cash. Contending
ideas include: collecting more
rent from real estate, such as
parking garages; reaping more
profits from business loans; and
offering video production and
other services to outside enti-
ties.
PDC’s bleak funding picture
means the agency that spear-
headed revitalization of Port-
land’s central city for more than
four decades — projects such as
Pioneer Courthouse Square,
Tom McCall Waterfront Park,
the Eastbank Esplanade, light
rail and the trolley — won’t
have the same capacity it once
did.
“There was an era of big proj-
ects, and we got lots of national
at t en t i on f or
them,” Quinton
says. “I believe
we’re in a differ-
ent era.”
Past city coun-
cils relied on PDC
to tackle big
downtown proj-
ects since the
1970s, says Ken
Rust, the city’s for-
mer chief adminis-
trative officer.
“The city has
never experienced how to do big
projects without urban renew-
al,” Rust says. “Now it’s going to
find out what it’s going to take.”
Maxing out the credit card
PDC, which serves as the
city’s urban renewal, economic
development and neighborhood
revitalization agency, grew to
223 employees in 2008-09 with a
budget of $236 million. Now it’s
hoping to stabilize at about $65
million a year, after sending the
required housing set-aside
funds to the city Housing Bu-
reau, with a staff of fewer than
100 people.
“Layoffs are going to be nec-
essary; unfortunately, that’s the
case,” says Rob Wheaton, a
council representative for the
American Federation of State,
County and Municipal Employ-
ees Council 75, the union that
represents PDC employees.
Wheaton is worried that the
union will have to fend off ben-
efits cuts, and that remaining
staff will face a huge workload,
making it hard for PDC to at-
tract and keep its talent.
PDC makes most of its reve-
nue by creating urban renewal
districts, which siphon off in-
creases in property taxes to pay
for improvement projects. The
city sells bonds, using the di-
verted property taxes to pay
bondholders.
The city now has a whopping
$5.12 billion in property value in
urban renewal districts kept off
the regular tax rolls — more
than twice the amount of eight
years ago. Taxes on that prop-
erty don’t go to the county, pub-
lic schools and other local gov-
ernment.
So why is PDC in such a fund-
ing pickle?
Zombie districts
The city sold hundreds of mil-
lions in urban renewal bonds in
past years, but PDC already
spent the bulk of the proceeds.
Mayor Charlie Hales, borrowing
a term he got from Rust, says
the city’s long-
standing urban re-
newal areas, such
as the Downtown
Waterfront and
South Park Blocks
districts, are now
“zombie districts.”
They still spin
of f s igni f i cant
property taxes that
are diverted from
local governments,
but the money
goes solely to pay
off bonds, with no new cash
coming in to pay for projects or
PDC staffing.
“I think they built up a fairly
big-sized bureaucracy within
PDC; they just kind of got bloat-
ed, if you will,” says Tom Lin-
hares, director of the Tax Super-
vising & Conservation Commis-
sion, a watchdog group over lo-
cal government finances in
Multnomah County.
The Great Recession, which
resulted in an unprecedented
four years in a row of declining
property values in Oregon, also
caused a dip in PDC revenues
that no one predicted, Linhares
says.
The agency, and city council-
ors, also failed to stage urban
renewal so that it could create
new districts as old ones paid off
their debts and put property
back on the tax rolls.
PDC lives off the money
raised via bonds, not by prop-
erty taxes, Linhares says. When
the city can’t sell new bonds,
PDC’s revenue starts to dry up.
PDC also has pretty much
maxed out how much property
it can put into urban renewal
areas, butting up against the
state cap of 15 percent of the
city’s land base and assessed
property value.
New emphasis
When the Great Recession
paralyzed the real estate devel-
opment and financing markets,
PDC shifted its focus to eco-
nomic development efforts that
might net new jobs. It’s also
been targeting more neighbor-
hood revitalization, responding
to residents’ complaints that
it’s too downtown-focused.
Neither of those strategies
will produce tax-increment
funds as reliably as a subsidy
that enables a private develop-
er to build a project.
PDC also has decided not to
renew urban renewal districts
when they reach their targeted
expiration dates, due to pres-
sure from Multnomah County
and local schools, which want
property put back on the tax
rolls.
“We don’t believe that the
political climate exists to pur-
sue that,” Quinton says.
“There’s a greater awareness
and sensitivity to the impact on
the county and the schools.”
PDC also devoted significant
urban renewal funds to pay for
new county buildings in the
River District and the new Edu-
cation District near Portland
State University, which aren’t
likely to produce tax-increment
funding.
Though PDC did recently
create the new education urban
renewal district, much of that
will benefit PSU, which doesn’t
pay property taxes.
Quinton projects that tax-in-
crement financing will largely
dry up by 2021-22, a little more
than eight years from now.
The city isn’t expected to
pay off bonds for the Down-
town Waterfront and South
Park Blocks districts until 2024,
says Rust, who now works for
Public Financial Management
Inc. That bars the creation of
replacement districts until
then.
And new urban renewal dis-
tricts can take several years to
spur private investments that
generate tax-increment financ-
ing, says Scott Andrews, PDC
board chairman. It will take five
years for the Education District
to generate $5 million in urban
renewal funding, he says.
The good news, Andrews
says, is PDC has four or five
years, under its slimmed-down
funding model, to find new
ways to raise money.
Quinton says it’s not unusual
for a public agency to make
money via fees and services.
Metro makes much of its mon-
ey from solid waste fees, he
notes, and the Port of Portland
makes money from airport
fees.
Boston’s urban renewal
agency kept an ownership
share in a parking garage that
it helped finance, and earns
money that way, Andrews says.
Some might be more skepti-
cal of PDC’s ability to make
money via lending, given pro-
jections that it will only collect
on half its current loans. Some
call those “groans,” for loans
that become outright grants.
But PDC has tightened its
lending policies in the past cou-
ple years, Andrews says, and
started charging interest on
the loans. The $8 million loan
used to lure Vestas to locate its
North American headquarters
in the Pearl District, for exam-
ple, gave PDC a lien on the
property should the company
fail to repay the loan.
The new PDC will still have
significant funds. The agency
has set aside more than $50
million, for example, for a Post
Office distribution center rede-
velopment on Northwest Hoyt
Street. Some see that site as
having the potential for a Nike-
style campus that could be a
magnet for hundreds of jobs.
However, that’s just enough
money to buy and market the
property, not to develop it, An-
drews says.
“I think we’re less likely to
do a ‘build it and they will
come’ approach,” at the Post
Office property, Quinton says.
“We’re going to have to see
someone else come in and take
a lead role in redeveloping that
site.”
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PDC:
Agency loans tumble into ‘groans’
■
From page 1
TRIBUNE PHOTO: CHRISTOPHER ONSTOTT
Faced with declining revenues, the Portland Development Commission also was hurt by questionable business decisions, such as the 2010
purchase of the abandoned Grove Hotel in Old Town for $3.7 million. PDC now hopes to sell the building for $550,000.
“The city
has never
experienced
how to do big
projects without
urban renewal.”
— Ken Rust,
former city official
TRIBUNE FILE PHOTO: L.E. BASKOW
PDC offered a “predevelopment loan” this week to developer Jordan
Schnitzer to help him evaluate redevelopment possibilities at the
abandoned Centennial Mill on Naito Parkway.