Oregon Sustainability Center's funding and leadership fluctuates, putting project in doubt
Published: Wednesday, March 28, 2012, 4:55 PM Updated: Wednesday, March 28, 2012, 4:55 PM
By Beth Slovic, The Oregonian
Mayor Sam Adams is still pledging to build the Oregon Sustainability Center. But the $62 million project's survival has never appeared more in doubt.
And not just because the Legislature this month rejected $37 million in state funding for the project -- money that backers once called "crucial" to the green-energy showcase at Portland State University.
The project's price tag, leadership, timeline and scope are all in flux, although supporters insist that they can attract private financing and keep to a 2013-14 opening.
The seven-story building -- now funded with $17 million in city money and land, and $5 million in federal grants, tax credits and private donations -- would house businesses, environmental nonprofits, university classrooms and city offices.
"It has all the attributes of other buildings that get built commercially," said Patrick Quinton, executive director of the Portland Development Commission, the city's redevelopment agency. "Easier said than done, but we believe there are investors out there who have an interest in this building."
Private funding would come at a cost to an already expensive project, however.
Under previous terms of the deal, commercial rents at the building were expected to be as high as $40.25 a square foot, about 50 percent higher than downtown's Class A average in 2011. Nonprofit rents were expected to be $31.75 a square foot, compared with typical nonprofit rents of $20 a square foot. Also, PSU planned to spend about $1 million in tuition dollars to lease space.
Those costs would be even higher with private financing, backers told legislators in a document last August.
"Most other forms of non-public financing would exacerbate already high rents, as public financing carries a much lower rate of interest," they wrote. "The team has explored multiple options to finance this project, including private bank financing. ... In all cases, these alternative scenarios increased costs to the participants, project complexity, and risks."
The Legislature's refusal to authorize state borrowing for the project also prompted a key partner, the Oregon University System, to walk away.
"Moving to 2013 there are going to be other priorities, and the Sustainability Center is not on the list," said Jim Francesconi, an original supporter who sits on the Oregon State Board of Higher Education.
That loss jeopardizes an additional $3 million in state funding that the university system had planned to contribute, meaning the project faces a $40 million funding gap. It also undermines one of the building's chief selling points -- that it holds statewide economic significance.
In addition, without state funding, it's not clear whether PSU would ever own a portion of the building; PSU has justified paying top-dollar rent early on by saying it would use the space rent-free later.
"Ownership is not essential to a project," PSU President Wim Wiewel said in a recent statement, issued through a spokesman. "It's the costs over the lifecycle of the project. And we're in the middle of exploring options with the City of Portland."
On the plus side, contractors have told the Portland City Council that they can guarantee construction costs under $62 million.
Could the city fill in the gap? It's not likely. Commissioner Dan Saltzman, the council's swing vote when it voted 3-2 in September to greenlight the center, put a condition on his support. He said the center could not tap any new funding through the city's urban-renewal districts, the city's go-to source for development projects. A spokeswoman for the mayor, Caryn Brooks, said Adams won't seek to change that.
Funding isn't the city's only hurdle. This month, the project's development director, Robert Frisbee, left after his contract expired. PDC believed his work would be done by now, said Shawn Uhlman, a PDC spokesman. And at least one of the nonprofit directors who helped launch the idea for the center in 2007 has grown weary.
Sean Penrith, executive director of the Earth Advantage Institute, said his nonprofit still wants to rent space if lease terms are manageable.
But no one from the city had looped back to him since the Legislature said no, leaving him unsure what to say about the project: "Other than that I'm exhausted."
-- Beth Slovic