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Old Posted Jun 20, 2006, 3:22 PM
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Oak Tower | Dead

A Suite Deal

Here's a clear example why City Council wants to overhaul the PDC.

BY NIGEL JAQUISS | njaquiss at wweek.com

THIS 10,000-SQUARE-FOOT PROPERTY at 209 SW Oak St. was once an annex to the adjacent former police HQ.
IMAGE: JENNA BIGGS
Anybody puzzled why a majority of the City Council recently blasted the Portland Development Commission for being unresponsive to the council's direction need only look at a planned condo project at 209 SW Oak St.

As one of the council's PDC critics, Commissioner Erik Sten, puts it, the downtown Oak Tower's financial underpinnings are "clearly a game."

Here's the history behind that "game," which critics like Sten and Commissioner Randy Leonard say boils down to a private developer getting a great deal with little or no public benefit:

In 2002, the PDC bought a "blighted" two-story building at 3rd and Oak for $1.2 million from ScanlanKemperBard. The city's economic development agency made the purchase based on a January 2002 private appraisal, which said the 10,000-square-foot property was worth $850,000.

Christine Hermann, the PDC's project manager for the property, says the agency faced pressure from the business community to find a use for the long-dormant site, and "might have paid a little too much."

Fast forward to October 2005. The PDC, whose five members are appointed by the mayor, approved a deal in which the commission would give the land to Trammell Crow for a planned 26-story condo tower.

Before handing over the property, the PDC sought another appraisal by the same firm that did the 2002 appraisal, PGP Valuation. But after three years of PDC ownership, during which commercial real estate values downtown soared, PGP found the property's value had plummeted to a negative $2.7 million.

"That sounds like Enron accounting to me," says Bob Scanlan, who sold the property to the PDC. Other critics say the negative appraisal is a contrivance that will allow Trammell Crow to avoid paying union wages.

So how did the property lose nearly $4 million in value in the biggest property bull market in recent Portland history?

PGP appraiser John Ingle wrote the PDC in March 2006 that the current valuation includes a $1 million-plus discount for the financial liability of a long-term lease on parking spaces in the building's basement. (Curiously, two years earlier, those same appraisers only dinged the value by $200,000 because of the parking liability.) PGP declined comment to WW.

The big cost driving the project into "negative" value, however, is an "affordable housing" component that the PDC required for the site.

But like beauty, affordable housing is in the eye of the beholder. The agreement between the PDC and Trammell Crow calls for the developer to offer 15 percent, or 24, of the planned 160 condo units at a price affordable to buyers making no more than 120 percent of the Portland median household income for a family of two (currently $54,312) on the initial sale date, estimated to be in fall 2008.
http://www.wweek.com/editorial/3232/7659
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Old Posted Jun 20, 2006, 3:44 PM
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PDC is using standard business practices, but are a public company so you get to see how this stuff works. They need to understand that they don't have the advantages of a private company. They can and will get caught because they are public.

I still think a building on that site IS a public good.
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Old Posted Jun 20, 2006, 6:21 PM
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What next? If the PDC continues to have mini-scandal after mini-scandal like this, they will definitely be brought under Council control. Randy must be apoplectic.

I agree, cab, that it would be a public good in that area, and I hope they stick with the current construction schedule starting this fall.

Also a welcome addition to Portland's mostly-uninspiring skyline, especially from Esplanade perspective.
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Old Posted Jun 20, 2006, 6:57 PM
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if it isn't one thing it is another thing for Portland residents to whine about. We seriously are the most complaining proactive city I have ever seen.
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Old Posted Jun 20, 2006, 11:07 PM
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Dismantle the PDC, they do far more harm to the city than they do good.
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Old Posted Jun 20, 2006, 11:19 PM
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^that is what I fear is going to be the knee-jerk reaction...but there wouldn't be the Pearl or SoWa without them, and that is just for starters. I think it is great that Portland has an institution that has a budget to do nothing more than help the city improve. I also like that they can make some controversial decisions, tram anyone?, and not reaaaly have to answer to the public. I think there needs to be some reforms, but dismantling them would cause all these new towers we love to watch go up, slow to maybe one or two a year. We would also have an empty Meier and Frank building, no new Children's Theater at the Armory, a gang-filled MLK, Franz Bakery would move out of the Central Eastside without sewer relocation assistance, no tram, therefore no OHSU growth, no waterfront park, shall I continue?
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Old Posted Jun 21, 2006, 12:51 AM
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Well said, Mark. I too am worried that the PDC has shot themselves in the foot (ok, both feet, multiple times) too many times over the past couple of years and that a majority of the Council is going to vote (bojacked style) to absorb the agency as a city bureau.

I think the agency should remain semi-independent and that they should focus on even more daring and innovative developments (waterfront district/public market/fire station, CC hotel, etc, etc), hopefully featuring much more in the way of stunning, relatively-sustainable, "world class" architecture.
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Old Posted Jun 21, 2006, 1:03 AM
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I agree with your view points, guys. I would hate to see the PDC eliminated.
I also think that the 3rd and Oak property will be developed soon...too valuable of a piece of property.
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Old Posted Jun 21, 2006, 2:20 AM
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Why shouldn't the PDC have more oversight from the city? They have really fucked up quite a few times:

no tram cost estimate before making deals, Burnside Bridgehead, Enron-style accounting... not to mention their 37% employee turnover each year. How many directors have they had the past 5 years? 6?

We can achieve the same redevelopment goals in a much more transparent manner - perhaps even at a broader city-wide level - by a revamped agency, or city bureau that does the same thing. The PDC currently has the city's largest budget for any agency.
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Old Posted Jun 21, 2006, 10:23 AM
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As a former commercial appraiser, I am a bit confused by this story. Something has to be wrong. And I wouldn´t call this Enron-style accounting just yet. PGP is a very respectable firm--they wouldn´t risk losing their good reputation to benefit Trammel Crow.
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  #11  
Old Posted Jun 21, 2006, 3:16 PM
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Quote:
no tram cost estimate before making deals, Burnside Bridgehead, Enron-style accounting... not to mention their 37% employee turnover each year. How many directors have they had the past 5 years? 6?
look at any institution public or private and you will see similiar missteps. That's what these are. The tram costs soared because OHSU put a building in the Tram's path. What's wrong with Burnside Bridgehead? Enron-style accounting? I'm not quite sure you understand the kind of accounting Enron was doing, but the PDC isn't able to fix the books in the manner Enron did, and 37% turnover...big deal, it is a public agency that deals heavily in urban design. I would expect since Portland is world renown for our planning, that it would be natural for employees from the PDC to go onto other ventures. BTW, most hotels have over a 60% turnover...fast food is even more, maybe the city should take them over too?
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Old Posted Jun 21, 2006, 3:51 PM
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This was a comment posted on Willamette Week's website. Seems to indicate the developer is more at fault than PDC.

Quote:
What wasn't mentioned in your article was that PDC paid over $2 million for the property, and that it's appraised fair market value the year before the sale to Trammell was not too much different than that. Also, the developer provided the appraiser with a 25% cost-ratio regarding developmental costs, while the industry usually uses a ratio of 18% or less. Had Trammell used a cost-ratio of 18% the property would have shown a positive value rather than a negative one. Now who's cooking the books?
Posted by "Anonymous" | Wed, June 14 2006
I agree with you Mark that dismantling PDC is a complete knee jerk reaction and would not be the appropriate move. These issues tend to be more complex than the public is generally aware. The public and the press only hear/see/report black or white when it's usually shades of grey.
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Old Posted Jun 21, 2006, 4:23 PM
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I'm still bitter about this one:

Burnside Bridgehead - entire community (and city council) of Portland wants one developer, PDC goes for the other one, sets up fake public hearings and disses everyone in a condescending quick 'fuck you' speech to the public at the end, for which they had already made their decision.

Heads rolled on that one...

Otherwise, they have done some good projects, but how many signature projects do we need before developers aren't afraid to move into an area?
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Old Posted Jun 21, 2006, 4:25 PM
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Again, Private industry is way worse, you just don't get to see it. This kind of stuff is standard practice. The issue with the PDC is its being run like a business and isn't that the mantra of many of the anti-gov people?
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Old Posted Jun 21, 2006, 8:07 PM
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Quote:
Originally Posted by cab
Again, Private industry is way worse, you just don't get to see it. This kind of stuff is standard practice. The issue with the PDC is its being run like a business and isn't that the mantra of many of the anti-gov people?
If the PDC were being run like a business, it wouldn´t be throwing so much money down the toilet. I personally support the existence of a strong regional planning agency, but the PDC has thrown so much money away and done more than a few sweetheart deals with public money.
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Old Posted Jun 21, 2006, 8:49 PM
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where have they thrown away money?

This is my issue with people dogging on the PDC, I known there are fixes to be made but I personally haven't become too hands on when it comes to finding flaws with the agency. So while I encourage a broad review of the PDC's policies, and where they should target their funds, I don't see widespread abuse or corruption. If anyone has insight into where the PDC has thrown away money, or even deviated away from the policies of the city, I would love to see those examples.
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Old Posted Jun 23, 2006, 9:01 AM
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I fully support many PDC projects, but I am a bit dumbfounded by some. I don´t understand why Trammal Crow, perhaps the richest developer in the country, needs a subsidy to build a high rise in a time when many people are without health care or good education. I also think that the PDC ought to spend more time and energy focusing on inner N and NE Portland. Although there is more PDC activity there now, it has been a long time coming. I am a huge fan of the Pearl and South Waterfront as these are examples of the PDC and other local governmental entities paying for infrastructure, which in turn spurs development.

Another example of PDC mishandling is the Burnside Bridgehead debacle. How much money did the PDC spend on the public review process, which the PDC ended up paying absolutely no attention to in the end. One could go on and on. Now, as a whole, the PDC is a good thing. However, it often undermines public support for smart planning when a tax-financed entity has no one to answer for, and generally never really faces budget cuts while schools and the Oregon Health plan do.
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Old Posted Jul 5, 2006, 4:23 PM
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Leonard wants fresh squint of PDC deal

The strained relations between the Portland Development Commission and at least some members of the City Council will resurface Wednesday.

That’s when Commissioner Randy Leonard will float a resolution calling for an outside audit of a PDC-brokered deal for redevelopment of the block at Southeast Oak Street and Second Avenue. Leonard says he has some questions as to why the PDC originally said the block was worth $850,000, bought it for $1.2 million, then declared it was worth negative $2.7 million – before transferring it for free to the Trammell Crow development company for an upscale condo tower.

Although PDC officials and commissioners have attempted to answer his questions, Leonard says he doesn’t quite understand the explanations; he would like fresh eyes to go over the transactions. Leonard says he has not lobbied the other council members on the request but wants to have a full and open discussion about it.

He also says he is discussing the quasi-independent status of the PDC with some of the other commissioners, noting the council has until early August to place a measure on the November ballot that would take away PDC’s independence, making it a conventional city agency under full council control.
http://www.portlandtribune.com/news/...97727732163500
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Old Posted Jul 5, 2006, 5:04 PM
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the PDC has brought this on themselves. At one time it was a great thing for the city, but now they seem to have forgotten what created them and what their prime goal is, to benefit the city, not themselves.
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Old Posted Jul 5, 2006, 6:56 PM
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^in all fairness, Tom Potter has done a good job at replacing the disfunctional board that was left from Vera, and Maziotti(sp). I think with the Mayor's direction, this board should be able to have a chance to make a vision and implement it after they get done cleaning up the messes that was left for them. I would hate to see a few bad apples spoil what has been a massive economic engine for this city in the past.
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