Oak Tower | Dead

[roner]

I got to say I'm a little worried about the council having control of the PDC. The members of the council will become directly responsible for the actions of the PDC and could make them play to the interest of the votes and not the cities future.

On the other hand, the PDC has done some shady things over the past couple of years.

Is it just me or does the city of Portland need to give away land or subsidize projects to get anything built? Are we that low of a player? If so, the PDC needs to keep on keeping on. I'm afraid that the development boom will be ground to a halt with the council under control of the budget.

The voters of Portland are akin to luddites in my mind and a lot of them are very anti-development. For instance, someone over on blueoregon wrote that the huge towers in the Pearl (which are located where?) create a dead zone. Then he wrote that Buckman is thriving because the PDC has not been involved over there. I'm sorry but besides B-side on Fri+Sat nights, Buckman is a far greater dead zone. I think Portland is full of people like this. I’m I crazy? What do you fellas think?

[urbanlife]

yeah, I am kind of worried about having elected officials in more control over the PDC. I think politics will become a bigger issue that it already is. I think there is a middle ground to keep the PDC monitored without having it being completely controlled by the city council.

[MarkDaMan]

I think the mayor should, as his right of being a mayor, have veto power of PDC decisions. I don't think all five member should be clammoring for power, or given power by the state legislature. What I find perplexing is Sam Adams support of stronger, if not total, council control. It will be on no surprise to anyone if he announces he's running for mayor, so I'd think he'd want to strengthen the mayors hand in dealing with the PDC, while keeping the rest of the city council as an advisory board...at most.

I seriously doubt the city council could make the progress the current PDC board does when it comes to encouraging development, there is too much political influence in elected positions (that developer gave you X amount of money in your campaign so you are giving him that lot free, kinda politics). Since the board has been completely turned over, and it does appear the agency is being run by competent members, I say give it some time to continue responding to public concerns and revamping its own internal structure before making any radical changes to what has, by and large been an extremely successful enterprise and a boon to Portland's economy.

[Urbanpdx]

Mark, while I am not disagreeing with your points, I do wonder how you know that the PDC has been a "boon to Portland's economy"?

If all of that money had been left in the hands of the private sector, there quite possibly (probably?) could have been even more growth in the local economy.
Anyhow...it is certainly not a given...

[MarkDaMan]

I'm not gonna argue with you about what the actual $$$ contribution to Portland's economy the PDC has been...but the PDC does more than pretty up the Pearl. They have an industrial zone to specifically address the needs of some of Portland's biggest employers, have been instrumental in turning around MLK, cutting crime and allowing small businesses to prosper in a cheaper rent area without having to worry about excessive crime, and what about the private company that wanted to turn the square into a parking garage. I'm no so sure that would have been good for Portland's image (an economic driver), or even our own psyche, which many economists, downtown businesses, and local boosters credit with turning around downtown Portland, instead of it going flat and declining like many other downtowns across the country.

[tworivers]

Empty lot is full of issues
PDC board mulls new wage, property sale rules amid criticisms

By Jim Redden

The Portland Tribune Jan 5, 2007

Jim Clark / PortLAND TRIBUNE


Controversy continues to swirl around the Portland Development Commission – including the efforts by the PDC board to respond to the controversy.

When the board meets Wednesday, it will consider two new policies meant to reduce criticism of the PDC, the city’s urban renewal agency.

According to PDC board chairman Mark Rosenbaum, both policies were drafted to address issues that came into focus during attempts to redevelop a vacant quarter-block at Southwest Third Avenue and Oak Street.

One policy would require the PDC to sell all property to developers at fair market values. The other would require developers to pay state-determined prevailing wage rates on nonresidential projects receiving more than $1 million in PDC support.

On residential projects, wage rates set by the U.S. Department of Housing and Urban Development would apply.

“These policies will help ensure that the PDC operates in an open and transparent manner,” Rosenbaum said.

But Commissioner Randy Leonard, the most vocal critic of the PDC on the City Council, said he is not sure the reforms address his concerns.

“I think the problem is the culture over there and not necessarily the rules,” Leonard said.

Leonard began criticizing the PDC over the Third and Oak property after the agency obtained a July 2005 appraisal that said it was worth negative-$2.7 million. Leonard accused the PDC of manipulating the appraisal to help the potential developer – Trammell Crow Residential – avoid paying state-determined prevailing wage rates on the property.

Rosenbaum said the appraisal considered the cost of a specific project and was not intended to help Trammell Crow evade the prevailing-wage law. But Rosenbaum said the resulting controversy convinced him new policies are required to prevent future misunderstandings.

But the Bureau of Labor and Industries, the state agency that sets and enforces the prevailing wage rates, said the $1 million limit has no legal meaning.

“The PDC cannot rewrite state law,” said Mark Zolton, an assistant to Oregon Labor Commissioner Dan Gardner, the elected official who heads the agency.

Oregon State Building Trades Council President Bob Shiprack thinks the $1 million figure is too low but believes the unions ultimately will endorse the policy anyway.

“It’s a lot better than what we’ve got now,” Shiprack said.

A third new policy also is in the works. According to Rosenbaum, it is intended to allow the PDC to recover public funds used for projects if they turn out to be more profitable than originally predicted. The policy would apply to grants and other financial incentives from the agency

But Leonard called that a continuation of a policy the council passed on property tax abatemets at his urging several years ago.

“I wish I could say something positive about what they’re trying to do. I really do,” Leonard said.

Developer Homer Williams said he does not not believe the new policies will substantially change the way the PDC does business. He said the agency will still have to subsidize difficult projects, and that the required subsidies might be higher because of the new wage requirements.

“This is just politics at its worst. The City Council should just leave the PDC alone,” said Williams, who spearheaded the Pearl District and South Waterfront developments with PDC assistance.
Agency always had autonomy

The PDC uses bonds financed by property-value increases – called Tax Increment Financing – and other incentives to encourage private redevelopment of neglected or underutilized parts of the city.

Portland voters established the PDC as the city’s urban renewal agency by passing a City Charter amendment in 1958. As approved by the voters, the PDC is the city’s only semi-independent agency.

The mayor appoints the agency’s five-member board with council approval. The council must also create the geographic urban renewal areas the PDC currently operates in and must approve the sale of all bonds to finance its projects.

In the nearly five decades since, the PDC has operated in 11 urban renewal areas in various parts of the city, including most of downtown, the tracts where the new Pearl District housing has been built and much of the central east side.

A recent report on government performance by the Office of the City Auditor credits the PDC with helping to create a vibrant downtown, increasing the availability of affordable housing and contributing to the regional economy.

Despite such successes as the Interstate MAX line and the emerging South Waterfront area, the PDC has been criticized over the years for giving developers too many incentives and not including the public in its decisions. A January 2005 City Club report was especially critical of the PDC’s community outreach efforts.

The report was issued shortly after Tom Potter became mayor. He responded by pressuring the PDC board to replace then-director Don Mazziotti with Bruce Warner, the former director of the Oregon Department of Transportation.

Potter also has replaced the entire PDC board, although his most recent nominee, labor leader John Mohlis, will not go before the council until Jan. 17.

Despite the changes, the controversy over the PDC has not died down. In fact, a majority of the council now is committed to giving the council control over the PDC budget.

Commissioners Leonard, Sam Adams and Erik Sten recently moved to ask the 2007 Oregon Legislature to give the council the option of controlling the budget, regardless of what the charter says.

The push by the three commissioners comes as Potter’s Charter Reform Commission is wrapping up work on a series of charter reforms that could be submitted to Portland voters in May 2007.

The current draft proposals call for allowing the PDC board to retain control of its budget. Leonard cites the PDC’s handling of the Third and Oak property as a reason to give the council control over the budget, however.
PDC bought lot in 2001

The vacant quarter-block at Southwest Third Avenue and Oak Street has a long and convoluted history. Until 1985, the property was part of the former Portland Police Bureau headquarters and Central Precinct, which occupied most of the block.

The headquarters then moved into the downtown Justice Center. While part of the block was filled with remodeled offices for a law firm and with low-income housing, the quarter-block on the southwest corner remained vacant. When the PDC decided to buy it in 2001, the agency obtained an appraisal that said it was worth between $850,000 and $1.05 million, depending on the valuation method. The owner obtained an appraisal that said it was worth $2.65 million. The PDC bought the parcel for $1.2 million in July 2002.

The PDC solicited proposals in fall 2003 for building a mixed-use, mixed-income project on the site. Only one proposal was received – an offer to build a market-rate condominium tower with 15 percent of the units priced for those earning 80 percent or less of the median family income for the Portland metropolitan area.

The PDC board, told the proposal would require a $3.3 million public subsidy, rejected the proposal, and the project was modified to reduce the percentage of affordable housing units and public subsidy.

The PDC obtained another appraisal in July 2005. It was based on the construction of a 26-story condominium tower with 33 units of underground parking, a legal requirement on the property. That appraisal said the property was worth between a negative-$1.9 million and a negative-$2.7 million, depending on the valuation method used.

The PDC asked BOLI whether state prevailing-wage-rate law would apply to such a project in December 2005. BOLI issued a preliminary ruling in February 2006 that the law applies to the project.

The PDC disputed the determination, pointing to the negative appraisals. BOLI issued a final determination last March, confirming that the law applies to the project and questioning the negative appraisal.

The dispute prompted the City Council to ask the city attorney’s office to obtain an independent appraisal of the property in July. At that time, Leonard accused the PDC of manipulating the negative appraisal to help the developer avoid paying prevailing wages on the project.

The office obtained an appraisal in September that valued the property at $1.86 million. It obtained all internal PDC documents on the project in November.

The PDC obtained a new appraisal in December that said the property was worth around $1.2 million – approximately what the PDC paid it in 2002. Leonard said the new appraisal proves the PDC manipulated the early appraisal that resulted in negative values.

Rosenbaum said the early appraisal was based on conditions not included in the new one. Despite that, he said the controversy surrounding the appraisal convinced the PDC board to push for the reforms that will be considered at Wednesday’s meeting.

[MarkDaMan]

looks like Trammell Crow has had enough!


Affordable housing pledges evaporate
Developer ditches plans after City Council objects to PDC subsidies
By Jim Redden
The Portland Tribune, May 18, 2007

Portland has lost dozens of units of lower-priced downtown apartments and condominiums after the City Council raised questions about two Portland Development Commission-brokered residential construction projects.

The losses are being confirmed just as Portlanders gave the council more control of the city’s urban renewal agency. A majority of voters approved Measure 26-29 in Tuesday’s election, requiring the council to approve the annual budget of the semi-independent PDC for the first time.

Both projects involved Trammell Crow Residential one of the nation’s largest multifamily housing developers. The company previously had reached agreement with the PDC to build two residential towers with units affordable to those earning less than the federally defined median family income of $66,000 a year for a family of four.

As of today, the lower-priced units have been dropped from one tower and the other one is on the verge of being canceled. Although Trammell Crow faults the council, Commissioner Randy Leonard claims the deals were fatally flawed from the start.

“The City Council changed the goal posts on us, and the market made it impossible to proceed with the original projects,” said TCR Managing Director Thomas DiChiara.

“Citizens are happy to put public money into projects that help people improve their lives. But we need to spend our money where we get the biggest bang for the buck, not simply subsidizing other projects in hopes that some affordable housing units will be added,” Leonard responded.

One of the Trammell Crow projects is a 22-story apartment tower in South Waterfront. The PDC originally had recommended granting the project a 10-year property tax abatement in exchange for including 48 studio apartments to rent for no more than $850 a month, including utilities.

Although the deal met the city’s requirements for the abatement at the time, the council blocked it, feeling the units were not suitable for families.

Trammell Crow then decided to proceed with the project – called the Alexan South Waterfront – without the abatement or the lower-rent apartments. The company broke ground on the project last week. It is scheduled to be completed in May 2009.

DiChiara describes the apartments to be built as “upper-end” and said they will rent for around $2 a square foot, which is near the top of the Portland apartment market.

“It will be a great addition to the emerging neighborhood,” he said, noting that the 294-unit building will achieve a Silver LEED (Leadership in Energy and Environmental Design) certification from the U.S. Green Building Council.

Leonard said he still believes the city was right not to subsidize the lower-priced studios, arguing that they were too small for families.

“With the same amount of money, we can build affordable two- to three-bedroom homes. Maybe not right in the South Waterfront, where land is so expensive, but nearby,” he said.

The second project was slated for a long-vacant quarter block at Southwest Third Avenue and Oak Street.

The PDC had struck a deal with Trammell Crow to build a condo tower with a number of units priced for “workforce housing.” Although exact prices were never set, the term generally means that nonprofessional workers earning less than the median family income can afford to buy them.

But the company now is preparing to back out of the deal after delays caused by the City Council.

The project ran into trouble last year when Leonard questioned a key part of the deal – the PDC was going to give the property to Trammell Crow for free.

Leonard wondered how the agency could figure the property was worthless after paying $1.2 million for it in 2001. As it turned out, the PDC had obtained an appraisal in 2005 that said the property was worth a negative-$2.7 million, in part because of restrictions on the potential underground parking garage.

When Leonard brought his objections to the council, it ordered another audit, which was completed last December and said the property was worth what the PDC had paid for it, $1.2 million.

The PDC responded by trying to renegotiate the deal with Trammell Crow without the land donation. DiChiara said the project that had been proposed could not be built without such a subsidy, however.

As a result, the company is in the process of preparing a letter to the PDC withdrawing from the project.

“Developing that site has always been difficult. That’s why nothing’s happened with it so far,” he said.

Leonard said he was not opposed to the PDC subsidizing the Third and Oak project, but thought the land donation would have prevented Trammell Crow from having to pay state-determined prevailing wage rates on the project.

“Our subsidies should be transparent, not a ruse to accomplish another goal,” he said.

DiChiara did not specifically blame the council for the outcome of the two projects, but praised the PDC for its previous work.

“The PDC has been great to work with in the past,” he said, adding that at least some developers will want to see what role the council is going to play in the agency’s projects in the future.

Leonard said he believes the measure approved by the voters Tuesday will allow the council to guarantee that more affordable housing is built in the future. After the controversy over the two projects erupted, the council approved a policy requiring the PDC to spend 30 percent of its urban renewal funds on affordable housing projects.

“When we approve their budget, we’ll make sure that goal is met,” Leonard said.

jimredden@portlandtribune.com
http://www.portlandtribune.com/news/...44076958191100

[PDX City-State]

This is a blessing in disguise. With a downtown vacancy rate of about 2 percent, developers do not need subsidy to build apartments.

[mcbaby]

let's hope that some well designed affordable housing fills the vacancy.

[PacificNW]

I doubt if it will happen downtown....land is too expensive and it appears the voters do not want the PDC and city to give developers a financial break.......the city should have let the PDC and developer start and finish the Oak Tower project before the whole thing blew up in their faces. (Especially since that particular parcel has been difficult to market and develop). "Real" affordable housing is probably heading out of the downtown area and to the burbs or smaller, undiscovered Oregon towns where rents are lower.

[MarkDaMan]

^since the PDC was already going to give the land to Trammell Crow, why don't they just issue and RFP that says, hey, here's a free quarter block, what do you propose.

[MarkDaMan]

Developer walks away from trouble
Portland Business Journal - June 22, 2007
by Wendy Culverwell
Business Journal staff writer

Trammell Crow Residential has pulled the plug on its controversial plans to build Oak Tower, a 30-story residential project that would have towered over the intersection of Southwest Third Avenue and Oak Street.

"We just don't think it's a viable project for us," said Tom DiChiara, development director for the company, which builds and operates apartments and condominiums throughout the country.

The decision to halt the project ends a laborious effort to construct luxury housing in hopes of reinvigorating one of downtown's neediest intersections.

The Portland Development Commission sought a developer for the project, hoping the addition of first-class residences and ground-level retail would be a catalyst for a district where vacancy rates are above average, among other indicators of ill health.

DiChiara said the drawn-out process, politics and unmet promises contributed to the company's decision to withdraw after investing three years and considerable capital in the project. Saying the company was treated unfairly by the PDC, he said it became so complex that Trammell Crow could no longer find bankers to back the $48 million project.

John Warner, senior project manager for the PDC, said he regrets that the project envisioned by Trammell Crow won't be built. Even with public subsidies, the project was a winner for Portland that would have generated property taxes of $750,000 a year. The city would have recouped its investment in less than two years. Trammell Crow's decision to back out could reflect poorly on the city's ability to partner with developers on worthy projects.

"This casts a shadow on how good a partner the city of Portland is to shoulder the portion of the burden we represented we could. That was certainly a professional disappointment," Warner said.

The effort to build on a quarter-block site on the northeast corner of the intersection started falling to pieces almost as soon as Trammell Crow and the PDC agreed to cooperate.

Trammell Crow set out to construct apartments. When it didn't qualify for the tax abatement that would have made the project financially feasible, it elected to build for-sale condominiums.

But even that plan proved short-lived because of a controversial property appraisal. PGP Valuation said the property was worth less than zero, although PDC paid $1.2 million for it in 2002. The appraiser's calculations were based in part on unusual conditions at the site that the developer would have to accommodate, as well as its obligation to include a certain number of affordable units in the project.

Based on a negative value, the development commission planned to turn the quarter-block property over to Trammell Crow at no cost, a key financial concession that helped mitigate the risk of building in an untested neighborhood.

The negative appraisal attracted controversy and led to a second evaluation. The second appraisal, by Day Appraisal Co. Inc., put the fair market value at $1.12 million. Trammell Crow found that added new cost meant the potential benefit no longer outweighed the cost, whether Oak Tower was constructed as condominiums or apartments.

"It was always a risky project. It's an emerging neighborhood that hasn't seen investment in 30 years," DiChiara said.

The company has plenty of other projects to keep it busy. It is building a 22-story, 294-unit apartment tower at South Waterfront and has a mixed-use project under way on North Mississippi Avenue as well as another project in Wilsonville's Villebois district, he said.

Whomever elects to build at the Oak site in the future will have to contend with unusual legal commitments made by prior owners.

For instance, a 1997 agreement gives a neighboring property owner the right to a certain number of parking spaces on the site for $1 a year for up to nearly 300 years. Any developer will have to build those parking spots into a new building, then turn them over to the neighbors for a pittance.

Another agreement gives neighbors the right to use the ground floor of any future building for their garbage and recycling containers.

Trammell Crow, which negotiated to buy out the leases, variously intended to build between 160 and 190 units, with ground-level retail.

The property, now empty and surrounded by fence, occupies an intersection with a parking lot, Ruth's Chris Steak House and the Portland Outdoor Store.

Warner, of the PDC, doubts anything like Oak Tower will be constructed at the site in the near future.

"We just don't foresee in this current real estate cycle that kind of an opportunity becoming available for a while," he said.

If there is a silver lining to be found in the whole saga, it is this: The dilapidated two-story office building that once occupied -- some say blighted -- the site has been demolished, which eliminates one obstacle to redevelopment.

"We have a development-ready site," Warner said.

wculverwell@bizjournals.com | 503-219-3415
http://portland.bizjournals.com/port...25/story5.html

[MarkDaMan]

dup

[pdxman]

Nice going pdc

[der Reisender]

seems like something's wrong when we can't get a development-ready site in the center of the city moving forward with some type of project...

[cab]

Not a fan of PDC, but the city council killed this project. Leonard in particular made a huge stink that drove the project.

[tworivers]

Nice going pdc

Thank Randy, he's the one who tanked the deal.

[MarkDaMan]

^true...Leonard has some great qualities, but boy does he become focused on one aspect of one issue instead of the entire picture...in fact, this is the first time I've seen this in print media, it should a been a consideration Randy should have studied when weighing the fairness aspect...

Even with public subsidies, the project was a winner for Portland that would have generated property taxes of $750,000 a year. The city would have recouped its investment in less than two years.

So over 10 years, this tower would have generated $7.5M, $6.3M after expenses (free land)...idiots!

[brandonpdx]

get used to it. Anything that looks "funny" (which is needed sometimes to pencil these things out) won't get done anymore because the commisioners won't want their names attached.

[cab]

Didn't Randy also kill a low end rental building in SWF?