Sam’s Taxes Two-step

[November 7th, 2007]

Last month, City Commissioner Sam Adams unveiled a proposal seeking $485 million in new transportation taxes.

This month, Adams is proposing to give away valuable city real estate and shower a variety of non-transportation interests—including the Oregon Museum of Science and Industry—with surplus city cash.

The more recent giveaway numbers are a tiny fraction of the proposed transportation tax. But at least two City Hall watchers see a disconnect between asking for higher taxes one month and giveaways in other areas the next month.

“It makes a guy wonder what the hell is really going on in this town,” says Dave Lister, a small-business owner who ran unsuccessfully for City Council in 2006.

In a series of 21 public meetings, Adams has argued the city’s deferred road maintenance problem—which he pegs at more than $400 million—will continue to mushroom without a tax. (The plan he floated will include $130 million for Multnomah County to repair bridges.)

While polling commissioned by Adams shows the public supports raising new money to deal with the problem, items on the council agenda and on the list of proposals for how to spend an unanticipated budget surplus raise questions about just how dire the transportation crisis really is.

For example, the Portland Office of Transportation, which Adams oversees, is proposing to lease “air rights” over an East Burnside Street sidewalk to a developer for 30 years for just $1 annually.

The council is due to vote Wednesday, Nov. 14, on the lease. In New York City and other densely populated cities, air rights trade just like other real estate. But they are a relatively new concept in Portland; in fact, city transportation officials can’t recall the city ever leasing air rights.

In this case, the Office of Transportation is charging $1 essentially to lease an 8-by-100-foot space starting on the second floor and extending to the seventh floor of the “bside6” building at the corner of Burnside and Southeast 6th Avenue. The lease will allow the developers to build out over the sidewalk, enhancing views and expanding the building’s footprint.

Transportation staffers say the developers—Brian and Jill Faherty and Lance and Valerie Marrs—will actually realize only about 1,500 net square feet of rentable space from the air rights because of the building’s unusual design. Lance Marrs says he expects the space to have only “nominal” value.

But if developers get $20 per foot—slightly above current market—for the city-owned space over the 30 years, that’s nearly $1 million over the life of the deal. (The lease comes on top of a $250,000 transit-oriented development grant from Metro to help defray the developers’ construction costs.)

Adams says the project will create a landmark building on a lot that has been derelict for two decades and will help raise property values in the Lower Burnside neighborhood. Building out over the sidewalk also complies with design guidelines for inner Southeast Burnside.

“We’re forgoing revenue, but it isn’t an out-of-pocket expense,” says Adams, who’s running for mayor next year.

Paul Romain, who represents gas station owners, says his clients oppose a Portland-only gas tax hike that may be part of Adams’ plan. “Before local governments raise gas taxes, they need to look at all resources because gas taxes aren’t the only dollars that can be spent on street maintenance,’’ Romain says.

One place to look for cash would be the shopping list commissioners circulated last week proposing how to spend an unanticipated $6.7 million surplus resulting primarily from higher-than-expected tax revenues from lodging and property. (The city’s unanticipated surplus was three times larger last year.)

Adams did request about $1.5 million of that money be used for transportation projects. But he also sought an additional $700,000 for other one-time expenditures, including $300,000 for OMSI, which is struggling to pay off a multimillion-dollar loan from the state dating back to 1992.

The request for OMSI is part of his role as the city’s commissioner overseeing arts and culture, Adams says. A city contribution would be part of a larger bailout package proposed by Gov. Ted Kulongoski.

“Transportation is not my only focus,” Adams explains.

Adams, who hasn’t decided on his tax proposal’s final form or timing, says it would be wrong to conclude he hasn’t considered all other alternatives to a new tax to meet transportation needs. He says he has worked hard to get $11 million in general fund dollars in the past two budget cycles for the Transportation Office, which is supposed to be funded by the state gas tax and other non-general fund revenues at the city level.

“You could spend the entire general fund on transportation, and it still wouldn’t cover the backlog,” Adams says.