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Vera
Katz served as state Speaker of the House from 1985. She
beat then-Commissioner Earl Blumenauer in the 1992 mayoral
race, winning 57 percent of the vote. She ran largely unopposed
in 1996.
A state
law allowing enterprise zones was designed to let localities
give tax breaks in return for corporate concessions outlined
by the state. Then-state Rep. Margaret Carter authored a
1995 law that let localities require more concessions.
Ex-Blazer
exec Marshall Glickman promised to bring AAA baseball back
to Civic Stadium. The city, to the surprise of some council
members, promised him some healthy profits.
After
Francesconi's "no" vote on the Freightliner tax break, the
Association for Portland Progress, an influential group
of landowners, developers and major employers, invited him
to a meeting to further explain his vote.
Freightliner
is a subsidiary of Daimler Chrysler, a multinational conglomerate
and the third-largest auto manufacturer in the world. Daimler
Chrysler, which also owns Mercedes-Benz, reported $146.5
billion in sales last year.
In sharp
contrast to the years spent
trying to win public support for a south/north light-rail
line, the city cut
a quick deal with Bechtel for airport MAX. But some say
the downsides of
the $125 million airport light-rail line were never really
considered.
City Commissioner Jim Francesconi says he worries that people
will turn against public-private partnerships, such as the
tax break given to Freightliner, if it's not clear what
the public gets in return.
In 1996,
the
public-relations firm Wieden & Kennedy asked for a $2.2
million federal grant to relocate in downtown Portland.
When the deal
fell apart, W&K
proceeded with its plans anyway.
Money
for the $125 million, 5.5-mile airport light rail
will come from four sources:
The city of Portland ($23 million),
Port of Portland
($32 million)
Bechtel and Trammell Crow
($28 million)
and Tri-Met
($45 million).
The public agencies will pick up approximately $47 million
in other infrastructure costs, terminal improvements and
new light-rail
vehicles.
The
North-Northeast enterprise-zone program was put on hold
for two years prior to March, when council members expressed
concerns about how to enforce the tax-break deals. Two tax-break
recipients, Oregon Steel and Nabisco, had been accused of
not living up to their ends of the deal. The companies denied
the charge.
Although
state law requires competitive bidding, the local agencies
involved in the airport light-rail project exploited a loophole
that let them get around that requirement. A builders group
sued to block the deal in November 1998, but Judge Robert
Redding ruled against it. The case is on appeal.
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Secrets
and City Hall
Sometime in the next three months, Mayor Vera Katz will announce
her plans to run for a third term. In her press conference,
she will undoubtedly claim credit for many of the city's achievements
during the past seven years: additional money for schools,
declining crime rates, two major light-rail extensions, a
Convention Center expansion and, soon, a revamped Civic Stadium
to host minor-league baseball.
Katz's reelection in May 2000 seems a foregone conclusion.
There is no other serious candidate on the horizon, and
she remains a popular politician. The criticism of a few
years ago, that she lacked an agenda, has faded.
In a few corners of the city, however, some critics offer
different observations on Mayor Katz. They say that she
has presided over the most closed City Hall in decades.
That she has taken the public's business private in a series
of questionable multimillion-dollar deals. That with a mostly
compliant council, Katz's leadership style is transforming
an open and deliberative city into one marked by unilateral,
secretive, top-down government.
Community activist Jamie Partridge is one of those who
thinks Katz's City Hall has taken its business underground,
making decisions "without any public input in some cases."
"We need to slow down or open up this process," Partridge
says, "because millions of taxpayer dollars are at stake."
"The mayor's rhetoric and public opinion is very pro-public-involvement,"
says one City Hall staffer. "But her management style doesn't
leave a lot of room for public comment on the really important
stuff."
"I think Vera likes to operate comfortably," says Metro
Executive Mike Burton, who has worked with the mayor since
they served together in the state Legislature, "and often,
that means the details of an issue are already decided and
pinned down before it's made public."
Katz's style has generated some backlash. A signature drive
is now under way for a ballot measure that would make commissioners
elected by district, rather than citywide, in an attempt
to increase their responsiveness to public input. The firefighters
union recently contributed $5,000 to the effort.
"I work with the neighborhood groups a lot, and what I
see is a real disconnect between City Hall and the neighborhoods,"
says firefighters union president Tom Chamberlain. "I hear
it all over the city."
Katz and her defenders say the mayor has simply moved aggressively
to stretch scarce city dollars by working with businesses,
which often prefer privacy. That's the way things are increasingly
done these days.
"I think the current leadership of this city recognizes
the value of public-private partnerships more than the leadership
of the city ever has before," said Portland real-estate
lawyer Steve Abel, chairman of the Planning Commission.
Katz says she does work in secret, but only as necessary
to bulletproof a deal before unveiling it to critics. "I
worked in the Legislature," says Katz, former state Speaker
of the House. "I have to tell you, that's how things get
done. Otherwise, things don't happen."
Former Multnomah County Executive Dennis Buchanan agrees
with Katz that groundwork is necessary before going public.
"The danger," he says, "is when there's some attempt to
fast-track or shortcut the public process."
The record suggests that in at least three recent projects,
Katz crossed that line, operating in a way that allowed
little room for informed debate--the kind of debate that's
supposed to be in the city's best interest.
Even Katz now concedes that she kept the public in the
dark about important aspects of her deal to turn Civic Stadium
over to private investors.
In September 1998, City Hall solicited ideas for the renovation
of the picturesque but rundown stadium. The city received
only two proposals. A review committee selected the winner,
Portland Family Entertainment, a limited partnership managed
by Marshall Glickman and former city finance director Mark
Gardiner.
PFE proposed an arrangement in which the city would provide
$31 million in bonds to revamp the stadium, while Glickman's
group would invest $6 million in initial renovation costs.
PFE would buy a Triple-A baseball and minor-league soccer
team, control the stadium and keep the bulk of the income.
The city would get licensing fees and a cut of the revenue.
In January, the city began negotiating with PFE to fine-tune
the proposal. As part of the negotiations, Katz signed a
confidentiality agreement not to release any information
to the public or even the rest of the City Council on PFE's
financial plans, such as operational costs, advertising
prices and profits--the information that would give the
City Council and the public an idea of whether the investment
was a good bet for Portland.
The news that Katz's secrecy pact withheld information
so crucial to the city's bargaining position would later
perturb City Commissioner Erik Sten.
"I knew that there was a confidentiality agreement, but
I never had the sense that we couldn't see important information,"
he told The Oregonian, which had requested details
of the deal with PFE. "There's no point in having a council
if we don't have access to key documents."
In August, District Attorney Mike Schrunk ruled that City
Hall's conduct in the matter not only violated the Oregon
Public Records Law but also raised "fundamental questions"
about government's responsibility to taxpayers when entering
public-private partnerships.
The documents were released, showing that PFE would average
32 to 55 percent return on its investment each year for
20 years. (The city disputes that figure, saying once costs
and taxes are subtracted, profit would be more like 20 percent.)
The city, meanwhile, would not start making a profit until
2007.
Not only did Katz leave the public and the council in the
dark about details of PFE's financial returns, but her close-to-the-vest
style left out other officials, too.
In March, Katz met with Metro and county officials to discuss
increasing hotel and car-rental taxes to finance the $85
million expansion of the Oregon Convention Center. A number
of officials were mystified by a cryptic item on a city
document relating to the bonds. The item indicated that
a portion of the tax hike would be used for the $33 million
renovation of the stadium, a separate project that had not
been part of the plan. This detail was news to most of the
people in the room.
When officials asked about it, they say, Katz acted as
if it were insignificant--leaving the impression it could
be a mistake on the part of staff.
"When we expressed concerns, it was like, that was just
something staff put together," says Metro Council Presiding
Officer Rod Monroe. "She dropped it, and led us to believe
that she agreed with us that Convention Center was the priority.
And of course, it came back."
After the plan was announced, Katz returned to Metro and
the county to ask their help in issuing bonds for the renovation.
Monroe described the style of presentation as "essentially
a fait accompli."
Katz did modify the plan to deal with complaints that the
civic deal was too risky--but only after Metro and the county
raised a fuss. They would've preferred to have been involved
sooner, said Monroe.
Katz argues that her fellow city commissioners and other
local governments work the same way she does. But Monroe
says, "No, we don't all do it. There's a difference in style,
and that isn't our style. The style at Metro is more open....
But I don't want to be overly critical. People criticize
Metro sometimes for being too slow. It's what you get sometimes
when you encourage debate."
The issue raised by Katz's withholding of crucial information
from the Civic Stadium debate was eerily similar to last
month's decision to give Portland's ninth-largest employer
a hefty tax break.
Last year, Freightliner, a heavy truck manufacturer, announced
a $93.5 million expansion to its Swan Island plant and asked
the Portland Development Commission, which Katz oversees,
for a $6.8 million property tax "abatement" under the city's
"enterprise zone" program. Executives of the firm said the
tax-break decision would have no effect on their plans to
expand, but expressed a willingness to hire minorities and
women from the depressed North/Northeast area in return.
Typically, when companies seek a tax break, local governments
negotiate with the company to get the most for the community.
Public hearings are often held to get a sense of how voters
feel and to pressure the company to put firm commitments
on the table.
That's what happened earlier this year between Intel and
Washington County, for example. Intel asked for a $200 million
tax break in return for a $12.5 billion investment in its
plant. The county held months of public meetings, even setting
up a Web site to encourage debate, before final approval.
By the time the County Commission voted to give Intel the
tax break, it had extracted a number of concessions from
the high-tech giant.
Intel spokesman Bill MacKenzie said public concerns led
to increased safeguards on the community's return on the
deal, a significantly reduced subsidy for Intel, and an
agreement to defray the costs of sprawl if more than 1,000
new jobs were created. Intel's subsidy was reduced by approximately
$40 million.
In Portland's case, however, the council reversed the process.
On Sept. 8, without a detailed commitment from Freightliner,
commissioners voted 3-1 to give the company's tax break
its blessing. In return, the city received only a vague
outline of the company's pledge to hire and train minorities
and women. Those discussions will be left to staff under
Katz's direction.
Katz argues it wouldn't be fair to add another hurdle midway
through Freightliner's application. Commissioners Charlie
Hales and Dan Saltzman agreed.
Upset, Commissioner Jim Francesconi protested at the Sept.
8 meeting, arguing that the city, in bending over backward
to be fair, gave up serious leverage in the talks.
Francesconi said he supports tax breaks if the public gets
equal benefit. But, he said, "Personally, I would never
enter into an agreement where I gave $6.5 million of either
the business's money or my money before knowing the terms
of the deal."
Sten, on his honeymoon, missed the Sept. 8 meeting, but
says he would've voted "no."
A third example of secretive government deals is the airport
MAX. Most Portlanders probably believe the push to build
airport light rail began in December 1997. That's when a
press conference was held to announce what was described
as a unique public-private partnership with construction
giant Bechtel. Headlines greeted it as a joyous event.
On Dec. 31, the council, in a sparsely attended meeting,
voted to fund a preliminary study. A videotape of that meeting,
circulated by critics of the deal, shows Katz telling the
council how the public process should operate.
"We will have a public citizens-comment committee that
Commissioner Hales will appoint, and he'll serve on that,"
she said. "But I don't really want them to debate whether
we should build this or shouldn't build [it]." The public
should instead focus on how best to modify light-rail cars
to accommodate air travelers' luggage, she said.
Katz's lack of interest in public input was probably due
in part to the fact that Katz, city staff and their counterparts
at four other public agencies had been meeting behind closed
doors with San Francisco-based global construction giant
Bechtel for close to a year before that.
During those meetings, they hashed out most of the details,
including whether they could skirt the state law requiring
competitive bidding by handing the contract to Bechtel,
and if so, how.
"We called ourselves the 'Gang of Five,'" said Burton.
He described the process as a marked departure from other
light-rail projects, which typically involve years of public
planning, study and debate.
"I like the project, don't get me wrong," Burton says.
"But to me it was a very curious thing to have this process
going on, given the amount of hearings we do on other light-rail
projects. This one was really a snappo, which in some ways
is very pleasant when you are in public life. But it's not
normally like that."
The deal worked like this: Bechtel and its real-estate
partner, Trammell Crow, would get development rights to
120 acres near the airport, plus an 85-year lease with a
14-year option and the right to all rents. The city, Tri-Met
and the Port of Portland would give Bechtel $125 million
to build the light-rail line. The company would also absorb
any overruns, front $5 million seed money for the project
and pay $23 million more over time.
The contract was awarded without competitive bidding. Bechtel
VP Ralph Stanley says that was fair because the idea was
not a priority for local officials when his company approached
them.
Katz and other defenders of the project contend the sole-source
contract saved time and money. They argue that the development
will hold 10,000 jobs, and light rail will make that happen
sooner rather than later.
"I'm not going to be defensive," Katz said, when asked
about her December 1997 comments. "That's why the voters
elected us, to make good decisions to improve the quality
of life in our community."
"I think the reason that light rail had so much momentum
is that people think it's a damn good idea," said Hales.
"People do tend to criticize the process if they don't like
the product."
John DiLorenzo, a prominent lobbyist/lawyer for conservative
causes, has sued to block the deal on behalf of Associated
Builders & Contractors. His client questions Bechtel's
agreement only to use union labor, which DiLorenzo says
discriminates against local non-union firms. DiLorenzo also
objects personally to the fact that the public didn't really
get a chance to weigh in on the arrangement, in part because
of the abbreviated process.
"The city of Portland, the Port of Portland and Tri-Met
all [approved it] within two weeks of one another," he said.
"Government doesn't normally work that way unless somebody
has choreographed it."
There are a variety of explanations for the increasingly
back-room style at City Hall. One is simply that Katz, former
state Speaker of the House, is more comfortable with operating
out of the public eye. It's a style that goes hand in hand
with what many observers describe as her micromanaging,
control-oriented mindset. It's a style that is rarely challenged
by other city commissioners.
Some say the public is to blame for allowing City Hall's
undemocratic slide; they say low crime rates and a sound
economy have bred complacency, which encourages City Hall
to do as it pleases.
DiLorenzo says he understands why officials--not just in
Portland--use public-private deals to stretch their limited
cash. But, he says, any deal is helped by vigorous public
debate.
"I think we would be better off if elected officials would
just level with the public," he said. "If the fear is that
that information would sour the public, then the members
of the council need to do a better job of educating the
public. The public's pretty smart, and if politicians would
be more forthcoming and be willing to make the case, I think
they would meet with more success than they anticipate."
Secrets
And City Hall
When City Commissioner Charlie Hales named Connie Hunt to
a citizens advisory committee on North Portland light rail
earlier this year, most everyone on the committee turned
out to be light-rail supporters, just like herself.
She'd thought the committee's job was to weigh the pros
and cons and solicit community input. But, she said, "It
wasn't long before I felt our real job was to sell the project
to the community, rather than to find out if it was what
the community really wanted."
City Hall has not always been like this.
Former Mayor Neil Goldschmidt cut more than his share of
deals, but he also opened up government to a great degree,
a number of old-timers say.
Bud Clark, who served two terms as mayor from 1984 to 1992,
pledged to run an open government, and by all accounts
he kept his word.
"When he first walked into City Hall, his philosophy was
this building belonged to the people, and everything in
it is the public's business," said Christine Tobkin, a former
aide.
One of Clark's few ventures into secrecy was his agreement
to a confidentiality pact over talks on a new $205 million
arena and entertainment complex for Microsoft billionaire
Paul Allen and his Trail Blazers.
Allen built the Rose Garden and took over the management
of the Memorial Coliseum. The city kicked in $37.5 million
for streets, parking and improvements.
In return, the deal would keep the Blazers in Portland
and create a major development that in turn would provide
jobs and revenue for city coffers. The activities and nightlife
were to be so big that one pundit predicted that former
Blazers exec Marshall Glickman would become the city's "minister
of entertainment."
Mayor Vera Katz cites the handling of this Rose Garden
deal in defense of her confidentiality pact with Glickman's
new group, PFE. "It seemed to work pretty well," she said.
But some disagree, saying the Rose Quarter's anticipated
status as an entertainment venue has not come to pass.
Portland planning historian Carl Abbott, a PSU professor,
says the Rose Quarter shows how project design can be hurt
by lack of public debate.
"I think the Rose Quarter has been a disaster in urban
design terms," he said. "It's a great big blob... It's a
big arena on a pad of concrete surrounded by parking garages
that interrupt any kind of street grid.... It was supposed
to be a vital urban entertainment center, [but] it's actually
a suburban-style development in the middle of Portland."
His words are echoed by former City Auditor Barbara Clark,
who said, "I've known people in city government who felt
the city got taken to the cleaners on that."
--NB
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Willamette Week | originally
published October 6,
1999
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