| DEAL HIM IN: It looks like Merritt Paulson will get Council approval July 23 for his stadium deal. |
After many delays and plot twists worthy of a David Beckham biopic, City Council will vote Thursday afternoon on a new financial agreement with Merritt Paulson to renovate PGE Park for his new Major League Soccer team.
The previous deal’s two biggest critics—Commissioners Nick Fish and Amanda Fritz, opponents of the proposal in March to bring MLS to Portland—have softened their public statements on Paulson’s plan.
“It’s a much better deal,” says Fish, who indicated he may vote yes. “I wish this is where we started.”
Fritz agrees—to a point. “It’s a better deal,” she says. “It still has significant problems.”
As first proposed in March, remodeling PGE Park for an MLS team in 2011 was to cost $34 million. That price eventually rose to $37 million. As of mid-July, Paulson was prepared to make do with $31 million by scaling back renovations to the press box and restrooms. (Paulson, however, hasn’t entirely ruled out the possibility of future renovations funded by taxpayers.)
The public is further protected in other ways. For example, the original financial plan City Council approved in March assumed $15 million would be raised from a new urban renewal zone around PGE Park.
But Fritz, Fish and Commissioner Dan Saltzman, under pressure from Multnomah County Chairman Ted Wheeler, resisted tapping urban renewal money that would otherwise go to schools and social services. The new funding proposal eliminates urban renewal money altogether.
The March plan also called for raising $5 million from state income taxes on the salaries of players on Paulson’s MLS team and team employees to help support the stadium’s renovation. That step required approval from the Legislature, but the Senate failed to act on a bill granting that OK after Gov. Ted Kulongoski threatened a veto.
Instead, the new plan calls for Paulson to contribute $8 million in cash and $11.1 million in prepaid rent and ticket taxes. It also uses only $11.2 million (instead of $31 million) in bonds from the Spectator Fund—money that comes from hotel taxes, ticket taxes at PGE Park and the Rose Quarter, as well as parking fees at garages near the Rose Garden and Memorial Coliseum.
In the two weeks since Mayor Sam Adams and Commissioner Randy Leonard unveiled the new deal, there has been little airing of the details. Here are a few questions still left unanswered:
What are the tradeoffs?
Paulson has agreed to prepay rent and user fees at PGE Park for years 2017 through 2034.
That’s better than an earlier version of the deal in which Paulson only guaranteed future rent payments. But there is a very basic downside to that tradeoff: The city will be forgoing potentially more lucrative cash payments from Paulson in the future. (Imagine if Grandma decided in 1989 to prepay all of your birthday presents with $5 gift certificates to McDonald’s.)
As part of the deal, the city had to establish what rent should be 25 years from now.
To do that, the city assumed the value of the dollar will decrease 8 percent a year (even though interest rates in the marketplace are substantially lower than that). Had the city set the rate at 5 percent, rent and user fees would have equaled $17.2 million—roughly 50 percent more than the $11.1 million in prepaid rent. Greg Peden, who has lobbied City Hall on Paulson’s behalf, counters by saying annual rent at PGE Park is already above market rate, which would be $500,000 instead of close to $900,000.
Will Saltzman reconsider his demand that Paulson be held entirely responsible for paying PGE Park employees a living wage?
Under the current operating agreement at PGE Park that expires in 2010, the City of Portland spends $175,000 a year to supplement the hourly wages of PGE Park employees.
In March, Leonard told WW the city would discontinue that practice, which he called a mistake.
In a June 4 letter to his colleagues, Saltzman suggested he would not support a deal that took Paulson off the hook for paying PGE Park employees a living wage of about $11 an hour.
The new deal makes Paulson responsible for only half of what it takes to raise workers’ wages to that level. Paulson will pay that money up front to the city, which allows the city to borrow less money to pay for construction costs. The cash to pay for the city’s supplement will then come from the Spectator Fund.
The Spectator Fund pays for maintenance at PGE Park and the Rose Garden. How much money will be left?
That’s unclear. Shortly after unveiling the financing plan, the mayor also announced a renewed effort to revitalize Memorial Coliseum, which will likely require public funding. Roy Kaufmann, a spokesman for the mayor, says the plan to redo Memorial Coliseum doesn’t necessarily rely on the Spectator Fund. It might not be able to.
Because the cost of borrowing $11.2 million will be close to $44 million over the life of the bond, the Spectator Fund will have a diminished capacity to cover other projects. The Trail Blazers currently subsidize the fund with taxes on their tickets and other fees. Their lease expires in 2025, yet the city is banking on the team being there to keep the fund afloat.
What happens to Paulson’s Portland Beavers Triple-A baseball team?
Paulson agreed to work with Portland officials in good faith until Aug. 1 to locate a site in Portland. But City Council also decided not to require that siting as a condition of the PGE Park revamp, and Beaverton has expressed interest in the team.
For more on Paulson and the Beavers, check out our blog post.