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September 20th, 2006 NIGEL JAQUISS | News Stories
 

MAGIC KINGDOM

Why the tram matters less to the city's future than subsidized waterfront condos for millionaires.

     
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A couple of weeks ago, Portland City Council voted to pump another $73 million into the new neighborhood known as South Waterfront. About the same time, a 31st-story penthouse in the half-built John Ross condo tower in that same neighborhood sold for $4 million.

Four years ago, when the city first proposed the South Waterfront project, nobody predicted either result—neither the need for so much public money so soon nor the extraordinary success of riverfront condos in what has been an urban wasteland for three decades.

Today, some believe the new high-rise neighborhood sprouting just south of the Ross Island Bridge is the biggest public giveaway in recent Portland history. The League of Women Voters, one of the few independent monitors of the development at South Waterfront, is decidedly unenthusiastic.

"This is the worst deal I've ever seen come out of the Portland Development Commission," says the League's Shelley Lorenzen, a former corporate lawyer. (The PDC is the development arm of Portland city government.)

"I don't think the deal makes any sense at any level," says Bob Ames, a former bank president and past chairman of the PDC.

Others, however, think South Waterfront is glowing evidence of the city's creativity and resurgent economic vibrance.

"When you can partner with an economic force like Oregon Health & Science University and leverage private dollars, it's appropriate for the city to make such an investment," says Jim Mark, CEO of the Melvin Mark Cos., one of the city's largest developers (but not involved in South Waterfront).

The Portland Business Alliance, normally City Hall's toughest critic, thinks South Waterfront is an example of politicos making the right decision. "The city was very forward-thinking to do this deal," says Sandra McDonough, the Alliance's CEO. "The investment it has attracted shows there's huge confidence in the heart of our city."

Love it or hate it, nobody would dispute that the the city's partnership with OHSU and developer Homer Williams is a civic undertaking of complexity unrivaled in recent Portland memory. The development agreement governing the transaction started out the size of a phone book and has now been amended eight times, most often to cover cost overruns (see timeline, page 19).

"This is probably the most complicated deal the city has ever done," says Mark Gardiner, a former chief financial officer for the City of Portland.

It will be years before we know whether the city's strategy at South Waterfront is more akin to a ground-floor investment in Google or a harebrained bet on an Internet dud like HomeGrocer.com. Development is expected to continue for at least 15 years, requiring several hundred million more dollars of public investment and future transportation improvements that will make the aerial tram look cheap.

But in the meantime, as the first slew of condo owners take up residence and the tram prepares for its maiden voyage in mid-December, here's what you need to know about Portland's newest neighborhood:

South Waterfront is Portland's Iraq. Remember how American troops first went to Baghdad to root out "weapons of mass destruction"? And when they proved nonexistent, the goal shifted to regime change? And then it morphed into nation-building, or something like that?

The rationale for City Hall's investment in the 31-acre parcel in South Waterfront Central District has been equally, shall we say, flexible. Five years ago, OHSU, Portland's largest employer, had run out of space to grow on Marquam Hill and was making noises about expanding on property it owned in Washington County.

In 2001, OHSU successfully lobbied the Oregon Legislature for $200 million in seed money for biotech development. "If you look around the country, [people] are clearly identifying biotech as the next growth industry," OHSU Vice President Lois Davis told The Oregonian after a legislative hearing on the funding. "This is perceived as Oregon's opportunity to get in on the ground floor rather than get left behind."

But OHSU publicly mused about spending the money for expansion in Hillsboro rather than Portland.

"It was more than a threat," recalls Larry Brown, the PDC's senior project manager for South Waterfront. "They were out of space on Marquam Hill, they owned lots of land in Washington County, and their board was pushing to use it."

The city quickly agreed to help OHSU develop on the waterfront, thus keeping its biggest employer rooted in Portland.

Soon the talk from both OHSU and PDC shifted to the extraordinary potential for job growth in what PDC referred to as the new "Science & Technology Research Quarter."

South Waterfront would be the crucible of its efforts to move aggressively into biotech, the clean, lucrative industry that has boosted economies in Boston, San Diego and the Bay Area. By 2003, PDC and OHSU had established goals for 5,000 new jobs in the first-phase Central District build-out and 10,000 new jobs in the entire South Waterfront area.

Under the development agreement, PDC has provided OHSU $8.5 million to chase biotech: $5 million for office space convertible into labs for biotech startups, should they materialize, and $3.5 million for a five-year biotech recruiting effort.

But so far, biotech jobs have proved as elusive as WMDs.

"If the premise was [that South Waterfront] was going to generate private-sector biotech, then the effort was deeply flawed," says Portland economist Joe Cortright, who in 2002 co-wrote a study of biotech for the Brookings Institution.

Mark Williams, OHSU's development director for South Waterfront, says critics need to be patient. "We are extremely interested in having various types of bioscience in the three blocks we own," says Williams (no relation to developer Homer Williams). "You can't expect that you're just going to declare something [biotech] is going to happen overnight. This is a long-term effort."

OHSU has plowed the $200 million it got from the state mainly into new construction up on the hill and has only one building in South Waterfront so far. That structure, the 16-story Center for Health & Healing, will primarily provide outpatient clinical services such as physical therapy and day surgery; just four of its floors are devoted to research.

Rather than pushing the envelope on genomes, the university is chasing geriatrics. The only other facility it is even talking about—let alone breaking ground for—is a high-rise assisted living center for senior citizens.

That's OK with the city, says Austin Raglione, deputy chief of staff to Mayor Tom Potter. "Short term, we may not see the biotech jobs," Raglione says. "But there will be long-term job generation, an expansion of the central city, the tax base and the creation of parks, transportation and affordable housing."

Forget biotech and forget health care: South Waterfront will live or die on condo sales.

There's little question that South Waterfront will eventually have more offices and medical buildings. OHSU's Williams says the university expects to develop a new one every five years—though Cortright's analysis suggests that significant commercial biotech in Portland is less likely than Blazer bad boy Zach Randolph winning the Nobel Prize in chemistry. "Biotech grows where it's already established," Cortright says. "That's not here."

Instead, South Waterfront is economically dependent on condos. Although condos may be less sexy than biotech, they provide what the deal sorely needs—cash flow. "Condos are the engine," says the PDC's Brown. "Without the property tax they will provide, none of this [South Waterfront] could happen."

Already 760 condos are either finished or under construction, and there are plans to double that number by 2008. That build-out is twice as fast as PDC and the developers originally expected units to sell, based on previous experience in the Pearl District.

And so far, the units are fetching far more than expected. Independent financial projections prepared for PDC in July 2003 said Williams would be lucky to sell condos for $300 a square foot. Units in Atwater Place, the newest building, are now going for nearly $500 per square foot.

"They're way ahead of schedule down there," says developer Jim Mark.

It is the success of the condos and the property taxes they will generate that's destined to repay the money the city is borrowing. Although OHSU owns a lot of land in the district and has nearly completed one building there, the university is a nonprofit and therefore does not pay property taxes.

Even though noisy, dirty construction will be the norm at South Watefront for years to come and there are no stores, restaurants or bars there yet (the Daily Cafe just signed a lease to put in a branch near the tram's terminus), buyers—about half of whom are from outside the metro area—have already purchased more than 530 condos.

Al Solheim, often credited as the first developer to see the Pearl District's potential, finds the transformation of the district amazing.

"Every time I drive by there, I say, 'Holy cow, I can't believe what they've done,'" he says.

Indeed, the views looking east and south over Ross Island and the Willamette River are spectacular. From the east side of the Meriwether, the first condo tower completed in South Waterfront, it's easy to forget you are in the center of a city, right next to a working shipyard where Zidell Marine still builds barges.

Eight-person crew shells glide by the green tip of Ross Island, a prehistoric-looking blue heron flaps lazily toward its nest, and the quiet purr of a newly installed Sub-Zero refrigerator makes more noise than the rush-hour traffic or even the work crew demolishing a rusty old PacifCorp electrical tower nearby.

"I'm from Florida, and I love being near the water," says Kathleen Schneider, 59, who lives with her husband, John, on the sixth floor of the Meriwether west tower. "I can row, ride my bike and have a spectacular view and be near downtown without being in it."

Of course, in recent months the real-estate market has slowed dramatically in other cities and begun to stagnate here. Figures compiled by the real-estate agents' listing service show that there are now 1,476 condos for sale in Portland, about three times as many as a year ago. Perhaps more telling, current supply equals about four months' worth of demand; a year ago, supply was sufficient to meet only one and a half months of demand.

Homer Williams says the market is simply returning to earth. "The market is not frothy anymore, but it's OK," he says.

There's no denying it—the city's subsidy is BIG.

Two weeks ago, the City Council voted to boost investment in public projects at South Waterfront to $195 million, nearly double the amount called for in the original 2003 agreement.

About two-thirds of the money will come from public sources. The other third will come from OHSU, the developers and landowners in the district (see chart, page 23, for a breakdown).

The increased investment will pay for tram cost overruns, parks, a streetcar extension and affordable public housing but will also cover such expenses as paying OHSU a $3.4 million bonus for its lobbying and will buy land from Homer Williams and his partners at prices inflated by public investment.

Most of the public dollars—about $74 million—come in the form of what's called "tax-increment financing," a tool that PDC commonly uses to generate investment in urban renewal districts (South Waterfront is part of the 409-acre North Macadam urban renewal district).

The way such financing works is, the city borrows against a future increase in property-tax revenues in the district and uses the money now to pay for infrastructure (and sometimes other goodies). Right now, because property-tax revenues are only trickling in, the city is borrowing the $74 million and guaranteeing repayment with its general fund.

The developers have guaranteed that repayment with property they own, but Lorenzen says if real-estate values plunge, the city will be on the hook.

Mayor Tom Potter says in response to written questions that his bean-counters have carefully assessed such risks. "The city believes that the risk of general-fund resources having to be tapped to pay the debt service on interim financing is minimal. [The city's Office of Management and Finance] is extremely conservative and prudent with the city's financial commitments, and they have been involved every step of the way," the mayor says. (To read Potter's complete responses, go to wweek.com.)

Regardless of whether the guarantee is solid, critics say the public is bearing too much of the cost for a project that they say primarily benefits developers, condo buyers and OHSU.

"It's difficult to understand why we're putting the general fund at risk to subsidize a hot condo market," says Lorenzen.

"They're putting a hell of a lot of money into two speculative ventures [condos and biotech] that still lack basic infrastructure," says Bob Ames.

PDC's Brown says critics should not overlook the fact that private investors are also contributing $70 million to the public projects.

"We get all these improvements [streetcar, parks, affordable housing, the tram]," says Brown. "And $70 million of it is paid for by our partners."

OHSU's Mark Williams rejects the notion that the university is getting a free ride at taxpayer expense. He notes that the university ponied up an additional $21 million to cover tram cost overruns.

"Any notion that we're getting a wonderful deal here or cutting some fat hog is just wrong," Williams says.

It's true that OHSU, the developers and other landowners are kicking in lots of money (much of which they will probably borrow from the city at subsidized rates), but the question is whether city money, in the form of tram payments, the construction of a lavish greenway along the Willamette or the $15 million in non-tax-increment funding the city is paying toward extending the streetcar could be better used elsewhere, such as paving dirt roads in Lents or building parks in Cully or a dozen other neighborhoods.

It's also true that, because of the way tax-increment financing works, residents of Lents, Cully and every other Portland neighborhood will be subsidizing South Waterfront residents until at least 2019, when authorization for the urban renewal district is due to expire.

That's because all new South Watefront property taxes will go toward paying off the borrowing used to pay for district improvements, leaving no money to pay for fire, police and other basic services that serve the entire city.

Potter says the city's contribution to South Waterfront is not an either-or situation. The city is pumping significant general-fund dollars into the New Columbia housing projects, he notes, in addition to programs for low-income home ownership and a host of other expenditures. "Fully realizing the potential of the North Macadam area in no way precludes or diminishes the work we are also doing to improve neighborhoods in Cully or Lents or anywhere else in Portland," Potter responded.

He adds that the greenway, parks and other public investments will benefit all Portlanders.

"Redeveloping this area helps reclaim our riverfront for everyone," Potter says.

Admirers say Homer Williams can work miracles with real estate; critics say he's even better at working the city.

A lot of people tried and failed to find a use for South Waterfront over the past three decades. More than once, city planners rejected the proposals of the Schnitzer family, who until recently, along with the Zidells, were the district's major property owners.

Only when OHSU and the city began their dance in 2001, however, did anybody really come up with a vision acceptable to the city, and that somebody was Homer Williams, fresh off huge success in the Pearl District. Before the Pearl, Williams had also pulled off unlikely successes as varied as Forest Heights on Portland's steep West Slope and Jumby Bay, an arid, remote Caribbean resort.

Somehow, Williams has been able to solve the problems of difficult properties and do it at just the right time, even if he often ends up in hock to his investors.

Currently, Williams and his partners Dike Dame and Gerding/Edlen Development are in the midst of erecting four condo towers in downtown Los Angeles. When they began in 2004, their project marked the first high-rise condo development in that city in 20 years, according to the Los Angeles Times.

"He's got a nose for opportunity," says Solheim.

Lots of developers look at land and back away, saying, "If only it were zoned differently." In 2001, Williams bought land at South Waterfront for a small fraction of what it's worth

today and then cleared the path for his condos in 2002 by persuading City Council to increase the maximum building height in the district from 250 feet to 325 feet.

Residents of the Corbett-Terwilliger-Lair Hill Neighborhood Association fought the zone changes, in large part because taller buildings would block their views of the Cascade mountain range. To obtain what amounted to very valuable air rights, Williams agreed to make the footprints of his buildings smaller. Then last year, realizing he'd surrendered too much, he persuaded the council to let him increase the footprint.

Bob Durgan, an Andersen Construction executive who represents the Zidell family (owners of 33 waterfront acres at the north end of the Central District), says City Council also made a very expensive mistake early on by granting Williams' wishes to expand the scope of condo development without requiring developers to pay for improvements to handle the increase in traffic larger buildings will cause.

"These guys got off scot-free," Durgan says.

Homer's winning ways have continued. Consider, for example, block 49, a parcel of land adjacent to the Old Spaghetti Factory restaurant that he purchased in July 2005 for about $1.25 million,

In a deal approved by the City Council earlier this month, PDC bought the land from Williams and his partners for $4.5 million (without obtaining an appraisal to justify the price it paid), which means the developers pocketed a nifty profit of $3.25 million in about six months.

In addition to the profit, Williams' group retained exclusive right to develop affordable housing for PDC on the site, which will earn it another $2.5 million or so.

"Why is it in taxpayers' interest to pay Homer top dollar and then give him an exclusive right to develop the property?" Lorenzen asks.

PDC's Brown admits the agency bought the property without first having it appraised. But Brown says Trammell Crow, a savvy national development company, paid a similar price for a nearby parcel. He says the Trammell Crow purchase is a better indication of current market value than whatever price Williams may have originally paid.

"Our question is what the market is now," Brown says. "We're not concerned with the details of Homer's [purchase]."

Williams denies he's received favorable treatment on any aspect of South Waterfront. He says his group, North Macadam Investors, would happily buy back anything it has sold to PDC at the same price. "PDC's negotiators are smart people," he says. "And there's a lot of transparency here."

The tram cost a lot, and it sure looks cool, but for now it's pretty irrelevant.

The original premise for the aerial tram was that it would whisk OHSU personnel from Marquam Hill to biotechland on the waterfront, and that the short commute would make condos attractive to highly paid docs.

There's no biotech, and so far, only five of the 530 condos sold have gone to OHSU-related buyers, suggesting that the $57 million tram, at least initially, is an expensive luxury rather than a crucial transportation connection between residents on the water and their jobs on the hill.

"I hope they're just late adopters," Homer Williams says of OHSU staff.

OHSU's Mark Williams says the people who work in the university's new building will zip back and forth between the riverfront and Marquam Hill.

"We think they'll use the tram a lot," he says.

Ask people today why they bought condos on the river and they'll tell you, "It's the view, stupid."

"I would have to say the tram didn't influence my decision either way," says Meriwether resident Schneider. "The river was the draw."

While the final verdict on South Waterfront is more than a decade away, it's clear that the almost perverse popularity of living in Portland may be the project's single strongest asset.

Mark Gardiner, the former city CFO who also served as a consultant to OHSU on South Waterfront and partnered with the city on the renovation of PGE Park, says the risks were far greater before developers broke ground. "Now you can see that people want to invest there and that there will be property taxes," Gardiner says.

Critics justifiably worry that City Council has put the general fund at risk based on the shaky premise of biotech and added to its risk just as the real-estate market is going soft. They also worry that if buyers continue to snap up condos, traffic along Southwest Macadam Avenue will become a very expensive problem.

Gardiner says such concerns are legitimate but that the city is right to be focused on a greater imperative: grow or die. "I remember doing some work for Oklahoma City in the late '80s," he adds, "when they were facing the opposite problem—no traffic at all."

South Waterfront Timeline

1988 Central City planning increases heights in district to 250 feet.

1999 City Council approves North Macadam Urban Renewal District, which enables tax-increment financing.

2001 Legislature gives OHSU $200 million in tobacco-settlement money for biotech.

2002 City Council OK's South Waterfront plan with a tram budget of $15.5 million.

2003 Council approves South Waterfront Development Agreement in August.

2003 Tram budget rises to $28.5 million in November.

2005 Tram budget hits $40 million in March.

2006 Tram budget soars to $57.5 million in February.

2005 In June, Homer Williams announces that his first South Waterfront condo tower, the Meriwether, is 94 percent sold.

2006 In September, City Council approves a host of new South Waterfront expenditures, including increasing tram funding to $57 million.

2007 Tram opens to the public in January after trial runs in December 2006.

Sources & Uses of $195 Million for South Waterfront

PROJECTS:

Tram - $57 Million

Streets, infrastructure - $42 Million

Streetcar - $42 Million

Affordable housing - $26 Million

Parks - $19 Million

OHSU biotech development - $8.5 Million

SOURCES OF FUNDS:

Tax-increment financing - $74 Million

Local improvement districts (mostly OHSU) - $40 Million

City of Portland - $23 Million

Federal government - $22 Million

Oregon Health & Science University - $9.5 Million

Developers - $7 Million

State/Regional - $1.5 Million

SOURCE: Portland Development Commission

Potter on the Waterfront

WW submitted questions last week to Mayor Tom Potter's office about South Waterfront, tax increment financing (TIF), developer Homer Williams and Oregon Health & Science University. Here are those questions, and the answers in their entirety:

Q. The recently approved eighth amendment to the South Waterfront Development agreement includes a large increase in public investment, primarily in the form of TIF dollars. Because the district is so new, those TIF dollars don't yet exist and so the city is borrowing the money backed by its general fund. The repayment of that borrowing and the ultimate flow of tax revenues depend on the continued sale of high-end condos at a time when experts seem to think the real estate market is cooling rapidly.

With those risk factors in mind and with the ever-present need for greater public investment in a whole host of other city services, what explanation would you offer Portlanders for why increasing the public investment in South Waterfront is both prudent and a better use of scarce resources than competing needs ranging from paving streets in Lents to building affordable housing in Cully?

I don't see this as an "either/or" situation. Fully realizing the potential of the North Macadam area in no way precludes or diminishes the work we are also doing to improve neighborhoods in Cully or Lents or anywhere else in Portland.

Look around Portland at how General Fund dollars are being used: $14 million went into New Columbia, a major redevelopment project in a needy neighborhood aimed at families with kids, seniors and low-income folks. There are 900 brand-new housing units there—including some homeownership single-family homes—that are full of people. The new Rosa Parks Elementary school that opened there last week received $1 million in General Funds.

We also just spent $500,000 on direct assistance to low-income homebuyers, focusing on families with children in Northeast and outer Southeast to help stabilize school enrollment and expand homeownership opportunities for families of color (Operation HOME). About half of this money goes into a revolving loan fund, which will make it available for even more families in the future, and about half went into land trust housing, which makes actual homes permanently affordable for future families to buy when the first family moves on.

Last year we sold a housing opportunity bond that netted the city about $11 million for affordable housing projects, mostly outside the central city (this bond is backed by city general fund payments). Those projects are all underway—about 400 units of housing for people earning below 80 percent MFI [median family income] ($38,000). One example is Rose Quarter Workforce Housing project—176 apartments being constructed in the old Ramada Inn for people who work at service industry jobs in that area. Same with Leander Court in Lents.

All of that work remains on track, no matter what happens in North Macadam.

Second, we are not in the business of building condos. That's Homer's job. We are providing the spark for over $1 billion in development that will ripple outward into many areas of North Macadam, and our city as a whole. Redeveloping this area helps reclaim our riverfront for everyone; it changes a former contaminated industrial area from a liability into an asset, it builds a greenway along the Willamette River and a park that will be available to the entire community, and the area will bring people into the city core.

As to the prospect of a cooling market—we follow national economic trends. Portland's economy is strong and there is continuing immigration that is part of the 1 million more people expected here in the next few decades.

While there is some risk to the city until sufficient taxable value is created in the North Macadam URA [urban renewal agreement], the city believes that the risk of General Fund resources having to be tapped to pay the debt on interim financing is minimal. OMF [the city's Office of Management and Finance] is extremely conservative and prudent with the city's financial commitments, and they have been involved every step of the way.

The repayment of the General Fund secured interim financing, incurred on behalf of the North Macadam Urban Renewal Area (including South Waterfront), is dependent upon the continued taxable development of the entire North Macadam Urban Renewal Area, as well as the continued growth in taxable assessed value of the existing development in the URA. High-rise condominiums are expected to be the primary new development product in the URA and, as such, the near-term success of the URA is largely dependent upon the continued development of condominiums.

We are monitoring NMI's progress, and they inform us they remain on schedule, with 4 of the 5 proposed projects under construction. In total, these five projects are expected to create sufficient value to secure $65.5 million of TIF obligations, or about 89 percent of the TIF obligations identified in the eighth amendment to the DA [development agreement]. Other projects currently under construction in the URA are expected to add additional value in the near future.

Regarding your question about the public investment in the SWF Project potentially reducing our ability to meet needs in neighborhood like Lents and Cully, it is important to understand that the urban renewal funds used in the SWF project area are generated exclusively from private investment in SWF and cannot be used outside of the district. On the other hand, the city and PDC have made major commitments to supporting our eastside neighborhoods. For example, PDC has established an urban renewal program with the Lents community committing nearly $10 million for parks, streets and other public investments over the next five years. In the Cully neighborhood, hundreds of single- and multi-family affordable housing units have been assisted in recent years and continue to be a top priority. We also are focusing resources for street improvements and public safety. The bottom line is that these efforts do not compete for resources with the SWF development, and the city's commitment has continued to grow in its neighborhoods while creating the SWF district.

Q. The development agreement among the city, OHSU and private developers led by Homer Williams is extremely complicated and has been amended eight times with changes that some critics have interpreted as give-aways to OHSU and the developers (relaxing the time line on a parking garage; providing a bonus for federal lobbying receipts and lowering the bump rate in OHSU's case; purchasing land at arguably high prices, etc., in the developers' case). Given how many mistakes were made in the tram process, what assurance can you offer Portlanders that the city's partners are not taking advantage of the city and its taxpayers in other aspects of the build-out of South Waterfront?

The number of amendments isn't necessarily a red flag for what's going right or wrong. Private-public agreements are complicated. When the papers were first signed, all the parties agreed then that there would be amendments in the future since we were about to build an entire neighborhood from scratch.

In this agreement, the private sector is paying for $69.2 million of a $195.1 million public-facility investment program. This is more than one-third of the costs of investments in public facilities—and no public funds are being invested in private ventures. Does that count as a "give-back" by the private sector?

The first phase of the SWF Greenway has been fully funded for the first time, and its construction accelerated by two years. The SWF Neighborhood Park has similarly been fully funded for the first time, and its construction also been accelerated by two years. Each of these actions is in response to neighborhood and resident requests.

Additional sites for affordable housing development in the area and funding to construct the first 100 percent affordable housing project at levels recommended by the Council is now secure.

Major public transportation investments, backed by extremely high levels of private-property-owner funding commitments, are moving forward. The Tram is on schedule. The Portland Streetcar extension to Lowell is under construction.

No one believes this process has been a model for how we do business in the future. That's why I've called for an investigation of the process that produced the tram overruns. I intend to begin this investigation in January 2007 after the tram is operational. Additionally, Commissioner [Sam] Adams is looking at developing a "good-faith estimate" system that that Council supports. The city has demonstrated that it is capable of managing large-scale projects on time and within budget; the $390 million Big Pipe project, Portland's biggest public works project in history, has been a model of effective management and cost containment.

Approach to the negotiation of the provisions and amendments to the Development Agreement have been exemplary in their sophistication and comprehension of the many details of land redevelopment. The agreements that have been negotiated have been done aggressively and been backed by extraordinarily successful experience of one of the country's premier redevelopment agencies.


Eric Johansen, the city's debt manager, says he expects South Waterfront to generate enough property taxes to begin covering the city's borrowing costs on $74 million of tax-increment financing by 2011-2012.

The City Council is increasingly split on South Waterfront. Commissioners Randy Leonard and Erik Sten recently voted against the large increase in public funding. Leonard says the deal gives too much to the city's partners and is "not fair" to Portlanders in other neighborhoods.

The average sales price so far in the 245-unit Meriwether is $382 per square foot; the 303-unit John Ross, $434; and the 212-unit Atwater, $487. The condos range in size from 600 to 5,000 square feet.

OHSU and other landowners will pay $40 million for tram and streetcar costs through local improvement districts, which are 20-year assessments on property. By law, city governments must offer to loan LID payors their assessments.

If South Waterfront property OHSU owns generates property taxes—through an assisted living center, for instance—PDC has agreed to channel up to $25 million of property taxes into OHSU's parking garage. Dedicating property taxes in such fashion is unusual.

Thorndike "Dike" Dame, who is Homer Williams' numbers man and longtime business partner, pleaded guilty to federal bank fraud charges in 1988.

 
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