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January 30th, 2002 PHILIP DAWDY | News Stories
 

A Fine Mess at City Hall

     
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Walt Pelett, owner of City Liquidators, says Portland building inspectors are all wet.
IMAGE: martin thiel

For a city with a $14 million hole in its budget, Portland seems awfully nonchalant about collecting past-due bills. While the Water Bureau's billing woes are well known, most people don't realize that the city's building code enforcement office has $4.5 million in uncollected penalties from fines on its books--and the city is doing little to get the cash, even from Lincoln Loan Co., the largest offender.

"We haven't done any more than write letters and make phone calls," says City Auditor Gary Blackmer, whose office is responsible for collecting the monies.

It's not that Blackmer wouldn't like to go mad dog on the deadbeats. He would. But two factors are holding him back: unpleasant memories of his office's last attempt to collect and the fear that the pot of gold may turn out to be iron pyrite.

On paper, the city is owed $4.5 million in penalties and interest from fines, some as old as eight years, meted out by the Office of Planning and Development Review, which assumed responsibilities of the former Bureau of Buildings.

OPDR ensures that state and local building codes are followed. When city inspectors find a code violation, they give the building owner a citation. If the problem is not corrected within 30 days, the citation turns into a fine typically ranging from $55 to $220. If the property owner doesn't pay the fine, OPDR turns the account over to the auditor's assessment and liens office, which then places a lien on the property and sends the first of several letters requesting payment. The idea is that the lien has to be cleared up before a property can be sold, so the city will eventually get its money. It's a great theory, but in practice, it's proven troublesome. As long as the property is unsold, the city gets no money. And, in the meantime, the penalties for not paying the fines have far outstripped the original bill. City records show 1,032 properties now have accumulated large penalties and interest for citations in which the original fines were typically less than $500.

For example, Jack and Georgia Hoffman owe $39,357.18 for what was originally a $165 fine levied in 1994 against apartments they own in Northeast Portland.

Walt Pelett, owner of City Liquidators, was dinged $385 in 1994 and 1995 on three of his warehouse buildings that at one point were deemed "hazardous." Now, with the penalties for non-payment, his bill has swollen to $50,843.57. Pelett says the initial fines were nonsense; the penalties and interest, an outrage.

"It's just another way to get money from you," says the store owner. Pelett, who's turned the matter over to his attorney, says the buildings were far from dangerous; one of them, the old Studebaker Building, was undergoing a $1.1 million retrofit. He plans to fight the amount he owes.

The biggest offender is Lincoln Loan Co., which owes the city a total of $93,478.54 on 48 different properties. Many appear to be the same properties that were at the center of a legal battle between the company and the city over housing-code violations in the early 1990s. In 1995, a court awarded Lincoln Loan $2.75 million, ruling the city had in effect targeted it for enforcement action. The case was overturned in 1999 by the Oregon Court of Appeals. Since then, the company has made no payments on the code violation liens placed against its properties, according to the auditor's office. Company officials--including its president, Melinda Wilde, the wife of ex-state Sen. Thomas Wilde, did not return WW's requests for comment.

Blackmer says he has his doubts about how much of the $4.5 million is actually collectible. Ann Kohler, an OPDR spokeswoman, says she can't estimate how many of the initial fines were solid. Tim Grewe, the city's chief administrative officer, says KPMG, the city's outside auditor, has not told the city to write any of the accounts off its books.

It will take Blackmer's office months to investigate each of the 1,032 delinquent accounts to ensure that the fines were warranted. Still, he figures a good chunk of the money is legitimate and thinks the city should go after it. City commissioners, however, seem reluctant. That's because the only leverage the city has is the option to foreclose on the property and sell it to cover the amount owed.

"Whether we should dig into this is a no-brainer," says city Commissioner Erik Sten. Still, he's cool to the idea of the city making foreclosure efforts until the evidence is in that such action is necessary--and that it's the most cost-effective solution.

According to Blackmer, the last time the city foreclosed on a property for a building code violation was in the early '70s--on a little old lady, right before Christmas--and no one's had the stomach to be ever again cast as the Grinch.

City Commissioner Dan Saltzman says that foreclosure "doesn't mean people are thrown into the street overnight." City Commissioner Charlie Hales, who oversees OPDR, says the city must find a "responsible and merciful disposition" of the accounts, but Mayor Vera Katz seems willing to get tough.

"Foreclosure is not off the table" as a collection option, says Sam Adams, the mayor's chief of staff. Given tough budget times, he says, the city has to chase down every dollar it's owed.

 
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