Tuesday, May 30, 2006

Highlighting Portland's Non-Uniquely Bad Biz Sense

In the primary season, and in general from some quarters, a major knock on Portland's Council is that it simply doesn't handle business well. It's being taken for a ride by Homer Williams and OHSU, goes the narrative. They knew they couldn't build a tram for $15 million, but they believed it hard enough to say yes. At least, that's the theory. Some would say it's more a case of being on the take, but from places like Jack Bog the word I hear most often is "incompetent."

No excuses--there are definitely favored developers and causes, and no small amount of failed oversight on projects gone over budget--but much of the issue lies with PDC's profligacy, and there are certainly model projects well conceived and realized under budget (cf Yellow Line). And then there's always the issue of perspective: how much error do we allow ourselves in the normal course of society? It's fashionable to speak of government in the third person, as if it were a disconnected cadre of alien robots. But it's us, everyone, or at least made of us, better and worse alike. Can we legitimately fill each office with rational, parsimonious legislators immune to temptation, or are hiccups caused by simple human frailty inevitable?

It's in that vein that two stories struck me from the Tigard/Tualatin/Lake Oswego corner of ClackaWashingmas County. In Lake Oswego, the city council discovered the downside to spending money they might not have, being told last week that $20 million already appropriated in development funds were needed instead to pay for the ultimate civic mundanity, sewage. I wish I could give you the link to this story in Thursday's LO Review, but perhaps for holiday reasons the online version is not updated. I can however link you to last week's story, which explains what went wrong--and it sounds amazingly like a tram story:
Engineers told the city of Lake Oswego Monday that replacing their sewer interceptor, a 20,000-foot pipe that carries sewage through Oswego Lake, will cost $65 million if funded according to its current design.

Likely, the project is five or six years away and its costs will steadily increase with inflation and rising steel costs.

The price tag was a shock for city officials, who asked engineers to explore two other potential designs in hopes of curbing the price.

Though the cost of the replacing the interceptor has previously been estimated at about $25 million, engineers say geophysical data shows the figure will be much higher because sediment and algae have turned the bottom of the Oswego Lake to “fluffy muck.”
Steep anchor point and no-vibration specifications? Meet "fluffy muck." Could someone with a bit of historical understanding of the lake probably told them the likely composition of the bottom? Probably. And furthermore, has the City known about the problems and need for repairs/replacement of their sewage line through the lake since the 90s? Of course. In fact, isn't the health of the lake a well known, ongoing problem (although one mostly underwritten by the private ownership of the lake)? Indeed. So why was the City putting its money and bond rating on the line with vanity projects like the Safeco HQ purchase? And doesn't the pattern sound familiar to a certain "socialist" city just northward? If there's one thing Lake Oswego is NOT, it's socialist. In 1998 in fact, voters opted to curtail urban renewal funding and reject new indebtedness for development.

Just across the county line in Tualatin is the newest metro area mall, Bridgeport Village. I have some grumbles with it, but even as someone generally predisposed against malls, I have to admit it's got some great stores and aesthetically is really quite pretty. And the parking lots and garage are perpetually full, so near as I can tell it's been a grand success. Tualatin--and by extension Washington County, which sold the land to developer Opus for the purpose of building the mall--was thrilled to offer up the former quarry and pet food factory site for avant retail. Of course, they also thought the county should make a bundle on this potential retail windfall as well. So they rejected a flat price of $18 million, for a revenue-sharing type of contract that the county believed would net them anywhere from $50 to $150 million. Nice deal! You've got to support letting the county be a player and getting fair value for relinquishing land over to private development, right?

Well, things didn't turn out so well. Surrounding infrastructure costs ended up higher, and the discovery of methane underground also pushed the final price tag above the trigger threshhold, meaning that the hoped-for big payoff for big profits turned into no payoff for merely 'good' profits. After turning down $18 million, how much did they get from their negotiated deal? $12.5 million. One wonders whether the county used Master P for their negotiations, trusting that ridiculously high incentive clauses would be easy to meet and then they'd all be players, drowning in Beaverton bling.

True, in Tualatin's case the money wasn't lost, it simply wasn't earned. But don't tell me that county commissioners hadn't already written up lists to spend that money when the deal was struck. The final settlement price will cause some of those wishes to have the rug pulled from under them, no doubt. And in the end, the problem is the same as Lake Oswego's, and the same as Portland's: public-private partnerships can be good deals for cities, but if they are negotiated on faith and monitored like a sleeping night watchman, they can be major, embarrassing headaches. It's not necessarily about socialist do-gooders blithely ignoring good business sense--sometimes, it's just people messing up or not being savvy enough to find success. For one thing, the private guys are so much better at guaranteeing their end:
County Commissioner Andy Duyck, whose district the fairgrounds land lies in, said he learned his lesson and the outcome of the Bridgeport Village deal will affect how he approaches a deal with Opus in the future.

“I would be very reluctant to enter into any complicated deal like (Bridgeport),” Duyck said. “It would have to be straight-forward. They do this for a business. They could run circles around us.”
In looking at future deals the county may strike with the developer, [county chair Tom] Brian added, however, that he would be more cautious.

“We did learn,” Brian said. “They’re darn good business people.”