Vesta puts the heat on city
High-tech firm plays the relocation card in bid for tax credits to stay in town
It's what a successful Portland tech company wields when it threatens to leave and take its 220 employees with it Ñ if it doesn't get a tax break.
A big one.
One so big it will cover the company's investment in a new building, provide it some equity and even supply a little extra cash.
It's the leverage Vesta Corp.'s Chief Financial Officer Sanjay Khare wielded last spring when he notified the Portland Development Commission that the Multnomah County income tax was hurting his company's ability to be competitive in its field.
An up-and-coming venture currently in the Wells Fargo building downtown, Vesta provides call-in credit verification services and 'stored value' cards for retailers.
At the time, Khare also was working as interim CFO of the commission's tax-credit arm, called the Portland Family of Funds. While working for both Vesta and the Family of Funds, Khare says he told commission staff that the city's taxes make it too expensive for Vesta to do business. 'Being in the city of Portland without any kind of offsetting financial incentives Ñ taxes in the city are quite high Ñ doesn't work too well for a company in a stand-alone Portland location,' he says. He let it be known that Vesta was looking for an out-of-county address, possibly in Vancouver, Wash., if relief in the form of tax credits Ñ such as those distributed by the Family of Funds Ñ wasn't in the offing.
Khare said he departed the Family of Funds when it became clear that it would begin negotiating with Vesta. 'In July of 2004, we had our first conversation about, gosh, there might be a deal for Vesta here that might work with PFF as well, so I stopped at that time providing services to PFF because I thought there might be a conflict,' he said.
PFF General Manager Kenny Asher said, 'There may be the appearance of conflict Ñ I know there are none.'
Khare had worked for both entities for about 10 months, from September 2003 until July 2004, but said there was no conflict of interest before his departure.
The Family of Funds had the tax credits in hand already: New Markets Tax Credits, won last spring after an extensive application process. The credits are intended to coax private investment in economically barren areas. When a business moves into one of these areas, it can reap millions in credits.
Vanport Square, a New Markets project involving a commercial strip along Northeast Martin Luther King Jr. Boulevard, was intended to house a grocery store Ñ something the neighborhood had been clamoring for Ñ which would spur foot traffic for other, smaller retail businesses. Nevertheless, it was quickly offered up to Khare's Vesta, along with the attendant $4.2 million in tax credits.
The credits are more than enough to cover the company's investment in the project, which the PDC said was $3.7 million. Khare disputed the figure. He said Vesta has not agreed to the $3.7 million but wouldn't say what the true figure was. 'Let's just say it was less than that.'
Khare said Vesta's fit with the Vanport project is neither a product of cronyism nor insider knowledge. 'It stands on its own terms. It's not better for Vesta than for anybody else that had 200 jobs that may or may not stay in the city. É I'm not sure, anyway, what kind of inside information that would be. I guess I knew PFF had tax credits, and obviously I knew who at PFF to call.'
Asher said he doesn't believe the New Markets program will become a tool for Portland companies looking for cheaper office space. 'We're in the business of supporting Portland business. We have been successful in bringing a real powerful tool to Portland. Credits are available for any investor.'
Asher said Vanport Square, despite two years of effort, was failing to draw the wished-for grocery tenant. The only one to consider the site Ñ Albertson's Ñ walked away from the deal, he said. 'Albertson's was not interested in the site. By the time Vesta showed up, they were gone,' he said.
Albertson's officials declined to comment.
Others involved in the Vanport Square project remember it differently than Asher.
Scott Eaton, a partner at Gerding/Edlen Development Co., one of three development firms working on the Vanport Square project, said Albertson's, while committed to the project, wanted to delay for a time before moving forward on Vanport Square. 'Albertson's really stepped up, and at the rates we had signed on, they were willing to pay more for the site than others,' he said.
PDC Development Manager Michael McElwee also said that Albertson's was interested, and that the city chose Vesta instead of pressing for Albertson's because Vesta needed less parking and used less space, so that more retail stores could be accommodated.
'What Vesta brings to the table is it's a high-tech company that employs 220 current employees Ñ about 20 percent of them from Northeast Portland,' McElwee said. 'They have a 24-hour operation that will add vitality and life to the street throughout the day. And that's real positive.'
Space chase continues
On Thursday, Vesta posted a notice to commercial real estate brokers announcing that it remains in the market for 25,000 square feet of space outside Multnomah County Ñ preferably in Clackamas or Clark County Ñ for its call center.
'We're trying to make clear to folks that the Vanport project is not a done deal by any stretch of the imagination,' Khare says. 'In fact, while that's under way, we will look at a wide range of alternatives.'
Jennifer Madek, an agent with Portland real estate brokers Norris Beggs & Simpson, said Vesta is one of many companies looking for a way to duck high costs in the Portland area. Many, she said, wait for their leases to come up for renegotiation to shop around for less expensive office space outside the county.
But Vesta's play 'is really below the belt,' she said. 'How can the city not respond Ñ especially the way things have been going, and now, with a new mayor.'