Audit praises, dings PDC loan program
The Portland Development Commission has improved the management of its economic development loan program but needs to do a better job tracking its largest borrowers, according to a city audit released Wednesday.
In his response letter, PDC Executive Patrick Quinton said the agency was already making more improvements and would comply with all recommendations.
The audit, 'PDC Economic Development Loans: Loan programs improved, but tracking major borrowers limited,' comes at a time of great change in PDC's loan operations that will change the program in the future.
Until recently, the PDC made economic development loans to a range of businesses, including real estate developers, restaurants and retailers. Now, at the direction of the City Council, economic development activities are being focused on certain industry clusters, including sustainable development.
The audit focused on economic development loans made during the past five fiscal years, mostly before the new focus took effect. It found that the PDC made approximately $74.4 million in loans during that time, mostly with urban renewal funds in the 10 urban renewal areas administered by the agency.
The audit reported that 55 percent of the money went to five entities. The remaining 45 percent went to around 200 recipients. The audit questioned whether this distribution pattern met the PDC's goals of fairness and diversification of risk.
The issue is clouded by the fact that the PDC's overall loan portfolio changed dramatically in July 2010. That is when the council created the Portland Housing Bureau by merging the PDC's housing program with the Bureau Housing and Community Development. The new bureau took control of PDC's housing loans, which outnumbered its economic development loans by a 4 to 1 ratio. The transfer changed the PDC's top loan recipients.
The top five recipients identified in the audit are: Portland Family of Funds, an investment group with 18 percent of the loans; Urban Heritage Portland Hotel LLC, owner of The Nines Hotel, with 17 percent; 14th and Everett RPO LLC, owner of the Vestas wind energy company headquarters building, with 8 percent; Riverplace Parking Garage Association, with 6 percent; and Beam Development, with 6 percent.
PDC policies require that the board receive quarterly updates on the status of all borrowers of more than 5 percent of the loans. The audit found PDC staff had not produced the reports in recent years because of confusion about other policies. PDC officials promised auditors they would resume the reports.
The audit is available at http://bit.ly/z1mRvZ.