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Questions remain about Post Office land deal

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Cost, affordable housing, use of PDC funds at heart of debate


TRIBUNE PHOTO: JONATHAN HOUSE - The U.S. Postal Service operates this retail post office in the Pearl District plus a regional mail distribution facility for Oregon and Southwest Washington mail deliveries. Mayor Charlie Hales and Portland Development Commission leaders are gung ho about a brewing city deal to buy the sprawling U.S. Postal Service property in Northwest Portland — even if it requires the city to take out a big loan.

But Hales may have some convincing to do with the other four city commissioners, who all raised tough questions about the plan at a recent work session.

The current plan is for the PDC to pay $80 million to buy the 14-acre Post Office complex on Northwest Hoyt Street and fund a new mail distribution center elsewhere, then at least $35 million more to build parks, sewers, water lines and roads and subsidize affordable housing. Then the city would offer sites to developers to build 3,100 multifamily units — including 645 affordable apartments — and office space for up to 4,000 workers, including a 400-foot-high office tower that would rank among the city’s tallest.

Patrick Quinton, PDC executive director, calls it a “once in a generation” opportunity for the city to expand its central business district. The Post Office might stay put for another generation if it doesn’t sell to the city, Quinton said, because the federal agency already is saddled with 34,000 surplus properties and this site “is not on their list” to unload.

“To do nothing is a decision” to leave the Post Office distribution center intact, Hales said, rather than seek a “thoughtful redevelopment.”

Hales likened the deal to three past visionary projects that reshaped big parcels of under-utilized land: The Pearl District, the Airport MAX and Cascade Station retail complex, and the aerial tramway and related South Waterfront developments.

Ken Rust, the city’s chief financial officer, said he’s comfortable Portland can get a bank loan to cover the city’s financing gap without putting the city general fund at risk.

Despite the reassurances, the other commissioners seemed skeptical about some parts of the deal.

Commissioner Dan Saltzman said the affordable housing part of the deal seems too “speculative,” as if it were an “afterthought.”

It appears the PDC is proposing to spend only 25 percent of the money on affordable housing, Saltzman said, below the 30 percent citywide mandate for all urban renewal districts — at a time when there’s pressure to bump that mandate up to 50 percent.

“I think it’s got to be at least 30 percent,” Saltzman said.

Commissioner Nick Fish concurred, citing the city’s recent experience in the North Macadam Urban Renewal Area, which includes the South Waterfront. The city failed to acquire affordable housing sites early in that effort when land was relatively cheap.

“There’s the potential for the affordable housing piece to slide” once again, Fish said.

Commissioner Steve Novick said it seemed a tough sell to spend $80 million to buy and relocate the Post Office when the city has a homeless crisis and a big shortfall in paying for road maintenance.

Commissioners Amanda Fritz and Fish suggested the city should pare down its list of other big-ticket urban renewal projects in the hopper: seismic improvements to historic buildings in Old Town/Chinatown, redeveloping Centennial Mills and the city’s 10th and Yamhill parking garage.

Novick and Fish suggested an alternative scenario whereby the city merely buys the site and relocates the Post Office, then simply sells the unfinished land to developers with conditions they must include affordable housing and parks, to cut the city’s financial risk and effort.

Rust said the city has used big bank loans in the past for similar projects, such as in the Pearl District and the aerial tramway. The city could get a $40 million line of credit from a bank at 5 percent interest that costs $2 million a year, Rust said. That interest payment could be covered via revenue the PDC earns from loan and other programs, he said.

Ultimately, Rust said, “The city will be made whole by future sales of property” at the site. But if those are delayed, he said, the city can sell a 10-year bond measure. By 2025-26, he said, the PDC will turn the rest of the River District Urban Renewal Area, which includes the Pearl District and Old Town/Chinatown, fully back on the tax rolls, providing the city with $11 million a year in additional property taxes.

Quinton said the city can’t just “flip” the Post Office site to private buyers after acquiring it. The federal agency is allowed to sell the site to the city, rather than seek competitive bids, in a government-to-government arrangement to achieve a public benefit, he said. As a result, the city can’t function like a real estate speculator and simply resell the land right away.

Quinton said the PDC wouldn’t allow what happened to affordable housing in the South Waterfront area to occur again.

“We’re going to acquire the development rights to affordable housing on the front of this transaction,” he said.

As Quinton explained after the work session, it’s wrong to characterize the PDC as only spending 25 percent of the urban renewal money earmarked for the Post Office project on affordable housing.

“This is money already subject to the set-aside” requirement, he said. The project, as currently planned, “ends up increasing the set-aside significantly over 30 percent.”


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