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									2007 PDC/City Council Budget Work Group                                  Transmittal Letter




                          Transmittal Letter



February 13, 2007


TO:            Portland City Council
               Portland Development Commission Board


FROM:          PDC/City Council Budget Work Group:
               Erik Sten (Co-Chair), City Commissioner
               Charles Wilhoite (Co-Chair), PDC Commissioner
               Jon Kruse, Citizen Representative
               Mark Rosenbaum, PDC Commission Chair
               Dan Saltzman, City Commissioner


RE:            Submission of the FY 2007/08 PDC Requested Budget


The Portland Development Commission (PDC)/City Council Budget Work Group was
convened to formulate PDC’s Requested Budget for FY 2007/08. The Work Group is
pleased to recommend a Requested Budget for FY 2007/08 (including a five-year forecast)
which reflects a very positive, thorough and informative process involving over 20 hours of
meetings. The end result is a fiscally responsible budget, aligned with both the PDC Board’s
and City Council’s objectives.

While we were fortunate to have four Urban Renewal Advisory Committee members join us
for some of our deliberations and have our hearings televised on cable access, this was
primarily an internal review process. With this transmittal, the Requested Budget is
subjected to the public review processes of both City Council and PDC. This provides an
opportunity for public input and we look forward to a frank and open community
consideration of our work.




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2007 PDC/City Council Budget Work Group                                           Transmittal Letter


                                     BUDGET HIGHLIGHTS

Although the Work Group covered many issues during our deliberations1, six elements rose
to the top in importance and help guide the structure of this document:

               The future of several urban renewal areas needs to be discussed with our
               community in the coming months. Some of this is reflected in the “Westside
               Central City Study” line item expenditures in three downtown URAs. The Work
               Group recommends several very concrete steps in order to allow the community
               time to consider the future of these districts; as well as a broader dialogue of if,
               and where, tax increment financing may be needed citywide. See Section I:
               Policy – the Future of Urban Renewal.

               The Work Group supports PDC General Fund request for $3.9 million. We
               fully recognize past controversies of PDC’s General Fund economic
               development requests. We support the package because it will assist small
               business; expand the use of the storefront grant program beyond URA
               boundaries; allow PDC to continue to work to retain and recruit business to
               Portland and the region; and advance elements of the City’s sustainability and
               alternative fuels initiatives. See Section II: Economic Development.

               The budget was formulated in the context of individual Urban Renewal Area
               (URA) projects as well as PDC-wide program areas. We reviewed and are
               comfortable with PDC’s efforts to implement the thirty percent set aside for
               affordable housing. We also highlighted seven important projects that will set
               the tone for PDC activity over the next few years. See Section III: Housing
               and Development.

               The Work Group calls for Council consideration to address the unfunded
               pressures caused by the pending Streetcar Loop project and the Burnside Couch
               Couplet. The former has near-term federal funding opportunities, while the
               latter requires more Council conversation. See Section IV: Infrastructure.




1
    See Appendix A and B for compendium of Administrative and Policy issues raised by the Work Group.


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2007 PDC/City Council Budget Work Group                                  Transmittal Letter


           The Work Group spent a significant amount of time reviewing PDC’s central
           administration budget. The agency is undergoing a substantial effort to upgrade
           its internal operations. These upgrades come with a large allocation of dollars
           and organizational energy. While we approve of these efforts as a prudent
           investment for building the agency’s capacity, we have some thoughts regarding
           public accountability and improved performance measures. This transmittal
           letter provides a summary of our concerns and our recommended safeguards to
           ensure taxpayers reap maximum benefit from these investments. See Section
           V: Administration.

           In addition to these items, the Work Group also had a short list of specific
           adjustments that were incorporated into the FY 2007/08. See Section VI.

We appreciate the opportunity to serve on this Work Group and support a similar approach
for formulating and submitting PDC’s Requested Budget in the future.




                                                                                             3
                                                                                                SUMMARY SHEET



                                                                                  Section I Future of Urban Renewal
URA                                                       Key Action #1                                          Key Action #2                                                    Key Action #3            Details on Page
Central Eastside                                          Extend for to August 2020                              Increase indebtedness                                                                              9
Downtown Waterfront                                       Extend till March 2010, then let "expire"              Synch with the Central Portland Plan                                                               8
South Park Blocks                                         Extend till March 2010, then let "expire"              Synch with the Central Portland Plan                                                               8
River District                                            Expand by 61 acres                                     Increase indebtedness                                            Synch with the Central            8
                                                                                                                                                                                  Portland Plan
Lents                                                     Expand along Foster Powell                                 Increase indebtedness                                                                         8
Eastside Neighborhoods                                    Study feasibility of creating urban renewal areas.                                                                                                       9
(Cully, 122nd, 82nd, others)
Potential new downtown urban renewal areas to help        Study feasibility of creating urban renewal areas to assist Synch with the Central Portland Plan                                                         9
Univ. District, Cult. District, Retail Core, NW           educational, cultural, retail and other priorities.
Neighborhood
                                                                                 Section II Economic Development
Title                                                     Purpose                                              Request                                                         Notes
Annual Ec. Dev. Request                                   Business Recruitment and Retention                                                                          $900,884 Recurring request               11 and 37
Storefront Program                                        Expands a successful URA program citywide                                                                 $1,500,000 Likely recurring                11 and 38
Small Business Assistance                                 Revolving Loan - Near Equity Fund                                                                         $1,500,000 One-time                        11 and 40
TOTAL                                                                                                                                                               $3,900,884
                                                                         Section III Housing and Development Opportunities
                     Key Initiatives                                               Location                                        Project Examples
Preservation and replacement of affordable rental units   DTWF, SPB                                             Clay Towers, Jeffrey Apts., Estate Hotel, Fountain Place                                           12
New construction of affordable rental                     SWF, RD                                               Block 49, Union Station Final Phase                                                                12
Affordable Home-ownership                                 Interstate, Lents, OCC                                Piedmont, Grant Warehouse, Killingsworth Station, Lents                                            12

Affordable rental                                         Interstate, Lents, Gateway                                 Crown Motel                                                                                   12
Homeownership Programs                                    Citywide                                                   Home repair, homebuyer assistance, Operation HOME                                             12

Project                                                   URA                                                        Resources 2007/08 through 2011/12
Freeway Lands                                             Lents                                                                                                            $0                                      13
Headquarters Hotel                                        Oregon Convention Center                                                                                 $3,700,000                                      13
Centennial Mills                                          River District                                                                                           $4,000,000                                      13
Central Post Office                                       River District                                                                                          $15,250,000                                      13
Washington Monroe                                         Central Eastside                                                                                         $4,800,000                                      14
Union Station                                             Downtown Waterfront                                                                                        $390,000                                      14
Downtown Retail (10th Yamhill Garage/Galleria)            South Park Blocks                                                                                       $13,800,000                                      14
                                                                                     Section IV Infrastructure
Project                                                   URA                                                        Issue
Portland Streetcar Loop                                   Central Eastside; Oregon Convention Center, River          $75 million in federal resources may be available; using a                                    15
                                                          District                                                   general fund bridge to develop the financing plan in
                                                                                                                     advance of TIF dollars should be discussed.
Eastside Burnside Couch                                   Central Eastside                                           Project needs to proceed, but examine options which do                                        16
                                                                                                                     not overly burden the CES TIF resources.
Westside Burnside Couch/Streetcar                         Downtown Waterfront, River District                        Longer term conversation on scope and resources.                                              16
                                                                                     Section V Administration
Key Actions
Adopt Performance Measures and monitoring functions future investments in administration produce concrete improvements.                                                                                            17
Right size administrative costs.                                                                                                                                                                                   17
Implement safeguards to ensure accountability to community.                                                                                                                                                        17
                                                                          Section VI Specific 2007/2008 Adjustments
URA                                                    Project                                                  Adjustment
Interstate                                             North Portland Library Siting                            Move $250,000 from 2007/08 to 08/09                                                                18
South Park Blocks                                      Park Block 5                                             Increase funding by $300,000                                                                       18
2007 PDC/City Council Budget Work Group        Transmittal Letter




                Highlights of the
       Portland Development Commission
          2007/08 Requested Budget


                           February 13, 2007




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2007 PDC/City Council Budget Work Group              Transmittal Letter


Contents

   Section I: Policy – The Future of Urban Renewal      7

   Section II: Economic Development/General Fund        10

   Section III: Housing and Development                 12

   Section IV: Infrastructure                           15

   Section V: Administration                            17

   Section VI: Adjustments to FY 2007/08                18

   Conclusion:                                          19

   Appendix                                             21

      A. Issues Matrix: Administration                  22

      B. Issues Matrix: Policy                          25

      C. General Fund Request Details                   37




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2007 PDC/City Council Budget Work Group                                   Transmittal Letter


                                       SECTION I

                        POLICY – The Future of Urban Renewal

Above and beyond expenditures and priorities, future success will be determined by how
and where urban renewal is invested. Some of the projects identified in this memo will be
reliant upon either creative financing or expanded/extended use of tax increment financing
(TIF).

As part of our review, the Work Group noted that after 2008 two Central City urban renewal
areas will no longer be able to issue debt: Downtown Waterfront (DTWF) and South Park
Blocks (SPB). A third adjacent URA, River District (RD) does not “expire” until 2020,
however given its rapid growth in increment RD will likely reach maximum indebtedness by
2010. The RD can legally be expanded by 61 acres (twenty percent of its original size).

While resources in the three districts are limited, the number and costs of pending or
potential new projects are daunting. The list includes: the Burnside/Couch Couplet; the
Streetcar; a possible 13 acres for redevelopment if the Central Post Office moves; affordable
housing; the future of PDC-owned Union Station; growth of Portland State University; and
many more. All of these worthy projects cannot be funded within the current debt capacity
and configuration of existing URAs. Some changes will need to occur to address challenges
and emerging opportunities.

In addition, any discussion to extend, amend or create new downtown urban renewal areas
should also include the need for urban renewal and its effectiveness in eastside
neighborhoods such as Cully, 82nd Avenue, David Douglas, and Lents Town Center (expand
current district), among others.

Concurrently, the Portland Bureau of Planning (BOP) has initiated a multi-year effort to
develop a new Central Portland Plan by 2010. The Work Group supports PDC’s $600,000
proposal for a comprehensive study of citywide urban renewal options (approximately
$300,000 of the request will be allocated to BOP to coordinate efforts with the Central
Portland Plan). This project, in part, is an update of the 1988 Central City Plan. Analysis
will examine:

   •   Unfinished business/projects,
   •   Review City policies and plans for the areas,
   •   Provide a development capacity analysis, and
   •   Profile each district with economic metrics, land uses, housing development,
       residential population, transportation and other issues.




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2007 PDC/City Council Budget Work Group                                        Transmittal Letter


In light of these circumstances the Work Group is recommending PDC proceed with the
following steps over the next eighteen months:

1) Issue: Extending date to issue debt of existing districts. Two of the Central City
   urban renewal areas will soon reach the date at which they can no longer issue debt
   (expire): DTWF in April 2008 and SPB in July 2008. There is work remaining in both
   districts and SPB has not yet reached its maximum indebtedness.

       Recommendation #1: Extend DTWF and SPB to March 2010 to accomplish objectives of
       these districts and maximize financial capacity. By extending to 2010, an additional capacity
       of up to $7 million could be realized. The two year extension also allows the PDC and City
       Council to coordinate work in the context of the BOP’s Central Portland Plan. These must
       be the final extensions in order to allow the taxes to return to other jurisdictions when the
       bonds are repaid.

2) Issue: River District expansion and maximum indebtedness. River District does
   not “expire” until 2020, however, given its rapid growth in increment RD will likely
   reach maximum indebtedness by 2010. RD can also legally expand by 61 acres (twenty
   percent of its original size).

       Recommendation #2: Immediately conduct research on which 61 acres to move RD with
       an emphasis on priority parcels from Old Town/Chinatown from DTWF; recommend
       timing for the move to optimize project financing and prompt completion. Increase RD’s
       maximum indebtedness to fund necessary projects and accommodate new acreage brought
       into the area. BOP requests the action to increase maximum indebtedness occur after the
       Central Portland Plan is complete in 2010.

3) Issue: Expansion of Lents Town Center URA boundary and maximum
   indebtedness. Foster Road is a key gateway to the Lents community. It meets the
   definition of blight and includes many re-development sites, but is currently outside the
   Lents Town Center URA boundary. In addition, the current boundaries on Powell and
   122nd extend to the edge of the public right of way on one side of the street. Finally, the
   current maximum indebtedness is not sufficient to fund significant projects including the
   Freeway Lands (one of the largest opportunity sites on the eastside) and several key
   Lents Town Center projects.

       Recommendation #3: Confirm what boundary expansion is necessary to fulfill Lents
       objectives. Analyze increasing the maximum indebtedness to fund necessary projects.




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2007 PDC/City Council Budget Work Group                                       Transmittal Letter


4) Issue: Central Eastside two-year extension. In 2006 the Central Eastside (CES) was
   amended to increase its maximum indebtedness, extend the last date to issue debt, and
   expand to bring the Washington Monroe High School site (WAMO). Existing debt
   limits are insufficient to meet the community’s development, economic development,
   and transportation infrastructure goals. Extending the last date to issue debt and raising
   maximum indebtedness would increase the CES’s capacity to complete projects which
   include the Streetcar, the Washington Monroe community center mixed use
   development, as well as the critical economic development initiatives which create and
   retain more jobs.

       Recommendation #4: PDC should continue discussions with City Council and the
       community to weigh the benefits and impacts of extending the CES’s date to issue debt to
       August 2020 and increasing its maximum indebtedness by another $21 million.

5) Issue: Central City Plan Update and Potential New URAs. BOP has initiated a
   multi-year effort to develop a new Central Portland Plan by 2010. The update will
   identify unfinished business/projects; review city plans and policies; and analyze
   development capacity. Under state law the City has the capacity to add about 850 acres
   for urban renewal use citywide. Any decision to extend, amend or create new downtown
   urban renewal areas should be weighed against the need for urban renewal in the eastside
   neighborhoods. Using lessons learned in Lents and Gateway, a more community
   oriented approach to development should be used for any new neighborhood based
   URAs.

       Recommendation #5a: With the decision to close the SPB URA is 2010, a mechanism for
       funding the long term growth of Portland State University is eliminated. Therefore,
       continue to coordinate with BOP on the Central Portland Plan. Specifically consider urban
       renewal recommendations for a possible new downtown URA which acknowledges needs
       near Portland State University, the Cultural District, the Retail Core and NW Neighborhood
       (including the Conway/CNF site in the NW Triangle).

       Recommendation #5b: Determine the financial feasibility of additional eastside
       neighborhood URAs. A technical analysis should occur to determine the size, increment
       generating potential, and purpose of urban renewal in areas such as Cully, David Douglas,
       82nd, Parkrose, 122nd and other areas as identified by BOP and PDC. Partners from the
       Housing Authority and the Bureau of Housing and Community Development should be
       consulted in the formation and planning for any new district.

The Work Group’s recommendations reflect an explicit understanding of how urban
renewal impacts other property tax collecting jurisdictions such as Multnomah County and
Portland Public Schools. Last year Multnomah County alone had about $14 million in
property taxes foregone since they are collected for urban renewal purposes across the
eleven URAs.

While reservations exist, the Work Group encourages the needs and deficits facing
jurisdictions be taken into consideration and common benefit pursued with new or
expanded use of urban renewal.




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2007 PDC/City Council Budget Work Group                                     Transmittal Letter



                                        SECTION II

                             ECONOMIC DEVELOPMENT

For over a decade there has been a lack of consensus between PDC and City Council as to
how the agency should invest General Fund and tax increment resources to advance
Portland’s jobs agenda. This has led to spirited debates. The opportunity exists in 2007 to
resolve this issue.

The Work Group believes the 2002 Economic Development Strategy is an appropriate
starting point for advancing efforts to agree on the public and private sector responsibilities
for improving the economy.

Last year, PDC received $872,000 from the General Fund to use for business recruitment
and retention. An example of this activity is the agency’s efforts to showcase potential
industrially zoned locations for biofuels manufacturing and distribution facilities.
Conversations with a handful of companies are continuing.

Through this process the Work Group concluded a more robust package of $3.9 million
should be considered. We believe these efforts signify a small but significant step forward
toward aligning PDC implementation of economic development activities with City
Council’s recent emphasis on helping small businesses, improving neighborhood commerce
and retaining and growing the job base.

The Work Group also sees this request as another opportunity to advance the City Council
Sustainable Industry initiative. The overarching goal of this effort is to enhance Portland’s
standing as the epicenter for research and development in sustainable industries; including
the promotion of sustainable development by helping new and existing companies create
local jobs in industries that provide new technologies, products or services that are more
efficient, use renewable or recycled resources and are less polluting. The initiative will focus
on both building demand for products and services and by helping new and existing firms
more effectively reach the marketplace.

The primary focus is clean energy technologies including:

        1) Increased development, production and use of biofuels, solar and wind power.

        2) Enhanced demand and local supply of energy efficiency and green building
           technologies and services.




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2007 PDC/City Council Budget Work Group                                   Transmittal Letter


The Work Group endorses PDC’s 2007 General Fund request for the following economic
development activities2:

       Title                         Purpose               Request             Notes
General Ec. Dev.          Bus. Recruitment and Retention    $900,884 Recurring request
Request
Storefront                Expands a successful URA         $1,500,000 Likely recurring
Program                   program citywide
Small Business            Revolving Loan - Near Equity     $1,500,000 One-time
Assistance                Fund
TOTAL                                                      $3,900,884

We encourage PDC to link the implementation of these new and expanded programs to the
following citywide goals and initiatives:

       o Find opportunities to grow the base of small and minority contractors through the
         expanded Storefront Improvement Program.

       o Continue to find improved metrics which reflect how General Fund economic
         development resources leverage tax increment expenditures within the PDC budget
         and advance Portland’s overall economic health.




2
    See Appendix for details on specific requests.


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2007 PDC/City Council Budget Work Group                                   Transmittal Letter


                                        SECTION III

                HOUSING AND DEVELOPMENT OPPORTUNITIES

The Work Group received very clear information regarding the allocation of housing
resources in each urban renewal area. The information illustrated percentage allocations for
both the one-year budget and the five-year forecast. The Work Group was comfortable that
the FY 07/08 Requested Budget is consistent with City Council’s new thirty percent set
aside for affordable housing. While some districts are short of the thirty percent goal in FY
07/08, they do appear on track to meet the goal over the five-year forecast.

By March 2007, the income guidelines for the thirty percent affordable housing set aside will
be finalized and adopted by Council. PDC is working with project sponsors and other
community partners to ensure these guidelines are implemented and reflected in funding
decisions.

The Requested Budget contains the following notable housing projects:

Central City
• Preservation and replacement of nearly 700 units of affordable rental housing (Clay
   Towers, Jeffrey Apartments, Estate Hotel, Fountain Place, Musolf Manor);

•   Begin first affordable rental housing in North Macadam (Block 49) and complete last
    phase of Union Station.

Neighborhoods
• New affordable homeownership projects in N/NE Portland (Piedmont Place, Grant
   Warehouse, Killingsworth Station), and Lents (about 50 homes)

•   Affordable Rental Housing (redevelopment of Crown Motel in Interstate and
    preservation in Lents, Gateway and Interstate)

Homeownership Programs Citywide and in URA’s:
• Home Repair loans for low income homeowners; Homebuyer Assistance and home
  mortgage programs to help moderate and middle income people buy, refinance and
  renovate their homes; Lead Abatement Grants; and Implementation of the strategies
  developed through Operation HOME to close minority homeownership gap.




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2007 PDC/City Council Budget Work Group                                         Transmittal Letter


As the Work Group delved deeper in its project by project analysis of PDC’s draft budget
across the eleven urban renewal areas, seven projects emerged as having the greatest ability
to advance City and PDC objectives and provide significant benefits to the community.

Aside from the private investment and community support, these projects can go from good
to great with the involvement of elected officials, City bureaus and PDC. However, like
many large scale projects, the vision can sometimes exceed the available resources, and
therefore close coordination is required.

   o   Freeway Lands (Lents Town Center): While it is a key project, the private owned
       Freeway Lands has no budget allocation beyond FY 2006/07. This 10-acre expanse located
       next to I-205 and the new Green MAX line in Lents has great potential for locating a job
       generating user. PDC and five City Bureaus will be involved in a collaborative process with
       the property owners. This is considered an industrially zoned opportunity that can be
       aggressively pursued once the market materializes. It will require resources to be allocated in
       future fiscal years and could benefit from increasing indebtedness in Lents. This project is
       also an opportunity to create another environmentally sustainable development near an
       urban wetland.

   o   Headquarters Hotel (Oregon Convention Center): PDC has budgeted about
       $3.7 million over five years for the Headquarters Hotel (HQ Hotel). In 2005, PDC acquired
       two blocks which support the development of the project as well. This is a partnership with
       Metro and the Metropolitan Exposition and Recreation Commission (MERC). Metro is the
       lead agency, and recently voted to take over management of the project. Their decision for
       whether and how to move forward will be made by June 2007. Regardless of whether the
       project proceeds or not, the PDC Board should weigh next steps with the City Council.
       This includes how the $3.7 million should be re-deployed and if/how the PDC-owned land
       should be developed or disposed.

   o   Centennial Mills (River District): The Work Group discussed to what extent PDC
       should invest in what will be a significant renovation/redevelopment along the Waterfront.
       In FY 2007/08 a scope and design for the future of Centennial Mills will be determined
       through a competitive response to a formal request for proposals. Currently, PDC has
       $4 million budgeted toward this project over five years. Given this is a high profile re-use
       and redevelopment opportunity, the Board and City Council should coordinate closely to
       help guide the direction of the project and the numerous expectations. With the uncertainty
       of redeveloping aging structures and the pressures of advancing many public policy goals,
       costs could escalate rapidly. PDC should be wary of this possibility.

   o   The Central Post Office (River District): PDC is working with the United States Postal
       Service (USPS) and the Port of Portland to look at the potential relocation of the Central
       Post Office and Processing and Distribution Center from their 13-acre location at 715 NW
       Hoyt Street. The most likely site is the Port of Portland’s Portland International Center
       (PIC) near the airport. The relocation offers an excellent redevelopment opportunity.
       PDC’s primary role would be to assist the Post Office in selling or redeveloping (to a non
       postal use) their RD site. The vision for re-use will rely on the community and the City.
       PDC is the lead agency for potential acquisition of the current location and the Port is the
       lead agency for the relocation to the PIC. The Work Group agreed this is an unusual
       opportunity, and merits the $15.3 million budgeted in future years. However, in 12 to 18
       months, if the project seems less likely, PDC should look to reallocate the resources.



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2007 PDC/City Council Budget Work Group                                           Transmittal Letter


   o   Washington Monroe High School (Central Eastside): This 7.1 acre site was the
       keystone for expanding the size of the CES in 2006. The neighborhood has clearly
       identified their vision for an anchor development which includes a community center,
       mixed-use, an athletic field and parking. PDC’s 2007/08 budget includes resources to
       purchase some of the property on behalf of the City as well as “soft” costs to begin looking
       at redevelopment opportunities with Portland Public Schools (PPS) and the community.
       PPS has selected Beam Development for their portion of the property. The Work Group
       agreed to support a fast-track effort to take advantage of the PPS’s development agreement
       to include housing on part of the Washington-Monroe site. A joint venture or collaboration
       to complete a comprehensive redevelopment of the property may save considerable money
       by consolidating housing and community center parking needs. Since tax increment
       resources in the CES are over-subscribed, the City Council should work with the Office of
       Management and Finance (OMF) to consider a City-backed financing strategy to permit
       development to proceed now while the district’s increment grows to finance the project.

   o   Union Station (Downtown Waterfront): Union Station is owned by PDC and managed
       by OMF (Bureau of General Services). The historic train station has outstanding seismic
       rehabilitation costs of $20-$40 million, with $5 million in immediate needs. Given the
       importance the structure plays as a downtown hub for rail and transit, these liabilities should
       be addressed within the next few years. A financial plan should be assembled which
       examines local, state and federal funds for rehabilitating the facility. Work should also
       consider options for increasing the density of uses which complement Union Station’s role
       in Portland. The Office of Sustainable Development (OSD) and Portland Public Market are
       also in the process of completing a layout study to see if the train station could be the site of
       a public market.

   o   Downtown Retail -- 10th Yamhill/Galleria (South Park Blocks): PDC has over
       $13 million budgeted toward projects which upgrade retail in the downtown core.
       Approximately $7 million is for the redevelopment and redesign of the City-owned
       10th/Yamhill Garage and another $6.8 million for resources to assist with property
       improvements in the area, such as the Galleria. The Work Group debated the merits of
       these projects in the context of a “close-out” strategy for both DTWF and SPB. While
       other investments, such as the growth of PSU are important, the Work Group agreed capital
       investments in buildings which have been long-term physical liabilities for the overall health
       of the downtown are important. The group also encourages OMF to achieve a timely
       completion of the 10th/Yamhill RFP process in order to clarify private sector interest and
       the resources required to make a significant difference to this part of the downtown. If this
       project does not proceed, PDC should determine a suitable investment alternative keeping
       the close-out of the district in mind.




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2007 PDC/City Council Budget Work Group                                      Transmittal Letter


                                          SECTION IV

                                        INFRASTRUCTURE

The City and PDC are pursuing a handful of major capital initiatives. These will transform
areas of the community through stronger transit connections, improved on street
environment and potentially address long-standing barriers to redevelopment.

Three in particular are:

          1) Portland Streetcar Loop
          2) The Eastside Burnside-Couch Couplet
          3) The Westside Burnside-Couch Couplet

All of these initiatives have the ability to greatly accelerate the growth of property value (and
TIF) based upon recently completed impact studies. To varying degrees they also will put
near-term stress on the availability of tax increment for economic and development
initiatives.

Streetcar Loop:
A near term opportunity exists to secure up to $75 million in federal resources for the
Streetcar Loop project which extends the Streetcar through the River District across the
Willamette to the Lloyd District and the Central Eastside. However, Portland must
assemble a financing plan by August 2007. This opportunity may not exist next year, and
therefore a solution needs to be developed between the City Council, PDC and other
partners. A preliminary funding plan by Streetcar stakeholders requests a collective amount
of $31 million across the CES, RD, and OCC URAs. However the districts have a
combined $9 million budgeted:

URA                        Requested Budget               Existing Financing         Gap
                           Document 07/08 – 11/12         Plan Assumptions
Central Eastside           $4,000,000                     $15,000,000                $11,000,000
River District             $2,500,000                     $12,000,000                $9,500,000
Oregon Convention          $2,500,000                     $4,000,000                 $1,500,000
Center
TOTAL                      $9,000,000                     $31,000,000                $22,000,000

The Streetcar Loop is a near term opportunity. The Work Group would like to see a
financing plan implemented which has the following principles in mind:

      •    Do not compromise existing urban renewal priorities.
      •    Use the General Fund to bridge tax increment and avoid delaying the project.
      •    Maximize use of future TIF associated with potential district extensions or
           increases in indebtedness.




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2007 PDC/City Council Budget Work Group                                   Transmittal Letter


Eastside Burnside-Couch Couplet:
The Eastside Burnside-Couch Couplet is about a $22 million project, of which about $10.2
million is budgeted from the CES URA. Efforts are underway to secure about $6 million to
$11 million in non tax increment resources. TIF will likely be asked to fill the gap wherever
non TIF resource requests fall short. The CES URA would be forced to make cuts in other
priority areas in order to fulfill such a request.

Westside Burnside-Couch Couplet/Streetcar:
The preliminary estimated cost for a Burnside-Couch Couplet on the westside of the city,
with an associated streetcar line is about $80 million. Between the DTWF and the RD, PDC
has about $6.2 million budgeted for this effort. This project clearly requires a thorough
discussion about how and when to proceed; and then a collective decision can be made
about resource requirements, funding partners, and acceptable trade-offs.




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2007 PDC/City Council Budget Work Group                                 Transmittal Letter


                                      SECTION V

                                 ADMINISTRATION

PDC has invested considerable organizational energy and resources to upgrade its
administrative services. This investment has been made to address identified deficiencies
and to improve overall agency productivity by maximizing operational efficiencies and
programmatic capacity. While the Work Group supports this investment, it recommends
PDC adopts performance measures and monitoring functions to ensure that the additional
administrative investments produce concrete improvements in performance and
programmatic capacity. We also recommend PDC investigate and report on efforts to
collaborate with City of Portland administrative functions, particularly regarding
procurement and the Enterprise Resource Planning (ERP) upgrades. The intent is to ensure
the most effective and efficient use of resources.

The team has two specific recommendations.

   •   PDC analyze the possibility of joining with the City of Portland procurement
       function. The concern of the team is that PDC and the City are maximizing efforts
       to engage MWESB efforts through the procurement process.

   •   PDC continues to work with the City’s IT function in determining the most effective
       approach to updating or replacing the PDC information system(s). This investigation
       shall include the possibility of PDC joining the ERP efforts currently in process at
       the City. PDC shall produce a report to be shared with the City Council, prior to
       adoption of a budget in late June, 2007.

The Work Group also encourages PDC to “right size” administrative costs. This may be a
challenge given some of the vagaries of the URA revenue projections and the timing of
major development projects. Nonetheless, PDC should implement appropriate safeguards
to ensure accountability to the community.




                                                                                        17
2007 PDC/City Council Budget Work Group                                    Transmittal Letter


                                       SECTION VI

        ADJUSTMENTS MADE TO THE FISCAL YEAR 2007/08 BUDGET

The Work Group pursued a methodology which researched each URA along the following
four categories:
                 o Housing
                 o Infrastructure
                 o Business Assistance
                 o Administration/Personal Services

Within this framework we requested information at the project and program level to gain a
full understanding of the investments various objectives and how they fit into a “thesis” for
each area.

In the course of those discussions the following changes were requested:

       Interstate
       Request: Move $250,000 budgeted for the siting of Multnomah County’s North
       Portland Library from 2007/08 to 2008/09 and re-program the $250,000 to smaller
       livability initiatives identified by the community.

               Reason: The County will not be prepared to site the library this fiscal year.


       South Park Blocks
       Request: Increase funding for the construction of Park Block 5 (located one block
       west of the Fox Tower) by $300,000. Park Block 5 is a new park which will extend
       the string of North Park Blocks by one full block. Shift money from O’Bryant
       Square to address this priority.

               Reason: An immediate opportunity exists to fulfill the community vision
               for Park Block 5. The $300,000 brings PDC’s direct contribution for FY
               2007/08 to $800,000 and ties together with a 2007 General Fund request
               from Parks for an additional $800,000. This collective $1.6 million will be
               able to leverage up to $1.6 million in private donations for the new park.
               O’Bryant Square will not be ready to spend resources in 2007/08.




                                                                                             18
2007 PDC/City Council Budget Work Group                                 Transmittal Letter


                                    CONCLUSION

This year’s PDC Requested Budget is the product of a unique process. For the first time,
members of the PDC Commission and City Council joined together as a team to consider
how best to use our community’s urban renewal resources. This new venture was an
experiment. We believe the experiment was successful and you will find the Requested
Budget acceptable.

We would also like to thank the PDC staff for an incredible amount of work during this
process. Every question and request for additional information was answered in a prompt,
thorough and competent manner. We expect both bodies will now conduct their own
comprehensive and public review of the Requested Budget. We look forward to answering
any questions or concerns you may have regarding our work.




                                                                                           19
2007 PDC/City Council Budget Work Group   Transmittal Letter




                                                         20
2007 PDC/City Council Budget Work Group   Transmittal Letter




                              Appendix




                                                         21
2007 PDC/City Council Budget Work Group                                   Transmittal Letter




                                       Appendix A: Administration
                Questions and Issues Raised by Work Group on the Administrative aspects of the PDC Budget

  Date                               Issue                                                               Notes
1.8.07   Chart for Expenditures by PDC Strategic Priority            Provided during meetings
1.8.07   Explain Strategic Priority: "Support/Enhances               Defined as supporting organizational performance; includes PDC Central
         Performance"                                                Service, People and Technologies and Executive Departments.
1.8.07   What is the category "Not Specific"                         Defined as all projects that do not belong to the Development,
                                                                     Infrastructure, Housing, Business Assistance or Administration Spending
                                                                     Categories. Includes PDC's predevelopment fund and the Loaves and
                                                                     Fishes Project.
1.8.07   What is Strategic Priority: "Follow thru Plan/Commitment"   Defined as "legally committed" which includes a signed loan, grant,
                                                                     Developer Agreement or Work Order.
1.8.07   Staffing history                                            Provided in the Requested Budget Work Group information packet. Section
                                                                     "PDC Financial Overview", chart: "Staffing Summary"
1.8.07   Chart by Spending Category was confusing - did not          Provided updated chart to Work Group on 1/19/06 that included all PDC
         include ALL funds (only URAs)                               Funds, including the General Fund, Special Revenue Funds and
                                                                     Enterprise Funds.
1.8.07   What does it take to increase maximum indebtedness?         It requires that a Plan amendment originates with an action by the PDC;
                                                                     followed by a review of the Planning Commission; and then approval by
                                                                     ordinance at City Council. Followed by a notice to property owners. Legal
                                                                     and technical analysis is required to determine the justification (projects
                                                                     expected to receive the increment); as well as the amount of increment
                                                                     expected to be generated. The entire process takes anywhere from 4
                                                                     months to 18 months.




                                                                                                                                             22
2007 PDC/City Council Budget Work Group                                    Transmittal Letter




                 Questions and Issues Raised by Work Group on the Administrative aspects of the PDC Budget

1.8.07    How was maximum indebtedness established?                   Urban renewal plans have to contain a dollar limit on the amount of
                                                                      indebtedness (bonds and other debt) payable from tax increment revenues
                                                                      that could be issued in the future. Existing urban renewal plans could base
                                                                      the maximum amount of indebtedness on estimates of the costs of
                                                                      remaining projects. Maximum Indebtedness is the primary control over the
                                                                      lifetime of an urban renewal plan. Decisions on maximum indebtedness
                                                                      are made by PDC in conjunction with the City's debt office an ultimately
                                                                      approved by City Council.
1.8.07    Can we look at the internal cost by project?                Sample Reports for how PDC tracks project provided at subsequent
                                                                      meeting.
1.12.07   What is the difference between Community Relations and      Community Relations provides for community involvement, public
          Public Affairs                                              outreach, and event planning services. Provides support for project
                                                                      construction. Supports minority or women-owned business, emerging small
                                                                      business (MWESB) and workforce development programs. Public Affairs
                                                                      provides for strategic communications planning, media relations,
                                                                      publication and speech writing, graphics and production services.
1.12.07   How do you calibrate structure over time to ensure you      Write-up of issue in process
          are 'right-sized'?
1.12.07   Concerns about tracking legal costs to the projects - how   PDC will explore methodology and the costs and benefits to track on-going
          much tie on the Tram? Can we track 'extraordinary' legal    legal staff time by project. Outside Legal Contracts directly related to
          costs?                                                      projects/URAs are billed directly to projects/URAs; summary of legal
                                                                      budget and expenses attached.
1.12.07   HR: 4 FTE seems too high                                    Explanation provided during mtg. in late January.
1.12.07   Benefits: Compare with the private sector? Can we join      Underway: Analysis will be completed in March
          the City?
1.12.07   Benefits: Look at PERS involvement                          Underway: Need to review flexibility, complete in March
1.12.07   Need better explanation/more detail on IT FTE allocation;   Explanation provided during mtg. in late January.
          IT needs and plans for the future




                                                                                                                                             23
2007 PDC/City Council Budget Work Group                                   Transmittal Letter




                Questions and Issues Raised by Work Group on the Administrative aspects of the PDC Budget

1.12.07   IT: concerns on approach and timing to get to a decision   In depth discussion occurred at meeting in late January.
          for ERP
1.12.07   GIS: explain how we are structured and funded and          Discussion occurred at meeting in late January.
          answer if our projects are on Portland Maps
1.12.07   ES: need to understand BHCD compliance issues? (IT)        PDC will review all existing and future potential loan-servicing, asset
                                                                     management and compliance requirements as part of the ERP evaluation.

1.12.07   Need to be able to address the growth in admin vs.         Part of item #12 above.
          operations
1.12.07   General: need to understand staffing of operating          Part of item #12 above.
          departments relative to support coming from
          administration
1.12.07   Does contracting for services 'hide' FTE?                  Write-up of issue in process
1.12.07   How to measure performance? Explanation of Metrics         Write-up of issue in process
1.12.07   How to measure stakeholder assessment of how PDC is        Write-up of issue in process
          doing?
1.12.07   Concerned with Outside Legal Costs - is it enough?         Comment to consider.
1.12.07   Can we/should we join city Purchasing and procurement?     Write-up of issue in process
1.12.07   Update Maximum Indebtedness charts; verify Dujour debt     Provided at meeting in late January.
          is included in totals




                                                                                                                                         24
2007 PDC/City Council Budget Work Group                                 Transmittal Letter




                                               Appendix B: Policy
                 Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

Date      URA       Issue                                        Raised By       Notes

1.19.07   OCC       Provide a summary of the MLK Action Plan     Saltzman        Action Plan included in URA summary.

1.19.07   OCC       Has Council seen the Action Plan?            Saltzman        No. The Board approved it in summer 2006.

1.19.07   OCC       When will the HQ Hotel decision be made by   Sten            Metro is expected to determine some course of action later
                    Metro? Once this decision is made there                      this year. Their go/no go decision in February has been
                    should be an opportunity to decide whether                   postponed because they want more analysis.
                    the resources are re-programmed and/or
                    whether PDC should land bank the property.                   Noted in Transmittal Letter.
1.19.07   OCC       How much money is in the budget for blocks   Sten            Provided at subsequent meeting in January.
                    47 and 49?
1.19.07   DTWF      Have a realistic conversation about the      Sten            Noted in Transmittal Letter.
                    Burnside/Couch couplet funding now. Decide
                    if it can be done or not; and look at the
                    opportunity cost for other priorities.
1.19.07   DTWF      Can Union Station be a site for the public   Saltzman        Will become part of the longer term budget discussion.
                    market? OSD has done a study to see the
                    feasibility of moving the market there.
1.19.07   DTWF      Look at the trade off on investments in      Rosenbaum       Noted in Transmittal Letter.
                    housing and development when you put large
                    amounts of money into infrastructure.




                                                                                                                                          25
2007 PDC/City Council Budget Work Group                                     Transmittal Letter




                 Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.19.07   DTWF      What actions are required to amend a plan?                      Kruse        Typically it requires the amendment to originate
                                                                                                 with an action by the PDC; followed by a review
                                                                                                 of the Planning Commission; and then approval
                                                                                                 by ordinance at City Council. Notice to property
                                                                                                 owners is dependent upon the type of
                                                                                                 amendment.
1.19.07   DTWF      Budget your resources towards projects and strategies           Sten         Noted in Transmittal Letter.
                    which assume you we are bringing 61 acres of OT/CT
                    into the River District this year. Buy key properties now
                    before prices rise due to the completion of light rail on the
                    transit mall.
1.19.07   DTWF      Think strategically about which uses are best for which         Sten         Comment only.
                    properties. With the district seeing activity, identify now
                    which land is appropriate for upgraded services for
                    transition projects/day center access points which have
                    ground floor social service and upper floor affordable
                    housing. Make the site location strategic, so they do not
                    impede private development.
1.19.07   SPB       How are we assisting businesses which are impacted by           Saltzman     We have a contract with TriMet who is
                    the Transit Mall reconstruction?                                and          subcontracting to the PSU Small Business
                                                                                    Rosenbaum    Center.
1.19.07   SPB       Downtown is losing retail market share. We need to              Saltzman     Comment only.
                    reverse this trend if we can.
1.19.07   SPB       Will this Work Group weigh in on the larger issue of            Kruse        Noted in Transmittal Letter.
                    extending the downtown districts?
1.19.07   SPB       Retail flourishes in the downtown core when property            Sten         Comment only.
                    owners invest. Tom Moyer brought it Banana Republic
                    without help. Why would we help his peers? Is it the
                    public's fault that they won't step up?




                                                                                                                                             26
2007 PDC/City Council Budget Work Group                                     Transmittal Letter




                Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.19.07   SPB      Is the mix of development vs. housing appropriate         Wilhoite            Comment only.
                   for this district? You may want to be able to
                   articulate why or why not.
1.19.07   SPB      The look back provisions we are beginning to use          Rosenbaum           Information only.
                   with property owners could be a good tool for retail
                   assistance. In situations when property owners rate
                   of return exceeds a specific percentage, we can
                   "participate".
1.19.07   SPB      Aside from property we own, such as the 10th and          Sten                Noted in Transmittal Letter.
                   Yamhill garage, why as the district is coming to an
                   end, are we investing in retail instead of PSU? If
                   the garage project does not happen, look at PSU.
1.19.07   SPB      The budget for Park Block 5 is too small. I'd like you    Saltzman            Noted in Transmittal Letter (budget increased by
                   to look further at those resources.                                           $300,000).
1.19.07   RD       I am open to the Post Office project, because we          Sten                Noted in Transmittal Letter.
                   will probably get back in increment whatever we
                   invest up front. However, it is a big line item in out
                   years. Try not to keep it in the budget too long if
                   the project does not move forward.
1.19.07   RD       How do we know if business assistance is being            Durston             Noted in Transmittal Letter.
                   successful? How do we measure success?
1.19.07   RD       Is there an overall strategy for what we want to          Kruse               Rosenbaum: It is mostly the latter; but we are
                   accomplish citywide; and then that strategy is                                working to evolve so we can rise above specific
                   implemented URA by URA based on a continuum                                   projects and look across URAs at the category
                   over time? In other words, are strategies                                     level.
                   implemented based on a citywide picture or URA?
1.19.07   RD       What is the status of the Centennial Mills RFQ?           Saltzman            It's going out in February and due back by the
                                                                                                 beginning of April.
1.19.07   RD       I am a little leery of Centennial Mills because it        Sten                Noted in Transmittal Letter.
                   could be a money pit of a project.




                                                                                                                                              27
2007 PDC/City Council Budget Work Group                                 Transmittal Letter




                Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.19.07   RD       What is the $8M for on One Waterfront Parking?              Sten          It's related to the office building potentially built
                                                                                             by Jim Winkler. It is subject to the project being
                                                                                             built.

1.19.07   RD       Keep in mind the idea to build a skate park on the          Saltzman      Comment only.
                   property near the west end of the Steel Bridge (in
                   between the bridge ramps). This was a project discussed
                   by Howard Wiener in the late 1990s.
1.19.07   NMC      How are we involved in the Bioscience activities?           Saltzman      PDC has an agreement with OHSU to assist
                                                                                             with recruitment and possible investment into an
                                                                                             Accelerator facility.
1.19.07   NMC      What is the status of the Greenway Master Plan?             Rosenbaum     It will cost about $35M, we have about $6M
                                                                                             budgeted. It will run from the Old Spaghetti
                                                                                             factory north to Waterfront Park. We will need
                                                                                             money from the Federal government, local
                                                                                             resources and private development in order to
                                                                                             complete the project.
1.19.07   CES      Will a two-year extension result in more funds?             Sten          Yes. Two more years would allow you to
                                                                                             increase indebtedness by another $21M. These
                                                                                             are resources would not be available for ten
                                                                                             years (or so).
1.19.07   CES      What is the timing and amount of funds needed for the       Rosenbaum     In general. Burnside Couch will cost about
                   Streetcar and the Burnside/Couch project?                                 $22M. We have just over $5M. The streetcar
                                                                                             has said it will need $15M; we have about $4M.
                                                                                             Burnside Couch needs to be done by 2010. If
                                                                                             the streetcar needs resources before 2008/09;
                                                                                             interim financing from the City might be needed.
1.19.07   CES      Frame the Burnside Couch issue in the transmittal letter.   Sten          Deal points are due by the end of February.
                   What is the status of the Bridgehead development                          Expectation to complete a Dev. Agreement by
                   agreement?                                                                spring.

                                                                                             Noted in Transmittal Letter.




                                                                                                                                              28
2007 PDC/City Council Budget Work Group                                   Transmittal Letter




                  Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.19.07   CES        The key issues for next year's budget will be accelerating   Sten         NOTES: Rosenbaum mentioned County should
                     the WAMO community center with help from the General                      be involved in the discussion. Staff highlighted
                     Fund (maybe internal bonding by Parks); we need to                        that another extension will not alleviate near
                     avoid cutting the jobs agenda; we need to look at another                 term resource issues.
                     extension (sponsored by the Council). The Streetcar and
                     Couplet could be funded by the extension. It could also                   Noted in Transmittal Letter.
                     get more money to Hooper.


1.19.07   CES        What kind of density and income ranges are envisioned        Rosenbaum    Lindsay: It must be ownership and family sized.
                     for the community center development?
1.19.07   CES        How much of the streetcar is being funded through the        Rosenbaum    Financing plan forwarded to the group.
                     LID?
1.19.07   CES        Will the parking study being done for the Streetcar also     Saltzman     PDOT has not included WAMO, but can.
                     examine parking needs for the community center?

1.19.07   CES        Should the money for WAMO go into the infrastructure         Rosenbaum    Adjustment to occur in next financial report.
                     line item or the development line item?

1.19.07   CES        The City General Fund can maybe take the risk for the        Sten         Noted in Transmittal Letter.
                     Community Center or the streetcar.
1.22.07   Lents      What the status of the New Copper Penny? Ideally the         Sten         PDC is talking with Guardian and the property
                     building can be torn down when the area is already torn                   owners. It's still at the feasibility stage, no
                     up for light rail. We have connected the property owners                  decision on whether to proceed will made until
                     with Guardian to do an affordable housing project. It                     later in the year.
                     could be a good location to meet the 30 percent for
                     seniors; but their gap is large.




                                                                                                                                               29
2007 PDC/City Council Budget Work Group                                         Transmittal Letter




                    Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.22.07   Lents        How soon will the district reach maximum                  Saltzman            In about four years. ROSENBAUM: Options for
                       indebtedness? If the district expanded would it go                            the district, including expansion, will be
                       down to 52nd and Foster?                                                      discussed during the Westside conversation on
                                                                                                     1.29.07. Yes, the expansion concept would
                                                                                                     take it down Foster. About 90 acres (+ or -).

                                                                                                     Noted in Transmittal Letter.
1.22.07   Lents        Freeway Lands is key project but has no budget            Rosenbaum           Project could be a high priority for any increases
                       allocated right now. That's because it is a future                            in indebtedness.
                       opportunity, that is zoned industrial, to aggressively
                       pursue once the market materializes,                                          Noted in Transmittal Letter.
1.22.07   Lents        How is PDC assisting David Douglas?                       Saltzman            PDC is working through Commissioner Sten's
                                                                                                     office on what we can do to assist with their
                                                                                                     facilities. The community does not want
                                                                                                     increased density, so it is not a proto-typical
                                                                                                     Schools/Family/Housing candidate. But we
                                                                                                     might be able to help with their over-crowding
                                                                                                     issues. STEN: We can help with facilities and
                                                                                                     maybe also assist with some of the dangerous
                                                                                                     intersections in the area. This is one of the
                                                                                                     projects which might benefit from legislative
                                                                                                     efforts to spend TIF outside of URA boundaries.
                                                                                                     We can also use block grants.

                                                                                                     Noted in Transmittal Letter.
1.22.07   Gateway      What parks development is happening?                      Saltzman            There are two sites being pursued. One is a
                                                                                                     large 5-acre site; the other is smaller site near
                                                                                                     Halsey.
1.22.07   Gateway      PDC has not added funding for streetscape                 Citizen             Information only.
                       projects, would the City loan funds to complete
                       improvements if needed?




                                                                                                                                                     30
2007 PDC/City Council Budget Work Group                                          Transmittal Letter




                    Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.22.07   Gateway      There are a lot of studies going on this district. Are     Saltzman            They are related and the budget you see before
                       they related? When will implementation begin?                                  you begins to move towards implementation.

1.22.07   Gateway      How is the market in Gateway being constrained? It         Kruse               There is a greater risk of development in the
                       looks like the development line items are small.                               area, because the market has not yet proven
                                                                                                      itself. We can be more aggressive. The farther
                                                                                                      we push the market, the greater the cost.
1.22.07   Interstate   Consider increasing or creating a line item to assist      Wilhoite            Information only.
                       current homeowners on how to retain their houses.
                       This could also relate to home
                       repairs/maintenance/etc.
1.22.07   Interstate   In many cases, PDC's loans are essentially grants          Sten                Information only.
                       because of the nature of the borrower and the
                       public interest to help businesses, etc. succeed.
                       You should consider that when you build your
                       budget.
1.22.07   Interstate   Increasing the repair/retention line item will not         Sten                Information only.
                       necessarily mean you will help the right
                       people…yet. Spread the word about the program
                       first, and then increase the line item in future years.
1.22.07   Interstate   Multnomah County is not ready to construct a               Kruse               PDC/City will talk with the County to clarify
                       library at this time. The operating budget                                     timing and see whether they can wait till
                       associated with their bond measure was not                                     2008/2009.
                       intended to have resources until 2009/2010. If the
                       community wants to spend the $250k in a different                              Noted in Transmittal Letter.
                       way, scrub this line item and move it to 2008/09.
1.22.07   Interstate   If you reprogrammed the $250k for the Library              Sten                Noted in Transmittal Letter.
                       siting, how would the community like to spend it?
                       The URAC should identify other options and send it
                       to PDC staff.




                                                                                                                                                      31
2007 PDC/City Council Budget Work Group                                         Transmittal Letter




                  Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.22.07   Airport W    The PDC Board will be looking at a lease vs. sell         Rosenbaum           Information only.
                       approach for PDC owned property in the district. If
                       leasing is legal, we may pursue that route in order
                       to provide an on-going stream of economic
                       development resources.
1.22.07   Airport W    Can we sell Airport Way land and use it as an             Rosenbaum           Information only.
                       incentive for businesses that may want to be
                       adjacent to the relocated Post Office (assuming that
                       project moves forward)?
1.22.07   Airport W    What is the package the PDC is assembling for the         Kruse               The Post Office owns the land they are using in
                       Post Office?                                                                  the River District. The Post Office would use
                                                                                                     any proceeds from a land sale to pay for
                                                                                                     construction of a new facility near the airport.
                                                                                                     That facility would be located on Port land
                                                                                                     through a long term lease. What we to assist
                                                                                                     the PO in selling/redeveloping in the River
                                                                                                     District will be very important. The vision for re-
                                                                                                     use will be done with the community and the
                                                                                                     city. The Port is the lead agency moving this
                                                                                                     whole project forward.
1.22.07   Airport W    How much land does the Post Office want to lease?         Wilhoite            About 30 acres. The new facility could be as
                                                                                                     large as 800,000 square feet.
1.22.07   Airport W    Is anything going on with property near Holman            Saltzman            No
                       Drive and I-205?
1.22.07   Willamette   This district will create a lot of value and increment    Sten                Dan Bates is leading a conversation with other
          Industrial   if we can solve the Superfund/Brownfield issues.                              City Bureaus on a strategy for engaging elected
                                                                                                     officials and federal agencies.




                                                                                                                                                     32
2007 PDC/City Council Budget Work Group                                        Transmittal Letter




                     Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.22.07   Willamette    What percentage of land is impacted by the              Rosenbaum           A substantial quantity. The properties on the
          Industrial    superfund status?                                                           east end of the district are generating TIF
                                                                                                    ($80,000 worth). There is $400M in investment
                                                                                                    that is currently abated, but will turn into
                                                                                                    increment by 2011/2012.
1.22.07   Willamette    Should we consider contracting the size of the          Saltzman            The conversation will occur at part of the
          Industrial    district given its inability to generate TIF at this                        Westside study on 1.29.07. This should remain
                        time?                                                                       an open question as part of the “Future of Urban
                                                                                                    Renewal” effort.
1.23.07   Ec. Dev.      Sten will have concerns about the purpose of the        Mudbug              Longer term issue which needs to be a focus of
                        Economic Development Strategy and how the                                   the PDC/Council Budget discussions in March.
                        $872k General Fund will be used.
                                                                                                    Noted in Transmittal Letter.
1.23.07   Ec. Dev.      Show your successes in economic development.            Kruse               Complete and return to Work Group in late
                        This group needs a better framework in order to                             February.
                        articulate how you want to use the funds, and what
                        they will accomplish.                                                       Noted in Transmittal Letter.
1.23.07   Ec. Dev.      There needs to an overall discussion to make sure       Saltzman            Pursue General Fund ask, but realize it will no
                        Council and PDC are philosophically in agreement                            go forward until after Council and PDC reconcile
                        on how to pursue economic development. How                                  their mutual agreement on Ec. Dev. activities.
                        much of the activity to measure (in terms of                                This needs to be openly and candidly discussed
                        company location/expansion) occur anyway? It is                             in March and beyond.
                        difficult to truly measure. If we can get in
                        agreement, I'd be willing to ask another amount of                          Noted in Transmittal Letter.
                        General Fund to create a Flexible Fund for Ec. Dev.
                        which Council could oversee and PDC could
                        administer.
1.23.07   Ec. Dev.      What have you leveraged in terms of resources           Wilhoite            Complete and return to Work Group in late
                        over the past three or four years through PDC's                             February.
                        economic development General Fund allocation?




                                                                                                                                                33
2007 PDC/City Council Budget Work Group                                         Transmittal Letter




                     Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.23.07   Ec. Dev.      $872,000 seems like a very small amount for              Wilhoite            Longer term issue which needs to be a focus of
                        citywide recruitment and retention. We need to find                          the PDC/Council Budget discussions in March.
                        a way to get in alignment with City Council so this
                        activity can be funded at the level it needs to be in                        Rosenbaum: This issue needs to be informed
                        order to make this region viable.                                            by a permanent director of Economic
                                                                                                     Development as well.

                                                                                                     Noted in Transmittal Letter.
1.23.07   Ec. Dev.      What core activities does the G.F. request cover?        Kruse               Core activities are:
                        What are PDC broad based Ec. Dev. Activities?                                - Business Development
                                                                                                     - Regional Bus. Recruitment
                                                                                                     - Target Industry Development
                                                                                                     - Small Bus. Opportunity
                                                                                                     - Enterprise Zones
1.23.07   Ec. Dev.      Can you provide us with the Executive Summary of         Kruse               Complete.
                        the 2002 Ec. Dev. Strategy?
1.23.07   Ec. Dev.      What is your most current workplan on                    Saltzman            Complete and return to Work Group in late
                        sustainability?                                                              February.

                                                                                                     Noted in Transmittal Letter.
1.23.07   Ec. Dev.      What are you doing to advance the Biofuels               Saltzman            Major highlights: Conducted 22 one-on-one
                        Initiative?                                                                  visits, Facilitated 4 meetings with businesses
                                                                                                     and BDS re: permitting requirements; Facilitated
                                                                                                     3 site tours; Working with 2 companies that will
                                                                                                     begin production of biodiesel in North Portland
                                                                                                     (Combined operations will produce a total of 3
                                                                                                     million gallons a year of biodiesel from waste
                                                                                                     vegetable oil); Identifying sites for biodiesel
                                                                                                     retail operation sites will be developed by an
                                                                                                     existing producer of biodiesel in Oregon.
1.23.07   Ec. Dev.      How does the URA specific Ec. Dev. activities link       Durston             Complete and return to Work Group in late
                        up to and connect/relate to the General Fund ask?                            February.




                                                                                                                                                 34
2007 PDC/City Council Budget Work Group                                              Transmittal Letter




                     Questions and Issues Raised by Work Group on the URA/Policy aspects of the PDC Budget

1.23.07   Ec. Dev.      Show how all of your economic development                     Kruse               Complete and return to Work Group in late
                        activities leverages other TIF resources                                          February.
1.23.07   Ec. Dev.      Have a table showing how each URA invests in                  Saltzman            Complete and return to Work Group in late
                        each of the 5 core Ec. Dev. activities.                                           February.
1.23.07   Ec. Dev.      We need to have much fuller discussion with PDC,              Rosenbaum           Longer term issue (March/April). Provide initial
                        City Council and new private sector Ec. Dev. Group                                ideas of how to have the overall discussion in
                        to discuss how the city needs to pursue economic                                  time for the late February Work Group meeting.
                        development.
                                                                                                          Noted in Transmittal Letter.
1.23.07   OMF           It would important to what resources PDC is using             Carlson             Complete response in conjunction with OMF
          Analysis      to invest in the City's sustainability initiatives; and in                        research. Due late February.
                        general; the total amount of resources PDC is
                        putting to the 5 Council initiatives.




                                                                                                                                                       35
2007 PDC/City Council Budget Work Group   Transmittal Letter




                                                         36
2007 PDC/City Council Budget Work Group                                 Transmittal Letter



      Appendix C: General Fund Requests

                       General Fund Package
                             Item #1
              Business Recruitment and Retention

   Item 1 - $900,884:
   Business Development Citywide supports business activities outside urban renewal areas
   including business retention, business recruitment, international work, policy work, and
   various studies/analysis and funds target industry work.

   Follow-up from business contacts typically includes assisting companies with finding
   new space, working with various city bureaus to streamline permitting and resolve
   problems, assisting with workforce training, making referrals to technical service
   providers, identifying alternative sources of funding, and resolving numerous other
   issues. Business Development Citywide funds staff time to engage in activities on behalf
   of businesses. It also supports intergovernmental agreements with other City Bureaus,
   particularly the Bureau of Planning, and staff support to activities such as River
   Renaissance.




                                                                                         37
2007 PDC/City Council Budget Work Group                                   Transmittal Letter




                        General Fund Package
                              Item #2
                         Storefront Improvement
                           Program Expansion


Background:
The City of Portland is known nationally for its many attractive neighborhoods anchored by
vital business hubs. But over the years, some key business corridors have seen a decline in
their street presence and pedestrian environment.

As part of its commitment to community revitalization the PDC Storefront Improvement
Program contributes a major piece towards the city's revitalization efforts. The program
provides cash grants and technical assistance, of up to $20,000, to business and property
owners in eligible neighborhoods. Recipients must provide 50 percent matching funds. The
grants can be used to support for a variety of improvements, ranging from repainting to
purchase of new windows and awnings.

The Storefront program is one of PDC’s most positively received programs given it’s ability
to generate rapid, visual change to buildings at street level. Many of these improvements are
done to shops and businesses The program has:

   •   Helped new and established businesses attract customers
   •   Leveraged private investment from current owners and inspired improvements to
       neighboring buildings;
   •   Enhanced the appearance and charm of commercial areas while building a safer
       street environment; and
   •   Re-established pride in some of Portland's oldest and best-loved neighborhoods.

PDC 2007/08 Requested Budget includes over $7 million in tax increment for the program
over a five-year time period. However the demand for storefront improvements goes
beyond urban renewal boundaries. Areas outside URAs, such as Cully and Hollywood,
could benefit from this program in 2007.




                                                                                           38
2007 PDC/City Council Budget Work Group                                   Transmittal Letter


Therefore PDC is recommending the creation of a citywide storefront improvement
program to be funded by the City General Fund and administered by PDC. PDC would
suggest use of the program in the following areas (more specific boundaries will be
developed if the preliminary proposal is accepted):

           •   Expanded use in North and Northeast Portland
           •   Cully Neighborhood
           •   Outer Southeast and the Foster/Powell corridor
           •   Parkrose Neighborhood
           •   NE Sandy Blvd. and SE Division (between 12th and 40th)
           •   Stark and Washington (between 70th - 96th)
           •   NW 15th - 19th (between Burnside and Pettygrove)
           •   N. Fessenden Street (near St. Johns)
           •   Linnton Neighborhood
           •   Sellwood Neighborhood

Many of these areas are identified because PDC has received requests for the Storefront
program in the past, in addition to staff’s knowledge of the neighborhoods with in the City.

PDC believes demand would be great enough in these areas that extensive marketing of the
program would not be required and that additional staff would not be needed to process the
applications.

Request:
$1.5 million for FY 2007/08. This could produce grants for up to 75 properties.




                                                                                           39
2007 PDC/City Council Budget Work Group                                      Transmittal Letter




                         General Fund Package
                               Item #3
                        Small Business Assistance
                         Near Equity Loan Fund

Background:
Traditionally, the PDC Economic Development Department has carried out its mission
of job creation with the use of limited incentive funds including direct loans, grants, and
tax abatements generally in the Urban Renewal Areas.

While completing the 2002 Economic Development Strategy, there was demand from business
owners for flexible financial tools to stimulate job growth.

The Fund would give PDC and the City an opportunity to encourage job growth citywide,
specifically targeting small business operations through near equity loan with flexible
payback provision which focuses on providing funds with deferred principal repayment, a
structure that the for-profit financial institutions would not be able to design.

Wisdom of a Near Equity Fund:
Traditionally banks, venture capitalists, and the other for-profit financial service providers
use a risk-averse model to fund business and even where risks are embraced as a part of the
underwriting, other mitigating factors such as rate of growth of a company and collateral
have been major determining factors as to whether or not to fund a project.

Also, the current predominant business model of making loans to companies that are
struggling for capital or located in poorly patronized neighborhoods, and have the loan
structured in a manner such that the repayment does not allow for cash buildup is a
prescription for business failure. The fact that material costs are the same regardless which
part of the city a project is located disinterests potential developers from pushing
development in less vibrant parts of the city, thereby leaving them to fall behind as the
economy improves.

General Guidelines:
The near equity loan will have a flexible payback provision which focuses in providing funds
as capital infusion with delayed or deferred principal repayment schedule.

Characteristics:
    •   Primary focus on small businesses – companies that employ 20 or fewer people.
    •   Encourage growth in targeted industries and family-wage jobs.
    •   Work in parts of Portland that are not eligible for tax increment funds.




                                                                                              40
2007 PDC/City Council Budget Work Group                                         Transmittal Letter


Loan Rating Category:
   •   Management/Industry Experience.
   •   Repayment Ability.
   •   Credit.
   •   Collateral to Secure the Loan.
   •   Leverage of Private Dollars.
   •   Public Benefit.

Specific Guidelines:
   •   Maximum loan amount will be capped at $75,000 for the Near Equity Fund.

   •   The loan term varies. The Near Equity program would be structured to suit the cash flow
       needs of the borrower to the extend that principal repayment may be deferred up to two
       years, however accrued interest must be paid monthly. Loan fee up to 3% and Interest rate
       below market.

   •   A reasonable loan-to-value ratio depending on management experience, credit,
       repayment ability, leverage of public dollars, and demonstrated public benefits.

Performance Measurement
Management of the fund would focus on achieving a default rate of 8% or better within the
first three years of the program and thereafter aim at a 5% or better default rate.

Request:
$1.5 million for 2007/08.

           o 95% Near Equity Loan (approx.)
           o 5% Fund Administration (approx.)
The program will be administered by the PDC. Given the revolving nature of the Fund it
should be self-sustaining.




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