Below is my speech at the vote on 7/23/09, following the hearing on the latest version of the proposed predevelopment agreement to renovate PGE Park for Major League Soccer. I received a copy of the proposal at the hearing. Mayor Adams's office had provided us with a similar earlier version, except for amendments on Sustainability and Fair Wages. Commissioner Saltzman improved the deal with an amendment requiring the stadium to meet LEED Silver standards for green buildings. Both my amendments failed, to improve conditions for workers and to require the team corporation rather than the City's Spectator Fund to pay fair wages. A substitute amendment by Commissioner Leonard passed, stating that the corporation operating PGE Park has to follow the law (state and federal labor law).
There was some discussion regarding whether the citywide taxpayers of Portland are at risk with this deal. The assertion was made that most Spectator Funds come from people who do not live in Portland - visitors paying hotel/motel taxes, and people from elsewhere watching sports games. First, as noted below, the General Fund of the City of Portland backs the new debt if Spectator Funds decline, for instance if the Portland Trailblazers leave town when their current contract expires in 2025. Also, the City Council is responsible for ensuring all taxes, fees, and rates are spent wisely, for the purposes intended. The deal for soccer at PGE Park has basketball and hockey fans subsidizing MLS, and leaves the Beavers without a home. It leaves little money available for upgrades and maintenance to the Rose Garden and Memorial Coliseum. It borrows money at 9% using the fans' fees, and gives the MLS franchise a discount on the amount pre-paid for future years' rent -- the discount is 8% in this deal, compared with 6% in a deal for affordable housing the Council passed earlier in the afternoon. In any proposal before Council, we should consider not only, "is this a good plan?", but also, "what else could we do with that money in that fund?" We do not have an infinite amount of money to spend on anything. We do not have an infinite amount of money in the Spectator Fund. There should have been more consideration of what else the Spectator Fund money will be needed for. I greatly appreciate those who took the time to come to the hearing to remind the Council about the need to fund improvements at Memorial Coliseum.
My comments:
On the surface, there is much to like about the latest agreement. It doesn’t require the use of Urban Renewal Funds. It is paid for through user fees, prepaid rent, and private contributions. I was truly open to getting to the point of supporting the final agreement, despite my intention to vote against the competitive bidding exemption and granting of a sole source contract to Peregrine. I especially appreciate Mayor Adams and his staff keeping my staff and me informed as the proposals changed as best they could. I assume his staff looked into my proposal to increase ticket taxes for soccer games at PGE Park more significantly, and found some reason that would not work. Mayor Adams has set the expectation that reasonable people can disagree without being disagreeable, and I am grateful for his leadership on the Council.
I am concerned about the issues raised by neighbors in Goose Hollow especially sightline concerns. I am glad the parking structure issue is clarified.
However, now that I have looked at the details of the new deal and the proposal just doesn’t pencil out.
The use of Zero Coupon Bonds is troubling.
The agreement requires the use of these Bonds at a high rate of interest. The price on the ledger is $11 million, but the borrowing will actually cost over $44 million. The use of zero coupon bonds was of concern in the previous proposal, and remains so. Interest rates at 9% will be high especially in this economic climate. The bonds may be hard to sell. These bonds are necessary because there is no money available in the Spectator Fund for payments on additional bonding for the first seven years, until the Rose Garden bonds are paid off. Even after which, the cash flow of the Spectator Fund is reduced for another six years when the existing PGE Park bonds will be paid off. The outcome of this is the back loading of the debt payments, resulting in the $11 million to be borrowed costing the Spectator Fund $44 million by the time these bonds are paid off in 2035.
I cannot support borrowing money at high rates of interest to pay for a sports stadium, essentially taking out a second mortgage on the existing debt.
I believe this deal still puts the City’s General fund at risk.
$27 million of that $44 million debt incurred through the use of Zero Coupon Bonds is due after 2025. The significance of this is that until 2025, user fees from the Blazers are personally guaranteed by Paul Allen. In 2025, the City’s agreement with the Blazers ends and must be renegotiated. In a worst case scenario, the Blazers could walk away from Portland, with no recourse for the City of Portland, leaving a $27 million debt with no way to pay for it except through general funds. This does not protect the City’s general fund, which was one of the conditions of the Stadium Task Force. The Task Force requirement is not being met.
The City will receive no cash flow from PGE Park for 21 years.
The deal proposes to capitalize the rent payments for the years 2017 through 2038 and to use those funds to provide $12 million towards the renovation of PGE Park, When the City is incurring annual expenses related to PGE Park of $450,000 in 2017, increasing each year up to $730,000 in 2035, there will be no income from PGE Park to pay those expenses. This is not a fiscally prudent approach to finances. The reference to the visit of Burnley FC reminds me that the success of a soccer team franchise depends on the success of the soccer team on the field. Only three of the current MLS teams made a profit last year, The Resolution before us today states that MLS has economic benefits, which is not borne out by the evidence.
The City is continuing to subsidize the Fair Wage for Pergrines Employees.
The agreement includes a City subsidy for providing living wages to PGE Park employees. The City of Portland will be paying nearly $5 million over the 25 years of the Operating Agreement to subsidize the wages of Mr. Paulson’s employees. On July 9th, I was assured, in Council, by Commissioner Leonard and Merritt Paulson that the City would not need to subsidize the wages of PGE workers, and that instead those workers would be allowed to unionize. The Stadium Task Force included in their report a requirement that Mr. Paulson pay his employees a Living Wage. That Task Force requirement is not being met
Talking about the Task Force, their report also stated “Losing the baseball team is not an acceptable tradeoff for gaining a Major League Soccer team.” Yet the future of baseball in Portland is in doubt, and the Council voted to decouple the deals. The Task Force requirement is not being met.
As a City, we talk a lot about environmental sustainability, but we also need to focus on Financial Sustainability. The bottom line is that PGE Park with the redevelopment being proposed is unsustainable. It will not jump start the local economy. It will not create living wage jobs (except in this case those being subsidized by the City). The deal is certainly better than the previous proposals, but it is still not a good deal for the taxpayers of Portland. Even under the best possible scenario, the City’s costs to own and maintain PGE Park will never be close to self-supporting if we go forward with changing PGE Park from a multi-use stadium to a soccer-specific stadium.
In any deal, we must evaluate who pays and who benefits. At first glance, the use of Spectator Funds and private money seems to meet the test that those who benefit will pay. But in order to assess whether it is or is not a good plan, we need to discuss what other uses the Spectator Fund may be needed for, and whether it is appropriate to borrow money that may be needed to pay back the General Fund. That is why I say again that the taxpayers of Portland are at risk with this deal.
A large percentage of the Spectator Fund is generated in the Rose Quarter, by tickets at the Rose Garden and Memorial Coliseum, and by parking revenues from the Rose Quarter garage. I believe it is unwise to spend a large percentage of these revenues on PGE Park, for 15 games of soccer per year.
Mayor Adams is just beginning a task force to determine the future for Memorial Coliseum and the Rose Quarter. We have an underutilized Coliseum that we are looking to repurpose. While there are some Urban Renewal dollars available to redevelop the Rose Quarter, by eliminating the availability of the Spectator Fund, we reduce the funding sources available to modify Memorial Coliseum and develop the Rose Quarter. We should not tie up the Spectator funds for 25 years before we determine the future of Memorial Coliseum and the Rose Quarter. There is currently no way to assess the lost opportunity costs if we put all our Spectator Funds money in the PGE Park basket.
I am open to a big idea. I am willing to invest substantial money, millions even, for an economic development proposal with substantial likelihood of long term benefits from major investments. But there has to be a payoff for the investment for the general taxpayers of Portland, not a sweetheart deal to benefit a narrow group.
I have been known from my days on the Planning Commission as someone who looks at the details. Details that were in short supply, either not available or available only at the last minute and in some cases still unavailable. Details matter. And in this case, the details show that the agreement is still fiscally unwise.
- We have no guarantee the PGE stadium improvements will be cost-effective and provide the amenities Portlanders want with a sole source non-competitive bid contract.
- We may well lose the Beavers from Portland.
- There is risk to the General Fund. We will incur a $44 million in debt and a possible 27 million dollar shortfall in the year 2025.
- There will be no income from PGE Park for 21 years and the spectator fund will essentially be locked up to fund this deal. Funds that the City needed support improvements to the Rose Garden and our beloved Memorial Coliseum.
- We will spend nearly $5 million to subsidize wages for Mr. Paulson’s employees so that they can earn a living wage.
The question is not whether this is a better deal for Portlanders than the previous proposal. The question is whether this is a good deal for Portland taxpayers and in my opinion it clearly is not.
I hope I'm wrong. I hope it's wildly successful, and I will continue to look for improvements in the deal as it moves forward.
I vote No.
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Proposed Amendment:
Peregrine agrees to pay a Fair Wage, as defined by City Code, Chapter 3.99 to all employees, including any contracted employees, throughout the term of the Operating Agreement, with no subsidy by the City. Peregrine agrees to provide a neutral setting for employees should they choose to attempt to organize.
The amendment failed, despite Commissioner Saltzman's support. Commissioner Saltzman and I were also the only two votes for a second amendment with just the second sentence. Commissioner Leonard passed a substitute saying only that Peregrine will abide by federal and state labor laws.
