After making a public records request to the City of Salem for documents related to approval of the $749,000 Park Front LLC grant, and reviewing what I got, I'm even more disturbed by how this grant request was handled -- which relates to how Downtown Urban Renewal funds are being handled in general.
This is a lengthy post, so here's key "headlines" about the Park Front grant:
Park Front developer T.J. Sullivan wrongly asserted in his grant application to the City of Salem that 80 permanent new jobs would be created by the project. This should be grounds for the City Council revoking, or at least revisiting, approval of the $749,000 urban renewal grant, since the actual number of permanent new jobs likely is zero, or very few.
It is clear that the Park Front building was going to be built with or without urban renewal funds, so the City of Salem's claim that public funds leveraged private investment with public money is false.
The Park Front developers said they plan to use the $749,000 to "add back" features of the building that they were going to leave out after construction costs escalated and Pioneer Trust Bank failed to loan them as much money as they asked for. So I continue to call this crony capitalism, since these are normal problems encountered by developers.
Approval of the grant by the City Council acting as the Urban Renewal Agency Board was rushed through by City staff before the end of 2016 so it wouldn't be considered by the 2017 City Council that would include three newly-elected progressive councilors.
In this post I'm sharing 20 public record documents that struck me as being of special interest. All of the documents can be perused in these two PDF files that I got from City staff.
(I've got to give a big thumbs-up to Urban Development Director Kristin Retherford and City Manager Steve Powers for approving a fee waiver of my public records request that I asked for because the request was in the public interest. Otherwise I was going to have to pay $407 for the documents.)
Some of the requested documents were considered to be exemptions to Oregon's public records law. Here's a cover letter I got that shows what wasn't given to me.
If you want to know the background of the Park Front grant, check out my previous blog posts about this issue:
As you can read in the last Salem Business Journal post, I emailed the Mayor, city councilors, and other City officials, asking them to explain in clear and simple language why they approved or opposed the $749,000 Park Front LLC grant. Only Retherford replied, and at considerable length.
(Below, in item #20, there's a public record document where Councilor Tom Andersen explains in an email to a citizen why he voted against the grant.)
I had a productive back-and-forth exchange of emails with Retherford, the Urban Development Department Director, but I still failed to understand the rationale for giving so much public money to a private development that was going to be built anyway and didn't provide any substantial urban renewal benefits.
So I submitted a public records request to learn more about how and why the Park Front grant was made. My misgivings about how urban renewal funds are being used by the City of Salem not only remained after I reviewed the documents, they were strengthened.
What follows is both geeky and fascinating.
The documents I'm sharing are listed in chronological order, with two undated documents at the beginning. Because some struck me as being especially disturbing, I've showcased them by including a photo of the document. So if you don't want to look through all of the 20 items below, focus on the ones with photos.
Retherford assured me that the Park Front LLC grant was handled in a customary fashion. This probably is true. But "customary" doesn't mean "properly." My conclusion from delving into what still seems to be a case of crony capitalism is that the customary way the City of Salem is using public urban renewal funds needs to be changed.
(1) Undated message to T.J. Sullivan.
This email from Sheri Wahrgren, Downtown Revitalization Manager, shows what Sullivan needs to do to get a $300,000 grant at the Urban Development Director's discretion. Later the amount was increased to $749,000, which required City Council approval (acting as the Urban Renewal Agency board). I include this document as background information.
(2) Undated message from Sullivan to Wahrgren.
Here we learn the reason Sullivan wants a grant for the Park Front building. Construction costs have increased, and he wants $749,000 to "add back" some building enhancements. Is urban renewal money supposed to be used to enhance an office building that was going to be built with or without public funds? Should taxpayers bail out a private project that is experiencing cost overruns? I say NO. Also, Sullivan says that the building will be home to 80+ family wage jobs. These aren't being created, because my understanding is that all of the tenants already are located in Salem; the businesses are just moving to the Park Front building.
(3) May 12, 2014 staff report regarding changes to Riverfront-Downtown Urban Renewal program.
This report describes how the previous smaller "rehabilitation and restoration" urban renewal grant programs came to be replaced by the larger "capital improvement" grant program that Park Front LLC took advantage of. Basically, previously urban renewal money was used to renovate existing downtown buildings. Now large grants, again, up to $300,000 at the Director's discretion, can be made for new construction -- in this case, for an office building that has no retail space, no housing, no (or very few) permanent new jobs, and no real public benefits.
(4) April 7, 2015 letter from Pioneer Trust Bank.
Early on, Pioneer Trust Bank told Park Front LLC that it intended to finance the development of their $8,500,000 building, with the requested loan being $7,225,000. This was before an urban renewal grant was applied for, another sign that Park Front was going to be built with or without public funds. I've argued to Retherford that it makes no sense to talk of urban renewal money "leveraging" private investment when that investment was going to be made anyway. The $749,000 grant given to Park Front really was a gift of taxpayer money to a private developer.
(5) October 28, 2015 email from Sullivan to Mark Becktel and Sheri Wahrgren.
This seems to be Sullivan's initial contact with City staff regarding an urban renewal grant. He says that he is closing on property on the North Block, hopes to break ground on the new building in May 2016, and anticipates completion in May 2017. All without urban renewal money, but he wants some. Wahrgren says they'd be happy to meet with him. To repeat, and I'm sure I'll be saying this again, Sullivan had bank financing, land, and plans to begin construction. So why should taxpayers fork $749,000 over to him?
(6) December 1, 2015 application by Sullivan for an urban renewal grant.
What leaps out at me here is that Sullivan affirms 80 permanent new jobs will be created upon project completion, However, what I've heard is that most (or all) of the tenants of the Park Front building, including Sullivan's own insurance company, already are located in Salem and simply are relocating to the new building. I've asked Retherford if her agency confirmed that 80 permanent new jobs actually will be created by this project. If not, Sullivan made a serious misstatement on his application and this should be grounds for revoking, or at least reconsidering, the grant.
(7) December 8, 2015 email from Sheri Wahrgren to T.J. Sullivan.
On the face of it, this is a City of Salem staffer trying to be helpful to an urban renewal grant applicant. But I included this document because it reflects the extremely solicitous attention given to the Park Front LLC folks. Wahrgren asks if she can help submit the documentation for Sullivan's grant request, and wants him to tell her if she can help in any way. I doubt most citizens who are paying for a permit, or whatever, get treated so nicely. In the public record documents I received, City employees seem like they're almost trying to throw $749,000 at Sullivan. In my view, they should have been asking tougher questions about his grant request, rather than trying to rubber-stamp it.
(8) January 11, 2016 email exchange between Wahrgren and Sullivan.
This is another indication of how cozily Sullivan was treated in his quest to get an urban renewal grant. Wahrgren says they will be "issuing a commitment early in the process so you have confirmation of funding." Weirdly, from my perspective, Wahrgren wants confirmation that Pioneer Trust Bank will lend Park Front the money needed to finish the project. Well, if this is the case, why should Sullivan get $749,000 in public funds if he already has what is necessary to construct the Park Front building?
(9) February 8, 2016 email exchange between Wahrgren and Sullivan.
A month later, it appears that Sullivan is having difficulty finalizing a loan from Pioneer Trust Bank. Some language is redacted, but clearly other banks have been contacted. When Sullivan testified at the City Council meeting where his grant was approved on a split vote, he talked about how Pioneer Trust Bank wouldn't give him a full construction loan because the bank was concerned about several lending criteria. Yet throughout the grant application process, the City of Salem showed few, if any, qualms in granting Sullivan $749,000.
(10) April 14, 2016 email exchange between Wahrgren and Sullivan.
Wahrgren is asking some good questions, but she says the answers are needed to "prepare a funding commitment for Kristin's [Retherford] review/approval." So as noted before, every indication is that Salem's Urban Renewal Agency is eager and ready to give Park Front a grant. Sullivan says they are asking the bank for $8.5 million rather than $8.23 million because they are "looking to beef up the amount of glass and the landscaping." The difference is about $300,000, which happens to be the original amount Sullivan requested before the grant was upped to $749,000.
(11) May 16, 2016 email exchange between Wahrgren and Sullivan.
Sullivan assures Wahrgren that they intend to break ground on the Park Front project by the end of August or beginning of September, 2016. Again, he hasn't gotten the urban renewal money. But as noted before, this isn't necessary to go ahead with the building. It just is extra money, courtesy of taxpayers, that will enable some "enhancements" to the building.
(12) October 19, 2016 email exchange between Wahrgren and Sullivan.
By October, Sullivan and City staff have shifted from a $300,000 grant request to a $749,000 grant request made possible by using redirected "opportunity purchase" funds in the Urban Renewal Agency budget. Sullivan says that the additional $440,000 (which became $449,000) would be used to add features to the Park Front building. Meaning, he could construct the building without the additional public funds, but with the extra urban renewal money more features could be added. To which a lot of ordinary citizens would think, "Hey, can I get $449,000 from the City of Salem to add some features to the building I'm planning to construct?" Answer: No.
(13) November 9, 2016 emails from Wahrgren to Sullivan, and from Retherford to Wahrgren.
There's a couple of interesting things in this document. First, Retherford asks Wahrgren to "follow up to see if this can go in January." I'm assuming this means the $749,000 grant application, and January (2017) refers to a meeting in that month of the City Council acting as the Urban Renewal Agency. In a subsequent document I'll show why this is important.
Second, Wahrgren gives advice to Sullivan on how to revise his funding request letter. She tells him what to say in defense of his grant application so it meets the criteria for awarding a $749,000 grant. Again, pretty darn cozy grantor-grantee relationship.
It reminds me of banks prior to the financial meltdown telling mortgage applicants what information they should put on their application to qualify for a mortgage. She also says to Sullivan that the entire $749,000 appears to be for add-backs to the Park Front building, but apparently Sullivan hasn't listed added-back features that total to that amount. So Wahrgren gives Sullivan advice to make his request letter look better. Once again, we see that this grant isn't necessary to construct the Park Front building, but just to add some niceties to an office building with no retail or residential space that is going to be built with or without a taxpayer-funded grant.
(14) November 9, 2016 email from Sullivan to Wahrgren.
This is the Sullivan email that Wahrgren is responding to in the document above: "Let me know what you think of this letter and what I should change/add/edit." Look, maybe this will strike some people as fine, that the person requesting $749,000 in public funds is getting advice on how to frame that request from one of the people at the City of Salem in charge of giving out grants.
I'll just say that I applied for quite a few private foundation grants when I was the executive director of a non-profit health policy organization. What I remember is that I had to justify the need for the grant on my own. Nobody from a charitable trust or foundation told me what to say in order to get a grant. Yet City of Salem staff are doing just that for T.J. Sullivan -- who happens to be an ex-city councilor, a Chamber of Commerce vice-president, and chair of Mayor Peterson's Blue Ribbon Task Force on the Police Facility. I'm just saying, who happens. Maybe all urban renewal grant applicants are treated equally royally.
(15) November 21, 2016 email from Wahrgren to Sullivan, and his response.
Here Wahrgren asks Sullivan to fill in some blanks about the total project cost and the funding sources to meet that cost. Sullivan's answers are: Total Cost - $8,900,000. Bank financing - $6,200,000; Urban Renewal Agency grant - $749,000; Owner Equity - $1,951,000.
We can compare this to the April 2015 figures (see #4 above) in the Pioneer Trust Bank letter where the total cost was $8,500,000 and requested bank financing was $7,225,000. So while the overall cost of the Park Front project only rose by $400,000, the amount willing to be financed by a bank fell by $1,025,000. Thus it appears that the Urban Renewal grant would be a substitute for money that a private bank wasn't willing to lend to Park Front LLC. Alternatively, Sullivan could have reduced the size/cost of the building, or raised more equity money to put into the project. Usually this is what a private developer would have to do. But in this case taxpayer funds were used to bail Sullivan out, which I call crony capitalism.
(16) November 21, 2016 email exchange between Wahrgren and Anita Sandoval.
This document shows that City of Salem staff were rushing to get the Park Front grant approved before the end of 2016. In January 2017 three newly-elected progressive city councilors would be on the City Council, changing the balance of power. Sandoval, the Urban Development Agency Office Supervisor asks Wahrgren for a report to be written "like its final" "if you want this to be approved by the end of the year." Wahrgren replies, "That is my plan."
Illegal? No. Unseemly? Yes. Political games are being played, sort of like the reverse fashion of Senate Republicans refusing to confirm Obama's Supreme Court nominee in 2016. In this case, it is evident that City staff didn't want to risk new city councilors voting against the Park Front grant request, so the vote was taken at the very end of 2016.
(17) November 23, 2016 edited draft of a Retherford staff report.
This document is intriguing for two reasons. (1) Edits were made on the first page to take out a previous mention that the Park Front site "has been available for redevelopment for many years because of the challenges and additional costs associated with the infrastructure and environmental costs of a brownfield site."
If this were true, which it isn't, an urban renewal grant might have been justified. But actually the acreage had first been bought by Mountain West Investment as part of its redevelopment of the old Boise Cascade property, and then the acreage was sold to Marquis Properties, which intended to build a rehabilitation center and office building on it. Marquis then sold part of the acreage to Park Front LLC.
So the site had already been sold for redevelopment twice before Park Front LLC bought it. How many times does redevelopment have to take place before the Salem Urban Renewal Agency considers it "de-blighted"? I'd say, once, but three times, as happened in this case, sure seems enough. Yet, the third sale still was viewed as justifying a $749,000 urban renewal grant.
(2) In line with the above, the second page talks about a determination by the Oregon Bureau of Labor and Industries that the Park Front LLC project is separate and distinct from the Marquis project, even though both are being built on the acreage that Marquis got another $749,000 urban renewal grant for. Technically this may be correct. But common sense argues that after an urban renewal grant has been given to deblight a property, it doesn't make sense to give an additional grant to Park Front LLC to redevelop the same property.
(18) December 1, 2016 email from Sullivan to Wahrgren.
I find this brief email message from Sullivan irritating. He says about a possible delay in a City Council/Urban Renewal Agency Board (same people on both) vote on his $749,000 grant request, "OK, I would hate to wait for the new council come on line with this request pending."
Look, I'm a political junkie. I know that politics permeates goings-on at the Salem City Hall. But it bothers me that an urban renewal grant is being viewed as a political hot potato.
Sullivan, and by extension Wahrgren, appear to consider that the Park Front grant "potato" will be handled nicely by the 2016 conservative-dominated City Council, and are worried that the new progressive city councilors won't view it as positively. Call me overly idealistic, but I don't like the idea of urban renewal grants being made on the basis of politics. If the grant is justified, it should be acceptable to both conservatives and progressives. City staff shouldn't have rushed to get the $749,000 grant approved by the 2016 City Council at their last meeting in December. This was wrong.
(19) December 1, 2016 email from Wahrgren to Downtown Advisory Board.
In this staff report Wahrgren claims that given the total project cost of $8.9 million, the urban renewal grant would leverage $10.87 of private investment for every $1 of Riverfront-Downtown Urban Renewal funds. But this makes no sense, since there is plenty of evidence (see above) that the Park Front building was going to be built with or without urban renewal funds. So there is zero leveraging of private investment given that it was going to be made anyway. Instead, the $749,000 was a taxpayer gift to T.J. Sullivan and his fellow investors that made it easier for them to add back enhancements to the building that they didn't want to make due to increased development costs.
(20) December 23, 2016 email from Councilor Tom Andersen to Jess Barton.
Lastly, City Councilor Tom Andersen explained why he voted against the $749,000 Park Front grant in an email to a citizen who was concerned about the propriety of giving this money to the developers. Here's what Andersen said, which echoes my own sentiments.
"Hi Jess. This is what I have sent to others who have emailed me about this project.
I did so for many reasons, none of which relate to the insider allegations. The process was flawed; with misstatements from the beginning and a very late (11/21) application which led to a rushed decision; the project did not create 80+ jobs, it merely transferred them from one office building to another; there was no housing (I support these kinds of grants downtown where housing is created); it could have been structured as a loan and not a grant; the project would have been built without the grant, albeit at three stories, not four (so what - it still would make a profit for the developers); nearly 80% of the square footage of the building was going to be leased to business owned by the development group; and there are much better uses for the $$$.
I will continue to oppose projects of this nature and continue to support projects which bring residents to the downtown core and which could not be built without city support. This project did not qualify under any of these criteria.
Thanks again for your civic involvement."