PDC: THE LOAN ARRANGER

[June 15th, 2005] High-powered downtown law firms and investment houses are chasing-and in line to get-six-figure loans they may never have to repay from a Portland Development Commission program intended to encourage investment in urban-renewal areas.

The PDC's Quality Jobs Program has been running the past seven years, but it is now becoming yet another practice to be scrutinized by increasingly loud critics of the city's urban-renewal agency. "If this is being taken advantage of by...lawyers at the expense of creating working-class jobs [which was the program's original intention]," says City Commissioner Randy Leonard, "then that's something I want to learn more about from PDC."

PDC, best known for spearheading major development projects, also runs aid programs for business in its other role as the city's economic-development arm. The agency is currently in search of a new executive director (four finalists-former Metro Councilor David Knowles, former head PDC lawyer Karen Williams, Arizona Department of Commerce chief Gil Jimenez, and Oregon Department of Transportation director Bruce Warner-were announced Monday). Whoever gets that job must sort out which programs work and which amount to pork.

Here's how Quality Jobs works: The agency channels PDC loans to businesses for building improvements, expansions and relocations. The charge: to lure businesses to urban-renewal areas and to encourage those that are there (and threatening to leave) to stay put.

The loans are structured as quid pro quos: Businesses must both invest their own money in improvements or new construction and pledge to create a certain number of jobs paying at least twice the minimum wage and meet other goals. In exchange, PDC reimburses part of their construction or other improvement costs with a loan. To sweeten the pot, if businesses meet specific employment goals over several years, the loan becomes a grant that never has to be repaid.

So far, most loans have been five-figure amounts to small businesses: Pinball Publishing, a two-person printing firm, received $14,000 to cover improvements to new digs in inner Southeast. And the program's largest pending loan, more than $460,000 to Integra Telecom, seems to suit its goal of bringing new jobs to the central city.

But the program's biggest potential beneficiaries include Ferguson Wellman Capital, which manages investments worth more than $2 billion and seeks $130,000. The law firm Landye Bennett Blumstein applied for $147,000. And Schwabe, Williamson & Wyatt, a law firm that is among Portland's most prestigious and successful litigation outfits, is in line for $296,000.

PDC declined to provide specifics on what the firms will spend the money on. The agency says that information is exempt from public-records law, because it touches on proprietary competitive information provided as part of the loan application.

Fred Atiemo, the agency's program manager, notes the money isn't paid out until the agency verifies the expenditures it's intended to cover. As for white-shoe professional firms availing themselves of money they may never have to repay, Atiemo says the pending loans all meet the program's goals.

"It's not need-based," he says. "It is for those who threaten to leave. In the downtown area, a lot of the businesses will be law firms or accountants." Atiemo says Schwabe, for one, might well have taken jobs out of downtown without the PDC's potential inducement.

Mark Long, Schwabe's managing shareholder, maintains the firm considered moving some functions out of downtown when it needed more space. "There are a lot of things we do that could be done elsewhere," Long says, adding that a San Francisco firm recently outsourced some behind-the-scenes work to rural West Virginia. Instead, Schwabe expanded its offices in the Pac West tower.

Representatives of both Landye Bennett and Ferguson Wellman say the PDC loans help them cope with the city's business-income tax and resist the lure of suburban developments like Lake Oswego's Kruse Way.

But at least one lawyer says the idea that a prominent firm needs what amounts to a subsidy to stay downtown-near the city's various courthouses-is far-fetched.

"You can't [move] if you litigate a lot of cases," says Michael Schmeer, partner-in-charge at Davis Wright Tremaine. "We once considered moving to the Lloyd District, and that conversation lasted about five minutes."

As for the six-figure, forgivable remodeling and expansion loans, Schmeer sounds bemused. "I was aware of the program, but I had no idea it could apply to a business like that, and it irritates me," he says.

On the other hand, Schmeer adds, "I'm Googling it right now."