The political pressure to buy the Lodato property, alluded
to in Desmond's email, was the result of a campaign by
neighboring residents. The property was later confirmed
to be within Metro's legal authority to buy.
The Open Spaces program has been successful in buying
acreage, exceeding its target of 6,000 acres. At the time
of the report it had $40 million left to spend, including
$25 million of accrued interest.
A 1997 Metro Urban Growth Report projected that Open
Space would buy 67 percent of its land outside the urban
growth boundary, an area not immediately threatened by
development. Metro has exceeded that proportion, at 84
percent.
On Feb. 11, 1998, Jim Desmond had land to buy and money
in his pocket, but he was frustrated.
The head of Metro's Open Spaces program, Desmond had
been trying for months to purchase nine acres owned by
developer Tom Lodato. But that day Metro lawyer Joel Morton
warned Desmond that buying Lodato's land might break the
law.
The 1995 open-spaces bond measure identified specific
areas of land to buy, and the Lodato land may well fall
outside those boundaries, Morton wrote in his Feb. 11
email, which WW obtained under the Oregon Public
Records law. It was unclear if Metro had the necessary
legal authority to buy the land, Morton wrote.
"Joel, don't worry about the authority issue!!!" Desmond
emailed back, saying the property was authorized. The
deal was "not real clean on paper but we can't worry about
that now... Trust me, this is a done deal, very important
to both [Metro Council chairman Jon] Kvistad and [Metro
Executive Mike] Burton, and you don't want to stand in
front of this train or get anywhere near it."
Later that year, Doug U'Ren, a staff auditor for Metro,
obtained the above emails. He was trying to determine
whether Desmond's unit followed the rules designed to
ensure the $135 million in open-spaces bond money was
well spent. In all, he gathered thousands of pages of
documents over two years.
In November 1999 he finished a draft report. It found
that in order to get some properties, Desmond's office
seemed to be rigging Metro's property value estimates
to give sellers the prices they wanted. When the draft
audit was given to Desmond for comment, U'Ren and his
boss, Metro's elected auditor Alexis Dow, suddenly found
themselves under political pressure unlike any they had
ever seen.
Last month, Dow released a highly edited final report,
one that got an acerbic reaction from Metro officials.
"I don't know if I should be concerned about the audit--or
the auditor," said councilor Rod Park.
Park should have been relieved. Compared to U'Ren's first
draft, his work papers and confidential files, also obtained
by WW, Dow's final report was extremely mild. This
is the story of how it got that way.
Dow, a CPA who in 1994 became Metro's first-ever elected
auditor, had always envisioned an audit of the open-spaces
program. In 1998, Dow assigned U'Ren, a native Portlander,
to the open-spaces review. A certified internal auditor,
U'Ren worked for Portland General Electric and Tektronix
before joining Dow in 1994.
Metro had developed rules for the open-spaces program
to ensure integrity: Desmond and his crew of negotiators
could spend no more than 10 percent over the property's
fair market value, as determined by a real-estate appraiser.
If Desmond wanted to exceed that limit, he needed special
approval from the Metro Council.
When U'Ren began his audit and got the files, they seemed
incomplete. Some documents appeared to be missing, including
correspondence that could have shed light on whether rules
were followed. U'Ren told WW that a confidential
source, who from his notes appears to have been an employee
of the program, told him the files were "sanitized" of
embarrassing information before they were turned over
to U'Ren. Desmond and General Counsel Dan Cooper denied
the allegation, and it could not be proven definitively.
Even with what he felt was incomplete information, U'Ren
found plenty of evidence that the firewall of rules designed
to shield appraisers from any pressure by Desmond's unit
had broken down. In six of the 12 land purchases he studied
in detail, the appraisal files showed signs of "interference"
by negotiators and land acquisition staff, U'Ren wrote.
Factors that would lower the property's true value were
essentially glossed over, and assumptions that were made
"seem to always produce high value, and seldom low market
value," he wrote. It seemed that Metro's negotiators were
often controlling the appraisal process--the opposite
of what was intended.
U'Ren's November draft audit found that six of the 12
appraisals he dissected in detail were "not credible."
To U'Ren, it appeared staff wanted to boost the appraisal
values in order to avoid a council vote and get the deals
done. "The reasons why staff has seemingly tried to change
the results of some appraisals are unclear," said the
draft, "but it appears to have caused fewer deals to be
taken to the Metro Council for approval."
Why bypass the council? Perhaps because through the end
of his term in 1998, penny-pinching councilor Don Morissette
made it clear he didn't want to pay more than fair market
value for property.
Furthermore, Desmond was under pressure from Burton and
the Metro Council to hit yearly quotas for land acquisition.
In fiscal year 1997-98, for instance, the goal was 1,195
acres. "If we are way short, particularly if under 1,000,
it isn't going to look good," Desmond wrote in a March
25, 1998, email exhorting his staff to close deals.
To ensure accuracy, the Metro auditor typically gives
the program she is auditing a first look at the report,
before it's made public. After Dow did so with the open-spaces
draft, however, she received outraged letters from Metro
Executive Mike Burton, his top deputy, his chief counsel,
the head of the parks department and the open-spaces program's
appraisal reviewer. The letters denied U'Ren's implications
and included threats of lawsuits and a bloody public relations
backlash.
"The Draft Audit is filled with accusations and innuendo
that amount to smears on the reputations of the dedicated
staff conducting the program, written apparently with
the hidden agenda of making headlines," wrote Dan Cooper,
Metro's general counsel.
The audit may "result in legal action to protect the
reputations of the various appraisers involved in the
program," wrote Metro's review appraiser, Craig Zell,
who warned of potential "embarrassment to the author [and]
unintended consequences."
"If these statements remain in the final document," wrote
Burton's top deputy, Chief Operating Officer Bruce Warner,
"I would anticipate a very heated and public dispute that
will not be much fun for any of us and do Metro a great
disservice."
Burton says there was nothing unusual in the response--but
Dow says she's "never" had a reaction so fierce.
On Feb. 2, WW published an article that essentially
came to the same conclusions as U'Ren's draft audit ("Green
Acres"). Based on a review of 32 property files as well
as interviews with appraisers and other real-estate professionals,
the article identified 16 questionable appraisals. After
the story was published, Dow's notes show, she started
feeling pressured not only by Burton but by the elected
Metro Council as well.
One week later Burton released his proposed budget. It
called for the addition of 10 positions at Metro, but
it proposed a cut to Dow's office by a part-time auditing
position--one-seventh of her total staff.
Dow called meetings with individual Metro councilors.
During them, councilors said they'd heard--presumably
from the open-spaces department--that U'Ren "did not understand
the appraisal process," says Dow. Councilor Susan McLain
"suggested that I should not have even undertaken the
audit," the auditor recalls, with Councilor Ed Washington
telling her "this is a popular program, this is Metro's
shining star."
McLain, on vacation, did not return WW's calls.
Meanwhile, documents show, the audit went through several
more drafts, including three more rounds of feedback from
the open-spaces staff, before the draft was finalized
and released.
Dow concedes that changes in tone were made to accommodate
certain Metro officials' "sensitivities," but says all
substantive changes were made in the name of accuracy
and objectivity, not because of political pressure.
Among the changes:
*U'Ren's draft said it appeared that "Metro Open Spaces
staff is willing to acquire certain properties at all
costs." In the final report, this language was removed.
*The draft audit noted on page 14 that Metro bought an
unexpectedly large proportion of its land--84 percent--outside
the urban growth boundary, where land can't be developed
anyway. This was controversial information, as the open-spaces
campaign had stressed that tax dollars would be used to
rescue land from development. This fact is "critical"
to judging the program, wrote U'Ren in his notes. In the
final report, this observation is moved to an appendix
in the back of the audit.
*Appraisals that had serious problems were termed "not
credible" in the draft audit. In the final version the
language was changed to having "elements of concern."
*The draft audit questioned six of 12 appraisals studied.
The final questioned only four.
Public records show that U'Ren disagreed with this change.
Specifically, he objected to the removal from the "questionable"
list of appraisals a piece of property on Cooper Mountain.
Though Metro staff judged the land to be "worth no more
than $485,000," it was eventually appraised and purchased
for $630,000. "I still strongly believe that no private
sector buyer would pay as much for this property as Metro
did," U'Ren wrote Dow in a subsequent letter.
Asked about the disagreement, U'Ren says, "Initially
I did not concur [with Dow], but after further analysis
I did concur."
Today, things are settling back to normal. The auditor's
budget was restored. But tension remains between Dow and
her counterparts in the Metro Council and executive's
office.
Some people feel the final audit was watered down. When
told of the audit's findings, Tom Harris, a former Portland
appraiser who valued properties for the program, said,
"Boy, did we have our blinders on, or what?"
As for U'Ren, he says he is content with the final report.
Have his opinions changed since the first draft? "Oh man,
that [question] gets me into tricky water," he says, before
declining to elaborate. He supports the decision to remove
his conclusions, because they were based in part on confidential
sources, not documents.
Kvistad says he is not surprised by the reaction Dow
got. "Anytime you take on a Metro sacred cow," he says,
"you are attacked fairly severely. I'm not saying I agree
with her audit. I'm saying she stepped into one of the
Metro areas that's off-limits to criticism."
For her part, Dow says she resents the perception among
councilors that she pursued the audit to get headlines,
as well as the suggestion that she watered it down to
avoid making waves. "I am a very strong individual. I
do the job that needs to get done," she says.
