For a fuller
account of the Dominion scandal, see The Oregonian's
series "Blueprint for a Slum," published in September
1990.
PCRI guidelines
require that renters earn 80 percent or less of the median
family income (1998 figure: $36,231) for Multnomah County.
Before his resignation last year Lawrence Dark's salary
was $95,000 at the Urban League. His wife is an assistant
U.S. attorney.
PCRI's lack
of openness irks Mike Dolan, a board member of Franciscan
Enterprises, a Northeast CDC. Dolan's requests to the
city for information about PCRI were rejected by the city
and the Multnomah County DA. Dolan subsequently wrote
an op-ed piece about PCRI for The Skanner.
In the city's recent history there have been few gambles
as bold as the 1991 creation of a public nonprofit corporation
called Portland Community Reinvestment Initiatives.
At the time, a crooked real-estate finance company named
Dominion Capital owned more than 300 houses, most of them
in North and Northeast Portland. A criminal investigation
pushed Dominion into bankruptcy, threatening the people
who lived in Dominion-financed homes with foreclosure.
As Dominion swirled around the toilet bowl, City Commissioner
Gretchen Kafoury and her aide Erik Sten plastered together
a takeover package. Backed by city-guaranteed financing
from US Bank, the newly formed PCRI bought 352 Dominion
properties from bankruptcy court in 1992, paying more
than $9 million. The plan, according to PCRI's statement
of goals, was that "such properties might be stabilized
and their values enhanced for the public benefit" through
sales and rentals.
Fast forward to today, and PCRI's portfolio, whittled
down to 231 homes, has an assessed value of $24 million
and a market value of considerably more.
Clearly, the city's gamble paid off.
But the venture's very success has area residents calling
for PCRI's dissolution. "We don't need PCRI any more,"
says Fred Stewart, a Northeast Portland real-estate agent
and investor. "They took city money and saved the lives
of hundreds of low-income people. But true success would
be for them to leave now."
Stewart notes that the areas in which PCRI's properties
are concentrated--primarily the King, Woodlawn, Humboldt
and Piedmont neighborhoods--have improved dramatically
and are no longer in need of PCRI's paternal influence.
He thinks it should simply sell. "I have nothing against
PCRI," says Stewart, the former head of the King Neighborhood
Association, "but I strongly feel they need to go away."
Steve Rudman, Portland's director of Housing and Community
Development, concedes the crisis in North and Northeast
Portland neighborhoods has passed. "One could argue that
the issue today is gentrification rather than the threat
of slums," he says. In fact, Rudman adds, booming property
values in PCRI's service area have caused many low-income
residents to move to East County.
But Sten, now a commissioner, says the organization was
never viewed as a short-term proposition. "The idea that
PCRI's work is done is just not accurate," says Sten,
who served on the organization's board until 1996.
Although three city employees sit on PCRI's six-member
board and nearly all of PCRI's debt is either guaranteed
or subsidized by the city, the organization is not considered
a public body. As a result, most of its records are private.
But the few documents that are available raise questions
about whether it has drifted from its original goals.
In January 1997, for example, PCRI sold a house to its
renters, Lawrence and Okianer Dark. At the time, Dark
was head of the Urban League and earning a salary far
in excess of PCRI's guidelines for renters--in other words,
he shouldn't have been living in the house in the first
place. PCRI Executive Director Maxine Fitzpatrick says
Dark was paying a market rent and that the house was too
costly for low-income renters. She says her organization
had the house assessed before selling it to the Darks,
but never put it on the open market.
City officials, unaware of the deal, were not thrilled
about the details provided by WW. "It's one that
I would rather have seen a broker involved in," says Martha
McLennan of the city's housing bureau.
Other property sales also raise questions. Although PCRI
was set up, in part, to keep houses in stable hands, six
of the 15 homes sold since 1997 were resold for a quick
profit. The most blatant example is a house at 4814 NE
20th Ave., which the nonprofit sold in January 1998 for
$95,000; the buyer resold the house six months later for
$149,600. Fitzpatrick told WW that she was unaware
of what happened to PCRI properties, but says selling
into a strong market, especially to renovators, is bound
to make some purchases look speculative.
In addition, PCRI's original business plan projected
that it would operate without public subsidies. However,
even while receiving $289,000 in government grants, PCRI
racked up a deficit of $237,000 last year. Fitzpatrick
and city officials concede the organization has been on
the dole longer than planned but say that is because the
Dominion properties were in worse shape than initially
thought.
Finally, according to its charter, "PCRI's initial organizational
strategy is to operate with few staff." Today, however,
the organization employs 20 people, nearly double its
total of five years ago, and wants to hire more. (One
notable employee is Sten's wife, Marnie Vlahos, who directs
non-housing programs. Vlahos' employment precedes her
marriage and Sten's election. Sten abstains from voting
on any PCRI business that comes before City Council.)
While the organization's total operating expenses have
only risen about 32 percent since 1993, personnel costs
are up about 140 percent. Meanwhile, the number of houses
PCRI owns has remained stagnant. Fitzpatrick attributes
the staffing increase to bringing contracted services
in-house and starting other services, such as child-care
development, that weren't in the original business plan.
Sten bristles at any suggestion that PCRI has drifted
away from being the lean organization that he and others
established. "We hold nonprofits to a standard that government
and for-profit companies can't meet," he says. "I have
a lot of faith that they've made extremely good use of
taxpayer money."
Whether or not Sten is right, the question remains: What
should be done with the equity on the nonprofit's balance
sheet? At the end of 1999, PCRI's properties were assessed
at $24 million; its debt is about $11.4 million. The $12
million-plus difference is a hefty return on the city's
investment. "It's time to turn that value back to the
neighborhoods," Stewart says. "PCRI should liquidate their
properties and get them back into the hands of low-income
people."
Another option--and one that Rudman thinks makes more
sense--would be to borrow against the appreciated properties,
in effect taking out a giant home-equity loan. "The answer
is not to recapture the equity," says Rudman. "Better
to borrow against it and buy somewhere else."
Fitzpatrick maintains, however, that she isn't interested
in liquidating her organization's portfolio or adding
more debt until her organization can operate without subsidies.
"Our job is to do what's best for PCRI's tenants," she
says.
