Skip to main contentUntil Merritt Paulson came along, City Commissioner Randy Leonard had never been to Manhattan. Tom Miller, chief of staff to Commissioner Sam Adams, had never been to Kansas City. And the city's most visible business, the Portland Trail Blazers, had never been receptive to the idea of another major-league sports franchise coming to town.
It's remarkable what one guy with a rich father and an interesting idea can accomplish.
Just 18 months ago, Paulson, 35, was a midlevel National Basketball Association executive living in New York.
Since then, he's moved to the Portland area, bought two minor-league sports teams—baseball's Beavers and soccer's Timbers—and now has propelled himself into the spotlight with an audacious proposition.
Paulson wants taxpayers to spend $85 million to build a new baseball stadium for his Beavers and renovate PGE Park—just remodeled in 2001 at a cost to taxpayers of $38.5 million—for soccer. In return, he'll spend $40 million to bring a new Major League Soccer team to this city.
"I'm willing to make a bet on the Portland market—that's an easy bet to make," Paulson says.
It's also, judging from past experience, something of a longshot. Portland has historically disdained financing sports stadiums (billionaire Trail Blazers owner Paul Allen built the Rose Garden with virtually no public money).
"Portland's an 'if you build it they will come' city," says Brian Berger, a former Blazers employee who hosts the nationally syndicated show Sports Business Radio. "People here don't want to pay for stadiums."
Then there's the dismal economy, which will increase the demand for public services and decrease the resources to pay for them.
And finally, voluminous research undermines the premise that pro sports drive new economic development by creating jobs, revitalizing neighborhoods and generating tourism.
"The projections underlying these deals rarely pan out," says Chuck Sheketoff, director of the Oregon Center for Public Policy.
"Why are we discussing stadiums before we decide on priorities for the city?" asks Debbie Aiona of the League of Women Voters. "If we did rank priorities, I'm not sure this idea would be at the top."
Despite such concerns, Paulson and his allies are plowing full speed ahead with chutzpah that's more New York than Portland.
Two weeks ago, Paulson told The New York Times his proposal was set in stone.
"This is not a negotiation," Paulson said. "The $85 million is it."
It's hard to miss the irony in Merritt Paulson's quest. At the same time his father, U.S. Treasury Secretary Henry Paulson, is bailing out financial institutions with hundreds of billions of public dollars, Merritt is seeking public funds for the Portland-based company he and his dad own.
The comparison may not be completely fair, but Paulson cannot escape the long reach of his father's shadow—even 2,800 miles from Washington, D.C.
He's trying, however. Paulson may be wealthier than the average newly minted Oregonian, but the rangy Harvard MBA has embraced Portland's values.
He's quick to acknowledge that funding his proposal can happen only after the city takes care of essential services.
"If basic needs cannot be met, don't do the sports," he says.
Self-effacing and earnest, Paulson fits the city's low-key style.
"He seems like a bright and capable guy, and I think he's in this [sports] business for the right reasons," says David Kahn, a Portlander who led an unsuccessful effort five years ago to bring Major League Baseball to the city.
At PGE Park, instead of hanging with fat cats in the owner's box, Paulson lopes around the stadium checking in with fans and cheering for the home teams. Away from the ballpark, he's an avid hiker and skier, and often plays hoops at the Multnomah Athletic Club, adjacent to PGE Park.
In true Portland fashion, he's joined the board of the Nature Conservancy of Oregon and drives a Toyota Highlander hybrid from his Lake Oswego home to work each day. He says the Beavers and Timbers Foundation will give away more than $100,000 to kids' organizations this year.
After Paulson bought the teams in May 2007 for a reported $16 million from Californian Abe Alizadeh, he spiffed up city-owned PGE Park, putting new televisions and carpeting in luxury boxes and persuading the city to replace the field's worn-out artificial surface.
"The previous ownership did not invest in the facility," he says.
Paulson says his business is profitable. But the lack of broadcasting revenue and corporate support limit his potential upside.
The big money in pro sports comes from appreciation in the value of major-league sports franchises.
For example, Starbucks CEO Howard Schultz bought the Seattle Supersonics for $200 million in 2001 and sold the franchise for $350 million in 2006, although it lost money nearly every year he owned the team.
Kahn says the lack of corporate support and strong political sponsorship make Portland a tough sell for MLB or the National Football League.
"But I think Portland would be a phenomenal MLS soccer town," he adds.
Not long after Paulson arrived in Portland, that is exactly the opportunity that came knocking.
Brendan Finn, Commissioner Dan Saltzman's chief of staff, was working at his desk in mid-October 2007 when Commissioner Sam Adams summoned him to a meeting.
Finn dislikes meetings, and this one was not on his schedule.
But as City Hall's resident soccer geek, he brightened when he learned Major League Soccer Commissioner Don Garber and Paulson were there to discuss bringing MLS to Portland.
One of Garber's jobs is converting the 13-year-old MLS from a league whose teams are all owned by three tycoons—Denver railroad magnate Phil Anschutz, oilman Lamar Hunt and New England Patriots owner Robert Kraft—into a profitable operation with broad ownership.
Although nobody would mistake MLS for the NFL, Garber has made progress. The 14 MLS teams averaged 16,261 fans per game in the 2008 season and have television deals with ESPN and cable networks to televise every game. The league will expand to Seattle in 2009, where it has already sold 13,000 season tickets (Blazers owner Paul Allen is an investor), and Philadelphia in 2010.
In Portland, the soccer-mad Timbers Army has papered City Hall with hundreds of letters and emails begging for MLS. More notably, Providence Health Services, the city's largest private employer, is also revved up.
Providence recently sent four officials to Texas to look at Baylor University's sports medicine clinic inside the new MLS stadium near Dallas. Providence officials met with Leonard, Adams and Paulson last week to discuss a similar facility in a renovated PGE Park.
The cost of an MLS expansion franchise has risen from $10 million in 2005 to $40 million today, and billionaires such as Home Depot co-founder Arthur Blank, owner of the NFL's Atlanta Falcons, want in. Six cities, including Portland, are vying for two expansion franchises MLS will award next spring for the 2011 season.
The league, a notch above the Timbers' United Soccer Leagues, requires stadiums configured for soccer, which in the case of PGE Park, Paulson says would cost up to $45 million.
Would MLS thrive in Portland?
"Garber said, 'You've got a strong market and a strong stadium,'" Finn says. "But not having a soccer-specific stadium would be a deal-breaker."
Adams listened to Garber's pitch cautiously.
"I lived through the PGE Park debacle and I've got the scar tissue to show for it," he says.
As Mayor Vera Katz's chief of staff, Adams oversaw PGE Park's 2001 renovation, which cost local investors millions in losses and left the city with $28.5 million in remaining debt.
"I explained we're not going to be the most aggressive city when it comes to financing a stadium," Adams recalls.
Despite that tepid response, Paulson recognized the potential of the league's push to tailor a product to demographic groups advertisers love—young men and Hispanics.
Paulson acknowledges U.S. soccer has never achieved commercial success, but says the MLS is finally in a position to deliver on the game's promise, despite decades of similar promises.
"What's different today is, the quality is way up and so is the fan's experience because of the soccer-specific venues," he says. "And the MLS has terrific owners."
The problem is that PGE Park's boomerang configuration is the wrong shape for MLS soccer, and too big for AAA baseball.
"Even when we get a good crowd, the place is so big you can feel like you're in a wind tunnel," Paulson says.
Paulson had the money and ambition to become an MLS owner. What he didn't have was any idea how City Hall operated.
In February, Paulson identified a firm which could help him—the Gallatin Group.
Dan Lavey, Gallatin's Portland boss, is a Republican political strategist best known for his work with U.S. Sen. Gordon Smith. On his staff is Greg Peden, a former City Hall lobbyist for the Portland Business Alliance. Shortly after Paulson hired Gallatin, the firm engaged Don Mazziotti, director of the Portland Development Commission from 2001 to 2005, to work on Paulson's project.
Mazziotti was charged with finding a new location for the baseball Beavers, because if PGE Park were remodeled for MLS standards, it would no longer be suitable for baseball (Portland State University and high schools would continue to play football there).
Mazziotti identified two city-owned sites that could accommodate a new stadium: Terminal 1, located northwest of the Fremont Bridge (which the city bought from the Port of Portland to use as a staging area for the Big Pipe project), and Walker Stadium, a rickety, 74-year-old baseball park in Southeast Portland's Lents.
Peden, who is close to Leonard, smelled opportunity.
"I knew if anything was going to happen for Merritt, we needed somebody to champion the deal in City Hall," Peden says.
"And I knew how Randy feels about Lents."
A blue-collar former firefighter, Leonard might seem an odd ally for Paulson.
Although Leonard did show some interest in financing a stadium for Major League Baseball in 2003, he later blasted pleas for public financing of such projects as the Oregon Health & Science University tram and Paul Allen's 2006 request for a Rose Garden bailout.
But building a stadium in Lents—an impoverished neighborhood Leonard represented in the Legislature for nine years—quickly captured his imagination.
"My strong belief is that Lents needs an economic kick-start," Leonard says, citing 600 construction jobs and 250 permanent jobs the stadium could bring.
He acknowledges critics' concerns.
"Whatever we do—if we do anything—has to work for taxpayers," Leonard says.
In the past couple of weeks, Lents' chances of getting the new stadium have dimmed, but Leonard remains on board, even as the conversation has shifted to a site closer to downtown.
"I'll support whatever site offers the best deal," he says.
Decision makers have recently turned their attention to the Rose Quarter, making Lents a less likely site.
The Rose Quarter is home to the Rose Garden, where the NBA's Blazers and the junior hockey Portland Winter Hawks play. It's also home to Memorial Coliseum, which effectively became obsolete in 1995, when the Rose Garden opened.
For more than a decade, pols and business leaders have decried the area's lack of development.
State and federal highways, light rail, bike routes and the East Bank Esplanade funnel thousands of white-collar workers to the adjacent Lloyd District. The Oregon Convention Center sits nearby. But nothing much happens, in part because the Blazers play only 41 regular-season home games a year.
Still, in the past five years, when baseball enthusiasts pushed to bring Major League Baseball to Portland and hockey boosters pushed for a National Hockey League franchise in the Rose Quarter, the Blazers opposed both.
"We had reservations about whether the corporate support exists to support the NBA and another major sport," says J. Isaac, the Blazers' senior vice president for business affairs. "We thought you could end up with two sick franchises."
Today, however, Isaac says the Blazers are very interested in any proposal that would enliven the district.
To that end, the Blazers invited Miller, Adams' top aide, and PDC officials to accompany the team to Kansas City for an NBA exhibition game in October. The real purpose of the trip was to visit the entertainment district that has grown up next to K.C.'s new Sprint Arena.
Miller says the development is far different from the no-man's land surrounding the Rose Garden.
"You walk in and there's this outdoor concert stage and Megatron screen in a big courtyard," Miller says. "All the ground level is bars of various kinds, and the second level is all restaurants with all different cuisines and themes."
At about the same time, Adams posed a question: What about putting a new ballpark where Memorial Coliseum is now?
Replacing the Coliseum could bring 400,000 Portland Beavers baseball fans to the Rose Quarter for 72 home games annually and complement several existing or planned investments.
Adams wants to extend the streetcar to the area. Ashforth Pacific, the largest landowner in the adjacent Lloyd District, wants more development. The faltering Oregon Convention Center needs more entertainment options for visitors.
Rose Garden parking garages, which sit empty all summer and from which the city gets a cut of revenues, could serve the ballpark. And the city-owned Coliseum is a liability that must be addressed eventually.
"The Rose Quarter has incredible potential, but the lack of development there has been incredibly frustrating," Adams says.
On Oct. 27, Leonard accompanied Paulson to MLS headquarters in New York City to clarify expansion requirements. Although Leonard has traveled to Europe and Asia, it was his first trip to Manhattan.
He and Paulson met in a Starbucks near MLS headquarters an hour before meeting Commissioner Garber.
As Leonard entered Starbucks, Oregonian columnist Steve Duin called.
"We talked about the [Police Chief] Rosie Sizer situation for 40 of the 60 minutes I had set aside for Merritt," Leonard recalls. "My phone quit working and I had to borrow Merritt's phone to finish the conversation."
Upstairs, Leonard says, the trip grew more productive. Garber got right to the point about what MLS required.
"He told Merritt, 'Either you or the city has to guarantee that the modifications to the stadium will be done,'" Leonard recalls.
Garber said that MLS will trim its list of six applicants down to four cities in December. The finalists must then come up with firm stadium proposals by March 31.
The big question, of course, is money. Paulson says he will pay for an MLS soccer franchise but only if the city will pay to renovate PGE Park and build him a new stadium for his baseball team—estimated at $85 million.
That is, indisputably, a plucky request.
In other MLS cities, the story has been different. A study prepared for the city recently found that none of the 10 soccer stadiums recently developed around the country has been financed entirely with public money, as Paulson proposes to do here.
Subsidizing facilities for wealthy owners just rubs Portlanders the wrong way.
Jules Boykoff, a former pro soccer player who teaches government at Pacific University, says, "I'm all for MLS in Portland, but this proposal is an example of socializing the costs and privatizing the profits."
Such comments have done little to deter Paulson. The Gallatin Group and Mazziotti have proposed a three-part financing package for both stadiums.
The scheme would dedicate soccer players' state income taxes to repay bonds, a legal but unproven approach. A second source of money would come from stadium operations. The third is tax-increment financing, a favorite PDC tool.
Eric Johansen, the city's debt manager, is skeptical.
"I can't envision that you could do it without a backstop from some other revenue source, such as the general fund," Johansen says. "I think it's fair to say that we haven't seen yet a combination of revenue sources sufficient to get the deal done."
The key to Paulson's success will be Mayor-elect Adams.
In preparation for taking over the city's top political post, Adams has demonstrated over the past year he knows how to cut budgets and oversee the routine city operations, but his guiding premise is that real leaders need to think big.
Adams has floated some ambitious ideas, only to be rebuffed. The Burnside-Couch couplet proposal is on hold. His $464 million transportation tax never made the ballot. His idea to convert the old Sauvie Island Bridge into a Pearl District pedestrian overpass over I-405 failed.
But he's the boss now (or will be in January), and is intrigued by the idea of bringing a major-league sports team here that's more in keeping with Portland's values. And he says soccer, which is cheaper and more global than other sports, fits the bill.
"I want Portland to be more international and less insular," Adams says.
Adams has been around City Hall long enough to know that Merritt Paulsons do not come around often.
"Part of it is that he brings financial backing," says Adams, "and part of it is that he has moved to Portland and gotten involved with the civic life of this city."
At the same time, there is the matter of the three city commissioners who will be on the Council next year but are not actively involved yet in Paulson's proposal: Dan Saltzman, Nick Fish and Amanda Fritz. And there is the widespread belief, both within City Hall and without, that Paulson is asking for too much.
Adams appears to understand that. "Merritt's passionate and he's committed, but that doesn't mean we won't get the best deal for taxpayers."
And as for Paulson? He has backed off his hardline statement to The New York Times, in which he said his willingness to spend $40 million on an MLS franchise was enough.
He now says the Times quoted him accurately, but he wants to see the city's response to his proposal.
"Any discussion of numbers would be premature," he says.
Merritt Paulson's father, Hank, the former CEO of Goldman Sachs, is reportedly worth more than $500 million. He owns 20 percent of his son's company, Shortstop, LLC.
Mayor-elect Adams promises a slate of public-works projects for next year. A stadium renovation could create hundreds of construction jobs.
Paulson added dozens of new recycling bins to PGE Park. He's even trying to get players to drink from recyclable bottles rather than disposable cups.
The other cities competing for MLS teams are Atlanta; St. Louis; Ottawa; Vancouver, B.C.; and Miami.
The Gallatin Group recently hired former Mayor Vera Katz, who was Sam Adams' boss for a decade. She is not yet involved in the stadium proposals.
Merritt Paulson is a registered Independent. His wife, Heather, is a Democrat, according to the Clackamas County elections office.
Last year, the $100 million Bobolink Foundation, controlled by Merritt Paulson and his family, gave away about $8 million, primarily to wildlife and conservation groups, although its biggest gift, $1.5 million, went to the Christian Science church.
An Oct. 1 consultant's report done for the City of Portland found that all 10 other MLS stadiums recently built or in development include at least $15 million of private funding.
WWeek 2015