Full Circle: The “Follow The Money” Edition

“City Hall. BLM & Portland Oregon. October 2020” by drburtoni is licensed under CC BY-NC-ND 2.0.

This is my latest post for a blog I started after leaving my job as the founding Executive Director of a nonprofit I helped to found in 2017. Part One provides some context for today’s installment.

What follows is a disclosure. It’s one that I feel is critical for every Portlander to know about because the most powerful business organization in our region, the Portland Business Alliance, has an even more profound impact on the City than you realize, and the City actually supports the organization financially through a public contract.

I’ll admit that I’m scared. Writing this is risky personally and professionally, but it’s imperative for me to share what I learned about how things really work here. If Portland’s going to get better, we must grapple with the city’s underlying dysfunction. One subterranean reality that is rarely if ever discussed is that a small minority of the business community maintains and wields outsized and unchecked power through this public contract.

I should mention that in the late summer and early fall of 2021, as part of the contract renewal process, I briefed City Council staff and, in some cases, the Commissioners themselves, about the questionable public contract I’m about to describe. With the exception of Commissioner Jo Ann Hardesty, they chose not to take appropriate action and voted to renew the contract for 5 years. Additionally, media outlets have been informed about this arrangement by myself and others over the last two years or so but have been unable or unwilling to cover these stories with investigative rigor.

My hope is that motivated individuals and organizations who care about the future of our city will be inspired to lend their time, talent and treasure to an effort that will put this provincial and unscrupulous arrangement to an end, for the better of all of Portland.

Here’s the rub: One of the reasons I decided to leave my job is that the Portland Business Alliance (PBA) threatened to sue both my employer and me personally because I spoke publicly about a massive public subsidy the PBA receives from the City of Portland.

A few caveats before proceeding with my story. These are my interpretations of documents I have been able to review. I have linked to documents in this blog entry, and I encourage readers to review them and reach their own conclusions. Much of the detail is very hard to come by due to the nature of the contract and the bizarre governance structure and lack of oversight by the City. If any of my assertions are incorrect, I welcome documentation from those who disagree.

The purpose of this post is to contribute to a public discussion about Enhanced Service Districts (more on that below) that has been ongoing for the past several years. Once the City resumes the Audit Response — that abruptly ceased when the City’s new staff member who was assigned to the Audit Response was terminated after a series of disagreements with the PBA CEO — my findings may be helpful.

I will clarify, however, that after publishing this piece, I will conclude my involvement in this matter. This will not be an ongoing personal or professional pursuit. It’s taken way too much of my life energy as it is, at this point.

I want to state three things up front:

• First, there are some very good people and organizations who do very good work with funds provided by this contract. I am not questioning that we need such a program. I’m casting doubt on the process by which it’s awarded and overseen. Ratepayers should know very clearly what they are paying for, especially when some of those ratepayers are actually Portland taxpayers.
• Second, my bringing attention to the PBA’s financially questionable dealings is non-partisan. This is not about being right or left, conservative or liberal. This is a question about ethical, accountable, democratic governance. It’s a matter to every Portlander whether ratepayer revenue is being spent transparently and whether a private entity is siphoning publicly-enabled funding to heavily subsidize lobbyists who push a particular agenda that is often out of line with the city’s stated goals and values. It behooves every small business and beloved shop and restaurant in our community, and every Portlander, to follow the money.
• Third, if and when individuals who are involved with this contract have previously or are named in my communications — or their professional position is referenced, this is not a personal attack. By engaging in a publicly-subsidized entity, those professionals have implicitly opened their professional work up to public scrutiny.
• Finally, I adamantly support small businesses and public policy that encourages entrepreneurship, economic vibrancy, and job creation, as evidenced by my work over the past five years building authentic grassroots support and political power for small businesses. My commitment to this work is best exemplified by the work I did to help secure millions of dollars in relief funds for small businesses during the Covid crisis, as well as the passage of state legislation to increase access to capital for small businesses owned by women and people of color. Questioning the merits of this contract is in no way anti-business.

How it works

• The City of Portland permits the creation of an Enhanced Services District (ESD) for the downtown area. There are other ESDs, as well; this blog post focuses on the Downtown Portland ESD.
• Property owners within that district’s boundaries (with some exceptions) are charged a fee for enhanced services such as trash cleanup and retail marketing. These “ratepayers” are mostly large commercial property owners, but also include residential condominium owners and even public entities including Multnomah County, Metro, TriMet and the City itself. More on the financial role of public entities, below.
• The City collects those fees on behalf of each ESD. In exchange, the ESD delivers enhanced services. The downtown ESD is called Downtown Portland Clean and Safe Program (DCS). DCS in turn contracts with the Portland Business Alliance.
• The Executive Director of DCS also serves as the Vice President for Downtown Services for the PBA and reports to the CEO of the Portland Business Alliance. This is a critical point. The ED of DCS does not operate independently of PBA — despite the fact that DCS is the recipient of the multimillion dollar contract. Additionally, 14 of the 16 board members (note, this page is out of date) for DCS are PBA members.
• While DCS and other ESDs are typically referred to as “privately funded,” numerous public and nonprofit entities pay fees as well including Portland State University, Oregon Department of Transportation, Prosper Portland, Portland Bureau of Transportation, Multnomah County, Trimet, Portland Community College, Housing Authority of Portland, Northwest Health Foundation, CareOregon, Central City Concern, Blanchet House, Mercy Corps, and various City of Portland properties.
• This City contract is valued at almost $6M per year. DCS is mostly known for good things: promoting downtown shops and restaurants, organizing events like the Christmas tree lighting in Pioneer Square, and helping downtown businesses grappling with trash and biohazards.
• DCS hires staff and contractors to do a lot of the work like cleaning the sidewalks and the bus mall, but DCS expenses also include substantial payments to the PBA for considerable administrative and other services.
• Nearly 50% of PBA executive salaries are covered by the City’s contract (see page 11) with DCS. In addition to these significant salary subsidies (roughly $300,000/year for the subsidy alone), the PBA also charges administrative overhead from this contract (in some instances up to 30%, which is unheard of in other public contracts) and uses these funds to pad their general operating budget.
• I’d suggest that someone with more financial forensic capabilities than I, if reviewing tax and other financial documents, would find that roughly one-third of PBA’s entire operating budget is covered by various payments stemming from the DCS contract. That’s roughly $850,000/year.

Simply highlighting this questionable arrangement and suggesting that it would be fiscally and civically prudent to press pause on a 5 year contract renewal was enough to inspire the PBA to threaten litigation against me and my organization.

Surely Someone Is Doing Something About This, Right?

If you’ve read this far, you may now have a sense of how this largely unchecked power in the form of a multi-million dollar contract has persisted. Learning about it is very difficult as the documentation is quite obtuse.

It is no secret, though, that the PBA has this contract, and that many people have questioned the funds’ use and transparency. For more than a decade, homelessness advocates and folks opposed to certain approaches to policing have raised concerns about the practices and private security entities that DCS funds. Those efforts are well documented in countless news stories and websites like this.

In addition, critics of DCS often focus on aspects of the programs they don’t like, such as the payment for police services and treatment of folks living outside. While it is important for these programs to receive public scrutiny and accountability from community safety and housing advocates, the most egregious reality — that the PBA relies on DCS to fund its own operations — has largely been overlooked.

In 2021, city officials had the opportunity to look into this more because the DCS contract was up for renewal. A year prior to the renewal, our City’s Auditor released a damning report that highlighted the myriad ways that enhanced services districts in our city needed improvement in their governance and accountability. The City Auditor’s report specifically highlighted that the City takes a hands off approach once it has collected the fees and is missing “the level of transparency and accountability required for similar services managed by the City.”

The PBA’s Downtown Clean and Safe contract was featured in the City Auditor’s Report as the District with the most concerns. The report flagged numerous problems with the contract, including:

• No review of the annual budget
• No monitoring of use of funds
• No financial and performance audits and no review of subcontracts

Where else in this city would our city government simply collect and transfer money to a private entity with no oversight?

So where does the money go?

What exactly does this administrative overhead and salary subsidy gleaned by the PBA into its general operating costs budget do, whether directly or as an offset of other expenses?

1. It offsets expenses related to the PBA’s lobbying efforts, which consistently undermine progressive campaigns in line with Portland’s values. The PBA’s capability to coalesce large sums of money for Political Action Committees (PACs) has a chilling effect on common sense policy proposals and ballot measures. The entity was a vociferous opponent of the Portland Clean Energy Fund, spending hundreds of thousands of dollars to oppose the innovative new program in 2018 and bankrolling legal efforts to consistently stall implementation in the years since. The entity also played a leadership role in spearheading opposition to Metro’s regional transportation measure in 2020, setting our region back decades to find funding to invest in chronically underfunded street safety and transit initiatives. Most recently, the PBA unsuccessfully attempted to thwart the Charter Reform campaign. As The Oregonian reported, “Portland Business Alliance bankrolled charter ballot measure opponents in final days of losing campaign, records show.”
2. It influences candidate elections. Once Rene Gonzales is sworn in as City Commissioner, PBA will have endorsed all five sitting Commissioners, and provided direct or indirect financial support to at least 4 of the 5 during their election campaigns.
3. The PBA’s advocacy benefits mostly its highest paying dues members, not the small businesses it purports to represent. Whether it’s working behind the scenes to oppose commercial tenant protections and a commercial foreclosure moratorium in the midst of a global pandemic, or advocating for the wishes of tech giant delivery apps over our local independent restaurants, the PBA consistently shows up in public forums and behind the scenes as an advocate for large banks, insurance companies and commercial property owners — not the iconic small businesses that make Portland Portland.

While PBA would be a powerful organization even without this contract, the fact is that PBA leverages publicly-enabled resources for the benefit of a handful of large corporations and a small group of historically powerful Portland families.

So, what needs to happen?

1. Immediately resume the Audit Response and require changes to DCS’s governance and oversight. Although DCS has its own Executive Director and other staff who manage the multiple outside contractors who provide cleaning and safety services, the ED ultimately reports to the CEO of the PBA. What’s more, the DCS Board of Directors is not representative of those property owners, shops, restaurants and condo owners who actually pay into the Enhanced Services District. The Audit Response was well underway until recently when the City’s relatively new staff member who was assigned to this project was terminated after a series of disagreements with the PBA CEO.
2. Structural changes in our city that will result in transparency in government contracting. Specifically adhering to the Auditor’s recommendations that “the City review the districts’ purpose and the City’s responsibility, and revisit the district agreements. If the districts continue to provide services in public spaces, the City should develop guidelines for district formation, governance, and management that ensures public input, transparency and accountability by the districts and their service providers.”
3. Require transparent budgets. For a few years, I served on the Board of Directors for the ESD for the Central Eastside, called Central Eastside Together. This ESD is our city’s 3rd and has a much more transparent and accountable governance structure. ESD board members received detailed briefings by the accountant who serves both the Central Eastside Industrial Council (the PBA analog in this case) and the ESD. The presentation showed how much revenue the ESD took in and how those revenues were spent. This straightforward and transparent process ensured accountability and reassured me as a volunteer board member that I was upholding my fiduciary responsibility under Oregon nonprofit law. I can only assume that the board members of Downtown Portland Clean and Safe also want to ensure they are fully informed.

If one ESD on one side of the river has transparent budgets and governance, why can’t the one on the other side of the river?

4. Require representation on the DCS Board from public entities that pay into the district. As shared above, a considerable number of public entities pay into this district. Based on a modest annual escalation from 2020 dues, well over $6 million of direct public investment and thus public taxpayer dollars are also subsidizing PBA’s operations.

In closing, I hope that this post will do more than just inspire a dialogue. There’s certainly been plenty of that in this city. It’s my intention to bring light where there has been darkness, to inspire further research by those who have legal and financial expertise that I do not, and to invite more Portlanders to demand that our elected officials and all public servants employed at the City follow the Auditor’s recommendations and demonstrate that they are in fact serving all Portlanders, not just a handful of large corporations and a small group of historically powerful Portland families.