Susie Lombardo
A year ago, the popular Northeast burrito shop, La Sirenita, underwent a facelift. Crumbling walls and peeling paint on the storefront were replaced with sand-colored, salmon-flecked tiles. It is the type of commercial improvement that makes business owners proud and helps draw in customers who may have been put off by a decrepit exterior. But what made the renovation even more welcome was that it was partially financed by the City of Portland.

Managed by the Portland Development Commission (PDC), the facelift was part of a larger scheme to beautify and jumpstart the economy along Alberta and throughout North and Northeast Portland. For 20 years, PDC has guided renovation projects throughout the city, helping coordinate large-scale improvement schemes and showering small-business owners with loans and financial assistance.

As the governmental agency that handles urban renewal projects in Portland, PDC is arguably the most noble of city government entities--a bureaucratic Robin Hood that takes taxes from large corporations to finance urban renewal projects. But, a few days before Christmas, the Supreme Court of Oregon threw a wrench into the funding mechanism for PDC. It is unclear exactly how damaging this court decision will be, but it is certain that the outcome will be extremely important in determining the future--and funding--of Portland's urban development.

Just days before Christmas, the Oregon Supreme Court delivered a ruling in favor of Shilo Inn. The Oregon-owned hotel chain had complained that their $15 million property near the Portland Airport was being taxed too heavily. The basis for this argument was that new tax rules under the 1990 Measure 5 and a subsequent voter initiative in 1997 capped property taxes; in addition, under these new rules, this revenue is earmarked for specific expenditures--funding for schools and other governmental programs.

In its most crude terms, Shilo Inn accused PDC of dipping into a revenue stream that wasn't theirs for the taking. Although, two years ago, the Oregon Tax Court approved PDC's mechanism for gathering funding--a decision based more on compassion, perhaps, than sound legal reasoning--on December 20, the Supreme Court reversed that decision. Taking a stern, inflexible approach to tax laws, the Supreme Court agreed with Shilo Inn and stated that PDC in fact did not have a right to certain tax money. Turning off this spigot that funds PDC may dry up as much as eighty percent of their funding.

"Worst case scenario?" asked Don Mazziotti, a spokesperson for PDC. "We're employing attorneys to figure that out." With 400 employees, PDC manages a sprawling network of urban development projects, from a new public boathouse under the Hawthorne Bridge to providing loans for the rehab of homes in North Portland. Over the next decade, they are also handling a massive renovation project along North Interstate. Until PDC untangles the legal language of the court's ruling, those projects are on pause. Mazziotti believes the process will take at least 30 days. After that, it is unclear which projects will be able to move forward.

Shilo Inn stands to collect about $10,000 in taxes that were taken to help finance PDC projects. Beyond the immediate repayment to Shilo Inn, though, the ramifications of this action are uncertain. After their legal victory, Shilo Inn has allegedly tried to gather up other businesses to file a class action suit.

An internal memo that circulated internally at PDC after the court ruling outlined what happened in demur tones. "This decision has potential impacts in each of our ten current urban renewal areas and will probably lessen the availability of Tax Increment Financing for borrowing in the future." The memo goes on to calmly explain that PDC will be at a standstill until the ramifications are determined.