Green-Eyed Monster

[October 21st, 2009]

Mayor Sam Adams returned from Washington, D.C., last week in good spirits after pitching a $20 million federal investment in the proposed Oregon Sustainability Center for downtown Portland.

“If we were any other city, I am not sure the federal agencies would have taken our proposal seriously,” Adams tweeted last Friday night after he and his traveling partners finished 12 meetings in two days. “The initial reaction to our pitch for funding the Oregon Sustainability Center has been a bit of ‘shock and awe’ to the climate-positive goal of this project, but very positive.”

Adams’ partners in meetings with agencies such as the Department of Energy and the Environmental Protection Agency included former City Commissioner Jim Francesconi, representing the Oregon University System, and Mark Edlen, the OSC’s developer.

It’s unknown if Adams’ optimism about getting federal cash will be vindicated because the request must contend with the ballooning federal deficit and multiplicity of competing requests before Congress.

But the center faces two more pressing challenges back home: price and history.

As befits a pioneering project, it is expensive. A feasibility study completed over the summer shows the proposed 220,000-square-foot building, which would have 13 stories and be located at Southwest 4th and Harrison Street, would cost $120 million and rent for $31.70 per square foot.

That’s hefty rent for the building’s mix of proposed tenants. The list includes nonprofits such as the Oregon Environmental Council, 1000 Friends of Oregon and the Oregon Bus Project as well as taxpayer-supported City of Portland and various arms of Oregon’s public universities. There is also a smattering of sustainability for-profits such as Green Building Services, which helps developers get LEED certification.

Even successful nonprofits are struggling these days, and many minimize overhead by renting Class B or C office space on a city’s fringes.

Andrea Durbin, director of the Oregon Environmental Council, says her group pays $18 a square foot in Old Town. But she believes OEC can save more than $1 million over 30 years in the proposed building because state bond financing will allow fixed rents and tenants will share various expenses.

Jay Colson, a principal in Green Building Services, says his 50-employee company wants to see lower rents.

“It needs to be competitive with Class A prices,” Colson says. “We’re not going to make an irrational decision.”

In a market where leading developers such as Tom Moyer cannot get financing, and the commercial brokerage firm Cushman Wakefield says the market for Class A space is projected to soften from its current price of about $25 per square foot, the center’s rent seems steep.

The building is expensive because it would be the world’s first large-scale “net zero” building. That means through the use of solar panels, recycling and efficiency measures, the building would produce all its own electricity, collect and recycle all its own water, and produce little waste.

The current financing has $80 million in Oregon University System bonds already approved by the state Legislature, another $3 million in cash from the university system and $15 million from the City of Portland.

The city’s money would come from two sources: urban-renewal borrowings to be repaid by future property tax receipts, and, possibly, from the sale of the city’s interest in the building at 1900 SW 4th Ave. That building now houses the Bureau of Planning and Sustainable Development, which is slated to move into the sustainability center.

The city’s desire to juggle bureau homes is a reminder of a second obstacle to the center: Portland’s troubled history of hoping that “catalytic” development will be sparked by similar, pioneering projects.

OUS Vice Chancellor Jay Kenton acknowledges preliminary cost estimates for the center are expensive. But he says comparing it to other Class A office space is misleading because the building’s design means operating costs will be far less than in conventional buildings.

Kenton adds that comparisons to previous economic development efforts don’t fit because the building itself will be an attraction rather than simply a place people work.

“This is going to brand Oregon as a leader in the sustainability movement,” Kenton says. “We think of this building as a portal. People are going to want to come here and connect with it, and it will drive a whole bunch of economic value to the state.”

Here’s the cautionary historical note of catalytic projects: In 2001, then-Mayor Vera Katz, whose chief of staff was Adams, oversaw a $12 million investment in the Creative Services Center in Old Town. Prospective tenants balked at the rent required to cover renovation costs, and the Portland Development Commission moved there in 2004 from the 1900 Building. The city filled that hole with other bureaus and is now trying to determine how much equity it has in the 1900 Building.

And then there’s the $200 million the city has poured into South Waterfront. In 2002 testimony before the U.S .Senate subcommittee on science, Katz said, “We are preparing this city to position itself on the cutting edge of the biosciences movement. The synergies for bioscience are limitless.”

In that same hearing, Katz’s team went on to predict the creation of 10,000 bioscience jobs. The city is still waiting, $200 million later.