Vanishing Automobile update #60

Portland: A Model for How Not to Run a City

Part One: The Reformer

June 22, 2006

Portland, Oregon likes to call itself "the city that works," a slogan it ironically appropriated from the first Mayor Daley's Chicago. Under Daley's twenty-one-year reign, Chicago was known for cronyism and authoritarian rule, a tradition that continues today under his son.

Like Chicago, Portland had its own authoritarian ruler who maintained power by passing favors and contracts to powerful allies and building selected constituencies at the expense of others who were less wealthy and less powerful. But most Portlanders did not realize who this ruler was until 2004, when a scandal rocked the very foundations of the city.

Our story goes back to 1966 when a 26-year-old legal-aid lawyer named Neil Goldschmidt won office as Portland city commissioner on a reform platform. In 1972, the charismatic Goldschmidt was one of the youngest people to be elected mayor of a major American city. As mayor, he persuaded the city and state not to build a a proposed freeway, for which the right-of-way had already been purchased, and to use the money to build the city's first light-rail line instead.

In recognition of this apparently innovative thinking, President Carter made Goldschmidt his Secretary of Transportation. After Carter left office, Goldschmidt returned to Oregon and was elected governor in 1986. Although he easily could have won reelection, he mysteriously left office after one term.

Goldschmidt then started a political consulting firm working for major corporations, such as Bechtel, and local property developers. In the 1960s and 1970s, Goldschmidt had been a reformer challenging the establishment. By the mid-1990s, Goldschmidt WAS the establishment, with cronies on every board, clients in every land-use deal, and a hot line to every significant politician in the state -- many of whom owed him their jobs.

Goldschmidt was easily the most powerful man in the state, the "Big Dog" of Oregon politics, said the Willamette Week newspaper (which itself was founded, though no longer owned, by one of Goldschmidt's former top aides). Having once used his charisma and contacts "on behalf of the city, the state and the nation," wrote Willamette Week in 1998, "now he's shaping the civic landscape for his corporate clients."

Goldschmidt's reputation, if not all his power, suffered a devastating blow when, in 2004, Willamette Week revealed that, as mayor of Portland, he had a sexual relationship with the 14- to 17-year-old babysitter of his children. A former straight-A student, she dropped out of high school and suffered many problems after the relationship. In 1989, she asked Goldschmidt for help and he eventually paid her some $200,000. The Pulitzer-prize-winning story added that it was apparently Goldschmidt's fear of disclosure that led him to not run for reelection as governor in 1990.

The scandal led to a sort of glasnost for Portland. Suddenly the media began to openly discuss the backroom deals behind Portland's planning reputation. "The term 'light-rail mafia' is tossed around by journalists," said an article in the Portland Tribune, "to describe the Goldschmidt-connected people working on regional transit projects."

Goldschmidt and his friends lined their pockets with millions of dollars from deals such as these:

The Goldschmidt sex scandal almost derailed the biggest project of all: a $2 billion complex of high-rises on the south Willamette River waterfront built by Goldschmidt client Homer Williams, on land owned by Goldschmidt client Schnitzer Group, connected to the Oregon Health & Science University, on whose board Goldschmidt served, by an aerial tram, all of which would be supported by at least a quarter of a billion dollars in public subsidies.

Goldschmidt began lobbying for the aerial tram, which was considered a lynch pin to the south waterfront project, as early as 1998. Portland city planners calculated on the back of an envelope that the tram would cost $15 million. By the time the project reached the Portland city council, planners knew this amount was woefully inadequate, but they never told the council, which dutifully approved the tram and the rest of the project.

After construction began, the price of the tram quickly grew from $15 to $30, $40, $50, and now $57 million. Certain other costs that the city agreed to pay doubled. Early this year, three of the five members of the Portland city commission threatened to pull the plug on the tram, even though promoters claimed it would cost more to dismantle the unfinished project than to complete it. At the last minute, one of the commissioners mysteriously changed his vote--did Goldschmidt twist his arm?--and went on to win reelection in a May ballot in which he received many large contributions from members of the Goldschmidt mafia.

While Goldschmidt has dropped out of sight (the statute of limitations on his crime having expired long ago), other members of his mafia are still around, if weakened. With bloggers like Jack Bogdanski scrutinizing city dealings, Portlanders can only hope that the waterfront project is the last gasp of the Goldschmidt machine.

Most of the subsidies for these construction projects are in the form of property tax waivers or tax-increment financing (which is also used to subsidize Portland's light rail). Since these subsidies inevitably take money away from schools, fire, police, and other services financed out of property taxes, opposition has grown from the public employees unions.

"There's a huge battle going on right now for the control of the Rose City," Portland Tribune writer Phil Stanford observed in early 2006. "On one hand, you've got what's left of the old Neil Goldschmidt machine." On the other hand are "the public employee unions and the politicians who assist them in their efforts to acquire an ever-increasing piece of the public pie."

Between the Goldschmidt scandal, another sex scandal that cost the chief of police his job, the aerial tram scam, a $57 million gap in the Portland school budget (caused largely by diverting property taxes to high-density developments), and numerous other problems, Portland is hardly the city that works. Even the Oregonian -- a newspaper that strongly boosted all of Goldschmidt's downtown projects -- proclaimed in a recent headline that Portland is "the city that isn't quite working."

Though Goldschmidt became famous for "saving" Portland, all he really did -- even when he was mayor -- was save downtown Portland and its immediate surroundings. Which is to say that he saved and boosted the property values in those areas at the expense of both property values and taxes paid by people in the rest of the city. Goldschmidt exploited a zero-sum game: Portland was growing, but by directing growth to certain places he made a few people very rich and they, in turn, made him rich and powerful.

Which means that even old Mayor Daley was more ethical than Goldschmidt. As Mike Royko noted in his biography of Chicago's major, all Daley wanted was power, while Goldschmidt, the former reformer, wanted both power and money. Now that he has lost his power, the schemes by which he and his cronies gained their money are revealed for everyone to see. This may help bring down the entire planning hierarchy that Portland has touted to the world for so many years.

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