Milwaukie demands return of neighborhood funding
A man considered to be a hero to his neighbors for helping reclaim a Milwaukie park from encroachment by a Portland jeweler was targeted by the city for "misappropriated funds."
Island Station Neighborhood District Association (NDA) Chair Milo Denham was granted $10,000 by a unanimous vote of the NDA to help defray his legal costs in fighting for the neighborhood's interests in the property-line dispute over Spring Park. Those funds are now in limbo as Ann Ober, Milwaukie city manager, threatened to pull the plug on the neighborhood's $4,000 in annual city funding.
"If the funds are not returned, the city will no longer make financial contributions to the Island Station NDA, beginning with the July 1, 2019 payment," Ober wrote in an April 24 memo to NDA officials, the day after an article on the property-line dispute was first published in the Portland Tribune.
Ober sent a nearly identical letter directly to Denham, who was not present at the April 17 NDA meeting in which members of the neighborhood group voted 8-0 to make the contribution. After a standoff between the city and the NDA, Denham returned the funds to the NDA account on May 1, but he said that neighborhood representatives will discuss the issue again at their May 15 meeting.
"We can hold it as committed funds, so we don't overcommit what little money we do have," he said.
Ober thanked Denham for returning the funds.
"The city is deeply appreciative of his action and hope that we can move forward together," she said. "A vote of the NDA, unanimous or otherwise, does not change the city's decision that this expenditure is inconsistent with the intended purpose of NDA funds."
As far as anyone's aware, this was the first time in the history of Milwaukie's funding of an NDA program — begun in 1998 — that the city has demanded the return of funds. NDAs are typically required to submit an annual accounting of expenditures, and in theory, if the city had ever found that an NDA grant didn't comply with the rules of the program, the city would ask that those funds be returned.
"In this case, the city was made aware of a sizable contribution prior to the annual audit and had to take action to protect the funds because the expenditure did not comply with the NDA program," Ober said.
Neighborhood leaders are now left wishing that they had been formally notified about the potential legal issue prior to their April 17 meeting so that they could have avoided the heartache of having their decision reversed.
"Notwithstanding the city's award-winning community outreach efforts, communication can always be improved," said city attorney Justin Gericke. "Perhaps the absence of other analogous situations is evidence the NDAs understand the program and its parameters. Nevertheless, the city is committed to making sure a situation such as this does not arise again."
Carolyn Tomei — a former Milwaukie mayor, state representative and neighborhood leader — made the formal motion at the meeting to contribute $10,000 to help defray Denham's legal fees related to the neighborhood's fight to reclaim about an acre of Spring Park from behind "no trespassing" signs erected by nearby homeowner and jeweler Judith Arnell.
"(Denham) was involved in this issue because the members strongly directed and encouraged him to do so," Tomei said. "This issue languished for years in the City Council and ISNDA because no one in the past was willing to spend all the time and energy it took to bring it to a close."
Tomei thanked Denham for his persistence in bringing the issue to a resolution that benefited the citizens of Milwaukie. Recognizing that "no good deed goes unpunished," Tomei says that Denham is now being punished by the Arnells and city staff for his good work to benefit the public.
"But the city and the neighborhood now have possession and access to a beautiful piece of land bordering the Willamette River with a breathtaking view of Elk Rock Island," Tomei said.
City officials insisted that the $10,000 cannot be used for "personal legal expenses," but NDA representatives say that conclusion appears in opposition to a county judge's ruling that Denham was representing the NDA's interests in the property-line dispute with the city.
In March, Clackamas County Circuit Judge Ulanda Watkins dismissed Arnell's stalking order against Denham, finding that the order was a misuse of stalking law and was, in fact, a property dispute.
Ellen Chaimov, acting secretary of the NDA, also attended the court hearing. She says that the city attorney is failing to draw a distinction between NDA funds being used for a personal legal issue and a legal issue in which the NDA chair is acting at the behest of a unanimous vote of the NDA membership.
"We thought that it (the $10,000 grant) fit really well under neighborhood preservation, which is one of the neighborhood grant goals," Chaimov said. "It doesn't seem that Milo should be hung out to dry as a representative of our neighborhood, so it's frustrating."
Ober said that services performed by Denham's attorney would not count as materials or services that "sustain or enhance the health, public safety and welfare of the neighborhood. Furthermore, NDAs do not have the authority to enforce the boundaries of city parks or to authorize a representative of the NDA to participate in such activities."
Ober added that city officials have never taken a position in the dispute between the Arnells and Denham, and therefore city representatives were not present to explain to the judge the limitations on the NDA activities.
"While the judge may have recognized Mr. Denham's position as chair of the NDA and that his intent was to further NDA objectives, that does not change the fact that Mr. Denham and the NDA did not have the authority to act on the city's behalf," she said. "Agreeing to pay Mr. Denham's personal legal expenses would imply the city condoned, supported or ratified one party over another in the Arnell-Denham dispute notwithstanding the city's continuous representations to the contrary."
While the Arnell family has seemingly encroached on publicly owned land behind "no trespassing" signs, their property has increased in value significantly.
In 1994, Charles Arnell bought the 1.43-acre property on 18th Avenue for $365,000; according to Clackamas County assessment officials, the property is now worth $1,122,347, which includes the value of the family's 4,758-square-foot home. Charles Arnell transferred ownership to his wife, Judith, in 2012.
City officials have been tangling with the Arnells over the property-line issue for more than a decade. In a 2009 letter to city officials, City Councilor Lisa Batey (then an Island Station NDA representative) wrote that "the city has turned a blind eye to Mr. Arnell's encroachments into Spring Park for years. … It's ridiculous to let him treat private property as his own."
More training needed?
Ober noted in her April 24 letter that city staff were asked by a city councilor in August 2018 to investigate whether city-provided NDA funds could be used for personal legal expenses. In October, City Councilor Kathy Hyzy (then a private citizen running unopposed for the position) asked the same question, but it appears the answer to the question was shared informally with other members of the NDA.
City officials say that "there are friendly and very committed city staff only a phone call away to answer any questions regarding the allowable uses of city-provided funding and any other questions about the program," Gericke said.
Hyzy's husband, Colin Hyzy, told other NDA members at the April 17 meeting that he had heard there could be a legal issue, but the NDA received "no formal information" regarding the potential issue in time for the vote, according to Chaimov.
He abstained from the vote and his wife was not present; he resigned his position as NDA treasurer on April 18 and then another signatory on the NDA account transferred the funds to Denham's gofundme account.
"As Colin was walking out the door to the meeting, I mentioned to him that I had received a memo from the city attorney that afternoon indicating that the use of NDA funds for Milo's legal expenses would not be an acceptable use of the money," Kathy Hyzy said. "I had a conversation with a neighbor who was present at the NDA meeting on the 17th, several days prior (to the meeting). I indicated a vote to pay for an individual's legal expenses out of our NDA coffers was likely a misuse of funds. I encouraged them to contact city staff to find out for certain."
Gericke said that the city received no phone call from the NDA to clarify.
In this month's city newsletter, Kathy Hyzy announced that her position as NDA communications director would be open for election at the NDA's meeting May 15. For 2019, Hyzy noted the City Council has a goal to increase community engagement.
"It may be that additional training for NDA officers can be encompassed within that goal," Hyzy said.
Arnell stressed potential divide
While neighborhood representatives are saying that they wish they had known sooner about the city's interpretation on limits to their funding, Arnell has been stressing that Denham is not representing the city.
Ober said the city attorney in August 2018 concluded that payment of such personal expenses was not a legal use of city-provided NDA funds and would be a violation of the city's NDA program and Resolution 9-1998. Months prior to Ober's April 24 letter to the NDA, Charles Arnell told the Portland Tribune that he was in possession of a letter from the city discussing Denham's relationship with the city.
"The city of Milwaukie has addressed this," Arnell said, adding that Denham has "not been asked to do it by the city of Milwaukie. And I have a letter from the city manager stating as such. So you can get that letter and you can then filter it through his comments and realize that he's making this a personal vendetta."
Ober confirmed that, after Arnell raised concerns about Denham's presence in and around the property, Arnell was informed in an email from Assistant City Manager Kelly Brooks in August that Denham was not the city's representative.
Ober said that Denham had the same information, citing "multiple communications in August between Mr. Denham and the city (that) specifically identified the matter as being between two private citizens and stated that the city was not involved."
Denham assumed that he had the support of the NDA, however, since in July 2018, neighborhood officials voted unanimously to send a letter to City Council stating that the NDA recommends "no accommodation to the property owner who has been illegally encroaching on Spring Park along the southern park boundary for over 10 years."
Portland Tribune Reporter Nick Budnick contributed to this article.