Am I the only one who thinks the new courthouse deal is bad?
Clackamas County is paying $313 million for a four-story 215,000-square-foot building on suburban greenfield land the county already owns, with pre-existing utility infrastructure and planning. By contrast, Multnomah County paid $324 million on its recently completed (about two years ago) urban, river-shore 17-story 464,700-square-foot courthouse, which required demolition, excavation, a lengthy permitting process and significant utility upgrades. That is, Clackamas County is getting 46% of the building at 96% of the cost. Are things just cheaper in Portland?
Even if a portion of this is driven by inflating construction costs, that means the people should consider alternatives to building a new building in such an adverse market. Did the county re-evaluate leasing and remodeling options in light of this cost inflation? In December 2021, less than a year ago, Pamplin Media Group reported the projected courthouse cost to be $189 million.
"Partnership" with a hedge fund
My main concern is the convoluted and "innovative" (meaning — never been done before) "financing" method by which a hedge fund will profit off our courthouse for the next 30 years. Hedge funds are essentially devices for siphoning money out of a local community.
Money spent locally by government recirculates locally, enhancing the local economy. Instead, our tax dollars on this project will be spent once, and then they will be exported to Canada.
Instead of developing a local economy, our leaders have signed us up for a plan that apparently will suck money out of our economy and send it to Toronto for the next 30 years.
The hedge fund's maintenance and operations contract lasts for exactly 30 years. Of course, that means they have an economic incentive to make everything last just long enough to get over that hurdle. The fund, called Fengate, is obviously staffed with smart people — they know exactly how long their obligation is and that their incentive is to have the building last exactly 30 years. They are designing the building, and that means they will be selecting the fixtures, roofs, finishes, structural components, and everything else, in the first place. They won't be buying building systems that have lifespans beyond the 30 years.
Our current courthouse is made of stone. Think our new one will be made of stone? Think again. It will be made of manufactured building products that are designed to last as close to 30 years as possible. Ever have an iPhone or a vacuum cleaner that dies a week after its warranty expires? That same engineering principle is being brought by the county commission to your new courthouse.
After 30 years we won't have a brand new courthouse. We will barely have a functioning building. We will be lucky if we will be able to keep from tearing it down.
Deciding not to decide how to pay
The county commission has promised to make "painful" budget cuts to pay for this courthouse. Rather than fund this project through taxes, we will simply cut services. What services are we going to go without so that we can enrich the shareholders of Fengate PCL Progress Partners?
Perhaps we should pave our roads less. Or maybe we can defund the sheriff and mental health treatment services. None of this has been decided, of course.
The Fengate deal is structured so that payments do not come due until 2025. The delay gives plenty of time for current commissioners to get reelected on the appearance of a cost-free courthouse, and deferring these budget issues until later, or onto some other politician.
Private profits, public costs
Fengate has smart lawyers, accountants and project managers who all have one goal: Fengate's bottom line. In a contest between Fengate and Clackamas County, my heart would be with the county, but my money would bet on Fengate.
In our own little "pond," the county is the biggest and most sophisticated party — it should naturally be getting good deals. But now it is swimming in a much bigger ocean, one where the private entities bring much bigger firepower to the table than even our county government can. We should expect this unequal bargaining power and sophistication to mean that Fengate will be getting the better part of this deal.
Besides the public cost of a 30-year building for $300 million, Fengate's other major source of revenue also comes at public expense: wage cuts. Fengate will pay its employees less. By "its employees" of course I mean "our neighbors" — the people maintaining and operating the courthouse. And Fengate won't be passing the savings along to us — the money it saves on wages will go straight into the shareholders' pockets. So, not only does this plan create disincentives to long-term maintenance, but it incentivizes the destruction of family-wage jobs for very little return.
I have read through what I can about the "partnership" with Fengate. But nowhere have I seen what Fengate expects to make on the deal. Obviously Fengate thinks they will get a large profit on this.
The county is paying $15 million per year (to be increased by inflation, as I understand it — how is that transferring risk to Fengate?). What is the expected profit? Are there contractual provisions that require a certain percentage of this payment to be used in the operation of the courthouse? Or are we just opening ourselves up to relentlessly escalating profiteering by Fengate?
This deal, as far as I can tell, stinks. Our county commission appears to be leading with the idea of short-term gain, but long-term pain. I understand the contract has been approved. Has it been signed? Is it too late to do anything besides demand explanations from our commissioners at the November polls?
Steven F. Cade is a resident of unincorporated Clackamas County.
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