Last week, City Auditor Gary Blackmer released the report of a months-long investigation done on the PDC and Bureau of Planning's policies surrounding tax breaks given to developers who build affordable housing. The report is serious. It points out the poor follow-up process that has resulted in some developers snagging tax breaks by promising to build affordable housing in the City's needy areas, then building not-so-affordable housing instead. This means the City and County are effectively paying for affordable housing that doesn't exist.

The Portland Tribune and Portland Business Journal wrote about the report, but their language is pretty dense and the housing law going on here is complicated. I want to make sure everyone in Portland understands what Blackmer has dug up. In really simple language, here's what the audit uncovered:

The PDC and Bureau of Planning grant property tax breaks called "Housing Tax Abatements" to developers who promise to build affordable housing in places that need it, like Urban Renewal Areas. But after giving the tax break, the City does not effectively watch projects to make sure the affordable housing actually gets built and used by low-income people. Instead, numerous condos and apartments receiving thousands of dollars in affordable housing tax breaks have been sold at non-affordable prices.

What does that mean for Portland? Gary Blackmer and the gang lay out a couple examples of development projects going unchecked (wade through the report's housing-wonk language yourself if you want):

- The posh 246-unit Louisa next to Whole Foods on NW Davis gets to skip paying $638,000 annually in property taxes in exchange for selling 24 of its condos at an affordable price. When the auditor reviewed the project, all of the condos were selling for more than the required affordable price.

- While the tax break is supposed to be an incentive to build, the City granted one condo developer the break after construction was completed. And then, when the auditor investigated, they found that five of the six units granted the tax breaks were being sold for over the affordable price that the city and developer agreed on.

Two of the four condo projects reviewed were selling units for more than allowed. A far cry from being affordable, The Louisa's website gloats, "Reside on the high side of life, living among sixteen floors of luxury apartment homes located in the center of the prestigious Brewery Blocks of the Pearl District."

This should not be happening. More after the cut.

Housing tax abatement is an important tool cities can use to get developers to put money into building housing that's less-than-ideal from a market perspective. In Portland, people willing to develop affordable housing in the Central City and Urban Renewal Areas can negotiate to not have to pay some property taxes. In 2006-2007, properties got out of taxes totalling $2.8 million to the City and $8 million to the County--money which would have gone to support schools and roads and all sorts of good things. Essentially, municipal planners decided it's good to make that monetary sacrifice so Portland's tight housing market can get more affordable apartments, condos and homes.

BUT, the auditor found that while the PDC and Bureau of Planning have been focusing on getting new housing built, the agencies haven't been effectively checking up to make sure the housing is actually what they've agreed it'll be. Splintered responsibility between PDC and Planning and unclear follow-up processes means developers effectively might have been able to build whatever they wanted after initial agreements.

"On the one hand it's the money, on the other hand it's the purpose," says Director of Audit Services Drummond Kahn, "The big question is are we getting what we paid for and without the City monitoring the projects, we can't really answer that question."

Portland Gentrification spells out what seems to be going on:

In sum, on one side we have multimillion dollar development corporations with offices full of experts, and on the other we have city commissioners and a development commission that have only enough manpower to let everyone look the other way when these juggernauts hold their hands out, swearing they'll make good. In the middle we have City Auditor Gary Blackmer, Portland Gentrification's subtle hero of the moment.

This report raises all kinds of suspicious questions. How could a monitoring plan to watchdog the results--something obviously essential to the development process that's routinely followed by federal housing programs--not exist here?

Did the whole monitoring plan get lost in the paper shuffle between PDC and the Bureau of Planning? It seems strange that the idea that big development projects should be closely monitored could just slip past planners at the two agencies. Maybe some condo builders have good friends in the City?