It started with make-believe numbers.

The Portland Housing Bureau wanted city money to clean up code violations at low-income apartments east of 82nd Avenue.

It sounded like a worthy idea, but bureau officials wildly inflated how many apartment buildings would be eligible. They claimed 400 properties in east Portland had been flagged for urgent repairs, when the actual number at the time was 19, according to an analysis by The Oregonian/OregonLive.

Then, after winning nearly $500,000 from the City Council last year, bureau officials banked the money and let it sit. They haven't repaired a single unit. The amount could have paid for nearly four dozen homeless shelter beds for a year, for example, or helped nearly 100 families avoid eviction.

Any new initiative takes time to get off the ground. But the story of Portland's rental rehab effort highlights the dangers of rushing to create a program from scratch without completing even the most basic due diligence.

What appeared to be a bargain - paying landlords for repairs if they agreed to keep rents low - got caught up in a case study of sloppy budgeting.

Mayors need accurate information to set spending priorities. Here the mayor was handed numbers that were compiled without any documentation to back them up, documents and interviews show. And no one bothered to scrutinize the statistics used to justify the need.

"That's either gross error or it's lying," Juliet Musso, who teaches public budgeting and financial management at the University of Southern California, said of the housing bureau's budget proposal. "And neither one of those is something you want in your budget process."

City housing officials deny misleading anyone. When pressed by The Oregonian/OregonLive, they repeatedly insisted their numbers were conservative and accurate. But they could produce no documentation to prove their assertions or to show that any count of problem properties had been completed.

Housing officials concede they've been slow to roll out the program. But they remain undeterred. They requested $1.5 million in the upcoming 2017-18 budget to continue the program and say they'll be ready to spend it this time. They plan to dramatically expand the scope of eligible properties and repair work. But money won't cover as many repairs as first envisioned because cost estimates have risen.

Meanwhile, almost all the 19 landlords facing citations when officials first pitched the program have since made repairs without a subsidy, city records show.

Kurt Creager, director of the housing bureau, said the city's database of code violators will always paint an incomplete picture because many tenants won't report problems for fear of eviction. No matter how you slice the list used to create the rental rehab program, Creager said, it doesn't come close to counting every apartment building with severe hazards.

"I go to east Portland and I see more properties than that with my naked, well-trained eyes," he said. "East Portland has a plethora of substandard, multifamily housing. So those numbers really don't have any bearing, whatsoever, in fact."

What is the need?

The push for Portland's rental rehab program began in fall 2015, when neighborhood advocates pressed the housing bureau to spend more money in east Portland.

They wanted $500,000 immediately for repairs at rental properties. Money also should pay for repairing water damage and removing mold, or to make energy-efficiency upgrades, they suggested.

Creager targeted the program for approval during the 2016-17 budget. But before the program could go forward, according to an internal housing bureau memo, some "key questions" needed to be answered.

"What is the size of potential need/appetite?" the proposal read. "Code violation data?"

Answering those questions fell to Andrea Matthiessen, a manager at the housing bureau. She received a 20-page report from the Bureau of Development Services listing each property with outstanding code violations as of November 2015.

The report was impenetrable. It was no more than a list of addresses, tax lot numbers, violation numbers and dates. It covered the entire city, not just east Portland.

It didn't distinguish single-family homes from apartment complexes. And nowhere did it show the number of units per property.

Yet somehow, housing officials began drawing conclusions about how many east Portland apartments would be eligible.

In one undated budget document, officials suggested there were 100 multifamily properties in east Portland with outstanding code violations. Those properties totaled 400 units, the document said.

Then the numbers increased.

In December 2015, housing officials revised the numbers to 400 properties representing more than 1,200 units. They shared those statistics with an advisory commission.

Then the numbers increased again.

In a February 2016 budget request to then-Mayor Charlie Hales, housing officials said it was 400 properties with 2,000 units.

In a matter of months, with no documentation to support it, the purported problem had grown by a factor of five.

'Iterative numbers'

It took The Oregonian/OregonLive less than two days to identify the real numbers.

There were three steps. First: Merge the housing bureau's 2015 list of problem properties with a government database that identifies multifamily dwellings. Second: Eliminate addresses west of 82nd Avenue. Third: Use websites and phone calls to find the number of apartments involved.

The results: 19 properties with 817 units, not 2,000 as the city said. Of those, only about 100 units had direct code violations, city records show.

Portland's explanation for its estimates is more elusive.

East Portland Rental Rehabilitation Program

How it works: The Housing Bureau's latest plans call for providing landlords forgivable loans of up to $25,000 per unit to: correct code violations or potential code violations; mitigate lead paint hazards; or install energy efficiencies.

The catch: Landlords must keep rents affordable for 10 years. Monthly rent and utilities in the first year may not exceed $825 for a one-bedroom unit, $990 for a two-bedroom unit or $1,143 for a three-bedroom unit, with increases capped in subsequent years. Additionally, no-cause evictions are prohibited for units that receive taxpayer money.

Who can apply: For-profit landlords with properties in east Portland, which generally is east of 82nd Avenue. Landlords must already be renting most units to low-income tenants.

Measuring impact: Portland could repair about 20 units with the nearly $500,000 budgeted for this year. Housing officials have asked for $1.5 million in 2017-18, which could pay for about 60 additional units.

How to apply: City officials haven't finalized program guidelines or announced how or when landlords can apply. Those details are expected this spring. For more information, contact the Portland Housing Bureau's program manager at 503-823-2379.

Matthiessen said in a February interview that an administrative assistant, who no longer works for the bureau, "manually tallied" figures from the 2015 list to produce a property and unit count. Matthiessen said "that piece of paper is long gone." She could not explain how an estimate of units was possible from a document with no data on housing units.

She said the numbers changed later based on conversations, which she didn't document.

"I think these were iterative numbers, based on conversations in some way, shape or form, fed by the data" from the development services bureau "that this is our collective sense of the need," she said.

Matthiessen gave a different explanation in an internal email to Martha Calhoon, the bureau's spokeswoman, last year.

In it, she said housing officials took the 2015 list of citywide code violators from the development services bureau, then "made the assumption" that 400 of the properties were in east Portland. They then assumed five units per property, on average, for a total of 2,000 units. The email says nothing about isolating apartment buildings from single-family homes.

Calhoon didn't provide the email to The Oregonian/OregonLive until this month, six months after the newsroom filed a public records request for documentation. She said the email had "escaped capture."

Creager defended Matthiessen's work but said she'd likely "take a different approach" going forward.

"She made a considered judgment," he said. "She did so with, I think, good intentions and with some reasonable assumptions."

Asked why the housing bureau couldn't have followed the simple methods used by a reporter at The Oregonian/OregonLive, Creager said, "Maybe you have more time than we do."

Musso, the USC professor of public policy, said she finds Portland's lack of due diligence "shocking" because necessary data were available to provide accurate estimates.

"Facts should not evolve through conversations," said Musso, a former budget analyst for the state of California. "Facts should evolve through research and credible sources."

'Really egregious'

Whatever the need, Portland's new program faces headwinds.

Dan Rodriguez, who manages a company that owns one apartment complex cited for code violations, said Portland's program would not interest him. That's because his business takes care of its units, budgets for repairs and doesn't need taxpayer money to make fixes, he said. He'd also have to agree to lower his rents if he took the city money.

Inspectors found nine violations in a single apartment at Rodriguez's 60-unit complex in east Portland. That apartment had "excessive mold growth," a spongy bathroom floor and an unsanitary carpet that posed a health hazard, records show. A tenant caused the problems, and they were fixed immediately, Rodriguez said.

"If someone's going to jump at this, it's going to be really egregious," he said of Portland's program. "Someone who's been operating underfunded, on the cheap, for a long time."

In all, records from the development services bureau show, 17 of 19 landlords made repairs without any incentive.

The city's lack of progress launching its program has frustrated some east Portland advocates.

"They've been slow in getting this program written up," said Frieda Christopher, who pitched the program to housing officials in 2015. "And we've been pushing."

Meanwhile, Portland's independent budget office has emerged as a skeptic.

Last year, analysts blessed the program because the housing bureau claimed fixes could be made for up to $15,000 a unit. Now it's $25,000 a unit, which would reduce the number of units the program could pay for by 40 percent.

Budget analysts are questioning the need and cost-effectiveness of the rental rehab program. In budget review documents, they've told the City Council to consider moving money this year to other "proven or promising" endeavors.

That negative assessment came despite the housing bureau's best efforts to justify its rehab program.

In recent months, housing officials have quietly changed many key features - moves that also happen to expand the potential pool of eligible properties, which has the effect of making misleading statistics close to accurate.

The bureau has proposed giving landlords money not only to fix outstanding violations, but also to tackle "potential code violations," lead paint hazards and improved energy efficiency.

And Creager said money now could go to owners of single-family rental homes in addition to apartment complexes. That change wasn't mentioned in his bureau's budget proposal two months ago.

Creager said he knows the rental rehab effort faces scrutiny and admits his bureau hasn't made it a high enough priority. Rules still need to be finalized, and the city then needs to get the word out to landlords. But he believes the program can flourish, if given a chance.

"I'm pretty confident," Creager said, that housing bureau managers "can demonstrate its value and prove our case, in due time."

-- Brad Schmidt

503-294-7628

@_brad_schmidt