the emery south waterfront

The Zidell family has considered allowing the Portland Housing Bureau to subsidize development of some affordable rental units in the second phase of The Emery apartments. The first building is pictured here.

(Elliot Njus/The Oregonian)

A dispute over affordable housing could kill a development deal between Portland officials and the Zidell family, which owns 30 acres in the South Waterfront District.

Zidell officials want to buy more time -- and let the uproar over affordable housing die down -- by asking Mayor Charlie Hales to delay the agreement.

An email to Zidell leaders from the company's public relations firm -- accidentally sent to OPB News, which shared it with The Oregonian/OregonLive -- lays out the strategy.

The message provides a rare behind-the-scenes look at the influence a private developer hopes to exert on City Hall and the steps the company is taking to protect its image -- even as the Zidell family offers no firm commitment to develop affordable housing.

It's also a clear response to coverage in The Oregonian/OregonLive on the city's failure to meet goals for affordable housing in the North Macadam urban renewal district, which includes the Zidell property.

City and company officials said Thursday that they still hope to reach a formal deal, although the timing and terms remain unclear.

Even without an agreement, Zidell's ZRZ Realty Co. is expected to develop its property and the Portland Development Commission will most likely commit public money to build roads and parks.

But a development agreement would give city officials more leverage to require affordable housing on Zidell's property.

As of Thursday morning, however, Zidell appeared set to call off negotiations.

"We seem to have loosely decided that ZRZ will go its own way," public relations consultant Kathleen Mazzocco wrote in an email to President Jay Zidell and other company leaders, summarizing a recent meeting.

On the to-do list: Company officials need to ask Hales to delay their deal beyond February and "decouple" it from the mayor's effort to extend boundaries for the North Macadam district.

Company officials also need to decide if it is "low risk" and "sound" to give the city a chance to subsidize affordable housing in the second phase of their Emery apartment complex.

"You will speak with the Mayor and soon after PDC to get their support," Mazzocco wrote. "Then we will assess the situation anew."

Portland and company officials have informally discussed a deal for years, but talks heated up about six months ago as Hales tried to finalize plans for the urban renewal district.

During negotiations, Portland Housing Bureau officials recommended decreasing affordable-housing goals for the area. But, with only 209 affordable units amid more than 2,000 high-end condos and apartments, advocates blasted the plan.

They urged the city to require affordable housing on the Zidell property in exchange for $27.4 million in public money for roads, parks and other improvements.

City officials have been backtracking ever since, delaying action on both Hales' urban renewal changes and a deal with Zidell.

According to Thursday's email, Zidell officials planned to let the city explain the latest breakdown, giving Hales and the Portland Development Commission an opportunity to "be the first to react and shape the story," Mazzocco wrote.

But that strategy carried the risk of bad press for Zidell, she warned. The company could also consider tipping off reporters.

"That will only work if we have strong messaging worked out in advance that does not pin blame on PDC and focuses on the benefits, if we have Charlie's support and PDC's support, and if you can talk in some concrete terms about exciting new developments for the site," Mazzocco wrote.

Mazzocco, who owns the company Clear PR, told Zidell that not having a development agreement "is only a big deal because your development has gotten tied up with this AH [affordable housing] issue, which is burning a little hot right now."

Mazzocco also wrote that building affordable housing on Zidell's property had become a flashpoint because of the city's progressive values, rising rental prices, savvy activists, poor messaging by the city and "an overly political Mayor."

She warned Zidell officials to be prepared for negative media coverage about affordable housing if the company and city don't reach an agreement.

"Our goal is to minimize it, taking care to keep investors and Council members happy as much as possible," she wrote. "You should consider this part of the risk of not having a DA [development agreement]. You might end up taking a short term hit, but it will go away as your project makes announcements and bring excitement back to the site."

On Thursday afternoon, Zidell officials said the email outlined only one of several options they're considering.

"I think what you see in there is just our scenario planning, if you will, of what happens if this happens, what happens if this happens, just thinking through all the options," Matt French, the managing director of Zidell's real estate business, said in an interview.

Jay Zidell said he would still prefer to strike a deal with the city because it would ensure certainty and benefits for both sides. But he said the company will not be rushed to move forward on the city's timeline.

"Two parties negotiating, there's no certainty that you're all going to end up where you want to get to at the end," he said of reaching a deal.

Patrick Quinton, executive director of the Portland Development Commission, said he didn't know the company was considering dropping out of a deal.

"There's always been a scenario where we don't get one," he said. "We've always assumed we're going to continue to work through issues and get to an agreement."

But if not, Quinton said, the city is unlikely to withhold public money for some projects outlined in a draft version of an agreement.

Quinton said extending Southwest Bond Avenue through Zidell's property would benefit the entire area, including the city's largest employer, Oregon Health & Science University. The same goes for building a greenway along the Willamette River.

As for developing affordable housing, Quinton said the best option is on city-owned land in nearby RiverPlace, not a "conceptual thing" involving Zidell.

"It doesn't mean that at some future date you don't want land available for that," he said, adding that Zidell development will generate property taxes to help pay for affordable housing in the district.

With or without an agreement, Zidell officials said they're focused first on developing two commercial buildings and remain open to "all types of housing."

"We've never said that we don't want affordable housing here," French said.

But Zidell officials stressed that they also want to retain flexibility on the central city's biggest blank canvass.

"Whatever we do on this site, we want to be careful about it and we want to be thoughtful about it," Jay Zidell said. "And if that requires that we have to be patient for a while, to make sure we get it right, we're prepared to be patient about it."

-- Brad Schmidt

bschmidt@oregonian.com

503-294-7628

@cityhallwatch