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In 2005, a year after Portland City Council approved an urban renewal district for Siltronic Corp., Mayor Tom Potter (second from right) and other city officials suit up to take a tour of the clean room at Siltronic Corp.

(The Oregonian)

Ten years ago, politicians in Portland City Hall fast-tracked a $200 million urban renewal plan to add hundreds, if not thousands, of industrial jobs along the Willamette River.

Proposed changes

Willamette district:

shut down 756-acre, $200 million district

Education district:

shut down 144-acre, $169 million district

North Macadam:

expand 402-acre, $289 million district by 35 acres, adding former Education district land linked to Portland State University. Extend final date to issue debt by five years, to 2024/25

Central Eastside:

expand 692-acre, $105 million district by 130 acres and $21 million in debt, extending the final date to issue debt by five years to 2022/23

Airport Way:

reduce 1,841-acre, $73 million district by about 850 acres, freeing up tax dollars for city, county and schools

River District:

reduce 351-acre, $490 million district by about 50 acres, freeing up tax dollars for city, county and schools

SOURCE: Portland Development Commission.

The cornerstone of the plan: a bustling silicon wafer manufacturer, already one of the city’s largest employers, primed to build a new plant expected to roll out the latest technology.

A decade later, Siltronic Corp.’s expansion never happened.

The city's $200 million spending plan – which required a new urban renewal district to corral taxes on a facility that was never built – hasn't offered a single dollar to companies or development efforts along the Portland Harbor.

And adding insult to injury, Siltronic is now one of the biggest critics of Portland's rising water and sewer rates, helping fund a political campaign to strip utility oversight from the City Council.



The failure of Portland's Willamette industrial district stands as a reminder: Despite widespread success downtown, urban renewal isn't a sure bet to transform neighborhoods, create jobs or win unbounded loyalty from the company that stands to prosper.

While the costs of the failed district aren’t substantial, they’re also not insignificant: about $5.3 million in tax money that otherwise would have funded the city, Multnomah County and local school districts.

Now, Mayor Charlie Hales wants to pull the plug.

He'll ask the City Council on Wednesday to informally bless killing off the Willamette industrial district and make big changes to several others. Final approval would come this fall. It's part of Hales' broad effort to focus urban renewal where he says the city needs it most while freeing up tax dollars for basic public services.

Officials for the city’s urban renewal agency, the Portland Development Commission, say a variety of factors sunk the Willamette industrial district. Its lack of success, they say, shouldn’t detract from progress elsewhere.

“I think it’s fair to say this is an anomaly, absolutely,” said Shawn Uhlman, a spokesman for the agency.

Siltronic expansion?

In 2004, it was all about Siltronic.

The German-based company opened its Portland location in 1979, securing about 80 acres of city-owned land on the west side of the Willamette River, just south of the St. Johns Bridge.

Then called Wacker Siltronic, the company first built a fab to produce 150-millimeter wafers, adding a second facility in 1995 for 200 millimeter wafers.

By 2004, Portland was in the running for a $466 million facility offering the latest technology: 300 millimeter wafers. If built, the facility was expected to retain Siltronic’s 1,100 existing employees and create 500 new jobs.

To help improve Portland’s chances, city officials approved the 756-acre Willamette industrial urban renewal district, which included Siltronic’s campus as well as the northern potion of Swan Island on the east side of the river.

Portland planned to make urban renewal money an “essential component” of the Siltronic project, borrowing upfront to help finance construction and repaying the bonds over decades with taxes collected from increased property value within the district.

“Approval of this new urban renewal area is a key part of continuing this mutually beneficial relationship far into the future,” Neil Nelson, Siltronic’s president, told the City Council at the time.

But beyond Siltronic, city leaders envisioned the Willamette industrial district as “a working-class Portlander’s urban renewal district.” The plan outlined goals to clean up contaminated brown fields, attract new businesses and convince existing companies to expand – all of which would offer solid pay for blue-collar workers.

“We want Siltronic to expand here,” Commissioner Dan Saltzman said in 2004. “But even if they don’t, this urban renewal district stands on its own.”

Siltronic didn’t expand in Portland.

In July 2006, the company partnered with Samsung Electronics Co. to build its 300-millimeter fab in Singapore instead.

Tom Fahey, Siltronic’s vice president for human resources, said that even without the new facility local business remains steady.

Yes, the company closed its oldest fab and employment has dropped to about 400. But Fahey said Siltronic's 200-millimeter wafer remains in demand and the company won't be hurt by Portland's proposal to close the district – a prospect that city officials never shared directly with the company.

The two sides aren't exactly on great terms: Siltronic, upset over rising water and sewer costs, is one of the major financial backers of a May 20 ballot measure to end the City Council's rate-setting responsibilities.

“We expect to be hanging on for quite some time,” Fahey said.

Why the district failed

It would be easy to assume that the Willamette industrial district failed because Siltronic didn’t expand.

That’s too simple, said Chris Harder, the Portland Development Commission’s business and industry manager.

“There is no one answer as to why,” he said. “I think it’s a combination of things.”

Benefits to government

Portland:

The city stands to gain $49 million over 30 years, or $21 million in today's dollars

Multnomah County:

the county stands to gain $46 million over 30 years, or $20 million in today's dollars

Schools:

Portland Public Schools and the state school fund stand to gain $51 million over 30 years, or $22 million in today's dollars

SOURCE: Portland Development Commission.

To be sure, Siltronic’s expansion was the most significant blow.

But Harder also pointed to the Great Recession, which dampened investment from private companies, and a lack of certainty over how much it will cost companies to cleanup pollution from the Willamette River.

Without private investment, property values didn’t spike within the district. Without higher property values, city leaders couldn’t tap urban renewal funds to entice development.

Debbie Aiona, action committee chairwoman for the League of Women Voters of Portland, was among those who opposed the new urban renewal district in 2004. She warned the City Council at the time that the plan would fail if Siltronic didn’t expand.

Today, Aiona’s group supports Hales’ proposal to shut down the district, as well as other urban renewal changes that would put more money in city, county and school budgets.

“We want to use urban renewal wisely,” she said. “And this was not a wise use.”

Since 2004, the Portland Development Commission has spent about $1.3 million on administration, staff and studies in the renewal district – with no money going to businesses or to clean up brownfields.

The agency is sitting on another $3.8 million in property taxes collected from the district. Under Hales’ plan, that money would be spent to assist manufacturing companies within the district.

“We feel pretty bullish that we can target those (dollars) in a strategic way to still help those manufacturing firms,” Harder said.

And in a twist, money from the urban renewal district could still end up benefiting the city and its long-intended partner, Siltronic.

The development commission is trying to lure a company to a manufacturing shop that desperately needs a tenant: Siltronic’s shuttered 1979 fab.

-- Brad Schmidt