Zidell Yards ZGF Rendering.jpg

A rendering of the proposed master plan for the Zidell family-owned property in Portland's South Waterfront. Negotiations over affordable housing have delayed a final development deal for city money.

(Zimmer Gunsul Frasca Architects/ZRZ Realty Co.)

Portland's decade long struggle to build affordable housing in the South Waterfront District isn't getting any easier, in part because city officials bowed to perceived pressure from key property owners, public documents show.

On Wednesday, city leaders will review highlights of a deal to spend about $27.4 million to subsidize redevelopment of the Zidell family's 30 acres, the largest open canvass in the central city.

Zidell is expected to "negotiate in good faith" to develop affordable housing on the land if the city provides additional subsidies.

But public documents obtained by The Oregonian/OregonLive show that officials in September privately worried that Zidell -- and separately, Portland State University, with a similar agreement -- wouldn't cooperate.

The records offer a glimpse into the internal politics of the Portland Housing Bureau, tasked with developing affordable housing, and the tradeoffs of urban renewal funding.

They also show that city housing officials were willing to let the Zidell family redevelop its property with no affordable housing as long as the development produced enough property taxes to help pay for affordable housing elsewhere.

This past fall, housing officials worked to reduce affordable-housing goals for the North Macadam urban renewal district, which includes the South Waterfront. In a Sept. 17 draft memo by Javier Mena, the assistant director, the bureau outlined concerns about Zidell and Portland State.

<a href="http://s3.documentcloud.org/documents/1506547/memo-to-nmac-urac-from-phb-9-17-14-khd-tm-1.pdf">Memo to NMAC URAC From PHB 9 17 14 KHD Tm[1] (PDF)</a> <br /> <a href="http://s3.documentcloud.org/documents/1506547/memo-to-nmac-urac-from-phb-9-17-14-khd-tm-1.txt">Memo to NMAC URAC From PHB 9 17 14 KHD Tm[1] (Text)</a>

Zidell's ZRZ Realty Co. "states that it has no desire to develop affordable housing on the properties it controls," the memo said. Likewise, it said, "PSU contends that (it) will be focused on institutional needs, including potential student housing, and should not be tasked with affordable housing."

Because the Housing Bureau is counting on the tax revenue from the Zidell and PSU redevelopment to pay for affordable housing projects in the rest of the North Macadam urban renewal district, officials weren't inclined to push back.

Officials expect to gain about $40 million for affordable housing through 2025 from the projects – but just $7 million without them.

The Housing Bureau "supports language" in the Zidell and Portland State agreements "that does not require any direct affordable housing development or pinpoint sites for affordable housing units," the memo stated.

But Traci Manning, the bureau director, deleted those conclusions from a memo released Oct. 28.

"I also took out the section where we acknowledge ZRZ and PSU don't want to build affordable housing," Manning wrote to Mena in an email. "It isn't clear to me why that would have to be part of our recommendation."

Housing advocates say the bureau is misleading the public in saying Zidell would negotiate in good faith. "It is certainly disingenuous," said Debbie Aiona, action chairwoman for the League of Women Voters of Portland.

In an interview, Mena said his memo captured the dilemma with Zidell at the time, as relayed by the Portland Development Commission, the city's urban renewal agency negotiating with Zidell.

In the months since, "we have seen willingness to engage and talk about affordable housing," Mena added.

Martha Calhoon, a Housing Bureau spokeswoman, said in a written response to questions that including details about Zidell's or Portland State's "perceived willingness" to develop affordable housing "would have been out of place" in the final memo.

Matt French, managing director of the Zidell redevelopment, said that as far as he knows, company officials never said they lack a desire to develop affordable housing.

"We want to develop a balance of housing solutions for all income levels," he said.

PSU spokesman Scott Gallagher said in an email that university officials will "happily consider" a partnership with the Housing Bureau. Under terms of a deal with PSU, the Housing Bureau can subsidize up to 20 percent of new units if the University Place Hotel is redeveloped.

To date, 209 affordable units have been built in the North Macadam urban renewal area, 373 short of the 582-unit goal the City Council set in 2003. The units are supposed to be dedicated to residents making up to 80 percent of the region's median, or $55,500 for a family of four.

Terms of the latest deal between the city and Zidell would allow the Housing Bureau to subsidize affordable units in market-rate housing projects or to buy some of the family's land if progress isn't made by 2019.

But those protections may prove moot. Officials are instead focused on developing affordable housing atop city-owned land in RiverPlace, a half-mile north of Zidell's property.

-- Brad Schmidt

bschmidt@oregonian.com

503-294-7628

@cityhallwatch