Homeless nonprofit bids to buy empty Wapato jail

Oregon Harbor of Hope offering $2 million more for the unused jail than county's current bidder

The long-running saga of Multnomah County's never-opened Wapato jail took another twist early this week.

The nonprofit Oregon Harbor of Hope offered $7 million to buy the North Portland facility for use as a homeless service center in a Monday letter to County Chair Deborah Kafoury. The organization was founded by Portland developer Homer Williams, who originally hoped to open a large homeless service center at Terminal 1 in Northwest Portland.

The April 2 letter arrived the day before the Multnomah County Board of Commissioners reportedly met in executive session Tuesday to discuss a reduced offer of $5 million for the property from Portland developer Marty Kehoe. The commission had agreed last November that Kehoe could buy the 525-bed facility on 18 acres for $10.8 million. But he lowered his offer after conducting further research, known as due diligence, on how to convert the 155,400-square-foot mothballed jail into a medical equipment distribution center.

The commission is expected to discuss the situation at its regular weekly meeting on Thursday, April 12.

The April 3 executive session was held the day after Commissioner Loretta Smith — the only board member to vote against the sale to Kehoe — held a press conference at Wapato with community members to argue that negotiations should be canceled. Smith has long argued for Wapato to be used for the homeless, noting that it is clean, safe, and was built with a full kitchen, medical facilities, conference rooms and classrooms.

Kafoury has consistently opposed using Wapato for the homeless, saying that it is too far from established social services agencies, not well served by transit, and has zoning problems.

During the press conference, Smith said she believes all of the objections against using Wapato for the homeless can be overcome by proper staffing, increased transit service, and either rezoning the property or having the City Council waive the restrictions under its housing state of emergency declaration.

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Offer has contingencies

In the letter to Kafoury, Oregon Harbor of Hope proposes to underwrite a $200,000 feasibility study to address such issues before making a final decision on the purchase. The offer also allows it to deduct any "unknown or extraordinary cost" discovered during its research from the $7 million offer.

"Our board trusts that you and the commission know that our proposal is made with no consideration of benefit to any other than our homeless people and our overall community interest. The board is pledged to the avoidance of conflicts of interest or pecuniary gain," reads the letter signed by Harbor of Hope executive director Don Mazziotti, a consultant and former director of the Portland Development Commission.

After the executive session, Smith said she believes all offers for Wapato should be considered by the commission, including the one from Oregon Harbor of Hope and others received during the sales process that generated the one from Kehoe. They reportedly ranged from $3 million to $7 million, with several that were less than Kehoe's original offer but equal to or greater than his current one.

"It is not fair if we don't give those people (initial bidders) an opportunity to reup ... We should actually be going back to the drawing board" and opening up the process again, said Smith, who talked to Kehoe after the executive session and believes he is being straight with the county about the reason for his lower offer.

Troubled history

Wapato has long been a financial albatross around the county's neck.

Voters approved a bond to fund the jail's construction in 1996. But county officials say that years later, the statewide passage of caps on property taxes meant that the county never had the funds to operate it.

Completed in 2004, it cost $58 million to build, and the county says it costs about $300,000 yearly to maintain.

An analysis by the Portland Tribune last year showed the total cost to date is more than $90 million, including interest and maintenance payments, and could exceed $105 million by the time all the bonds are finally paid off in 2030.

Kehoe's initial offer was for $10.8 million, well above the the property's $8.5 million appraised value. The offer came through CBRE Portland real estate services, which the county retained in mid-2017 to sell surplus properties.

Kehoe, asked about the counteroffer following the executive session, said he is under a nondisclosure agreement and cannot comment.

Smith said that if the final offer is $5 million or less, "we shouldn't sell it at all," adding that taxpayers "would be furious right now that we would even consider selling an asset that we've spent close to a hundred million dollars on."

Kafoury signed a letter of intent to sell the property to Kehoe last Oct. 31. The board of commissioners approved the sale on Nov. 8 in a 4-1 vote.

In the past, Kafoury pursued two unsolicited offers for the facility, located at 14355 N. Bybee Lake Court. The first was a $9 million offer from real estate speculator Garison Russo. He withdrew it after the Portland Tribune, in a series of articles, questioned his development experience and financial backing. Pacific Development Partners made a $10 million offer earlier this year, but that lapsed before being completed.

Other surplus county properties will be for sale in the near future through CBRE. They may include the McCoy Building at 426 S.W. Stark St., which is being replaced with a new health center currently under construction next to Bud Clark Commons in Old Town/Chinatown. Another is the Central Courthouse at 1021 S.W. Fourth Ave., which is being replaced with a new courthouse currently under construction at the west end of the Hawthorne Bridge.

Smith is running for the Portland City Council seat being vacated by Dan Saltzman.

To read a previous Portland Tribune story about the issue, go to portlandtribune.com/pt/9-news/390601-282234-wapato-jail-sale-on-hold-again.