Portland's urban renewal agency approved terms of an $88 million deal Wednesday to buy the sprawling U.S. post office campus in the Pearl District, marking a key first step in the city's most expensive redevelopment project to date.

But it's not a done deal just yet.

Members of the Portland Development Commission expressed heartburn over concerns that they may be asked to contribute more than $3.4 million in non-refundable deposits to move forward on the complex deal, which involves building a new facility for the the U.S. Postal Service near the airport.

"There's a lot of money at risk," Commissioner Aneshka Colas-Dickson said before the board voted 5-0 to approve terms of the purchase.

If all goes as planned, the deal would mark a monumental coup for the development commission and Portland Mayor Charlie Hales. For decades, city officials have eyed the redevelopment potential but have been unable to cut a deal for the post office site - 13.4 acres at the base of the Broadway Bridge, in what would be a game-changing project fusing the upstart Pearl District to downtrodden Old Town Chinatown.

"We look forward to moving on this project," said Tom Kelly, the board's chairman. "It's historic."

The complicated deal would tap $75 million from a city urban renewal district and $13 million from the Portland Housing Bureau. Portland would give its $88 million to the U.S. Postal Service, which in turn would use that - plus an additional $69 million in federal funds - to build a new facility near the airport for $157 million.

Postal leaders are working to strike a deal to buy 47.5 acres of the former Colwood golf course now owned by the Trammell Crow Company. The proposed purchase price wasn't publicly disclosed.

Portland officials hope to close on a deal by Aug. 1 and lease the facility back to the U.S. Postal Service for up to 2 1/2 years at no cost. Portland also would be required to spend an estimated $4 million to build a small new retail facility for the U.S. Postal Service within one mile of its current location.

After postal crews move to their new airport campus, city officials expect to launch a massive redevelopment effort encompassing the equivalent of 12 downtown blocks. Portland would spend an additional $52 million demolishing the existing postal building and constructing roads and parks.

Officials would sell off the remaining parcels to private developers.

The post office site is worth just $63.4 million today, according to Eric Jacobson, a senior project manager for the development commission. But city officials expect to increase height and density standards for the property to encourage development of 3.8 million gross square feet for housing and commercial space, including up to 700 units of affordable housing.

Officials expect to sell the property for "considerably more than we're buying it for," Jacobson said.

Wednesday's deal doesn't need to be referred to the Portland City Council for final sign off. But if terms of the agreement change substantially - such as the city contributing more money for a non-refundable deposit - the development commission's board will be asked for approval.

-- Brad Schmidt

503-294-7628

@cityhallwatch