30 Jul Political ties may yield taxpayer boost for private housing developers in Portland
Former government officials turned businessmen may be among the first to profit from Portlandâs new clean energy tax with help from their longtime political allies, according to interviews and public records.
The team of entrepreneurs, which includes former City Commissioner Erik Sten and former State Treasurer Randall Edwards, intends to raise $150 million to launch investment funds that purchase, rehab and finance construction of affordable housing in Portland, Sten said in an interview.
And an influential figure in Portland City Hall wants to sweeten their plans by paving the way for them to tap the new Portland Clean Energy Fund.
Marshall Runkel, chief of staff to Commissioner Chloe Eudaly and an architect of the energy tax, says he will help the businessmen access that pot of taxpayer money to pay for energy efficiency upgrades at the aging apartment complexes they want to buy.
Runkel, who in interviews vehemently expressed that the influence he is exerting in favor of Stenâs team and their proposal is appropriate, previously worked for the ex-commissioner, and his connections to Stenâs business partners run deep.
Atop the team of businessmen is Rey Ramsey, a former Stoel Rives attorney who was director of Oregonâs state housing agency from 1989 to 1993. He later worked in business and nonprofits, including as board chairman of Habitat for Humanity International, before founding investment firm Centri Capital in 2017.
Centri, which Ramsey operates from New York and Washington, D.C., has already raised more than $50 million to invest in low-income housing in Baltimore, Memphis and Philadelphia, according to a prospectus reviewed by The Oregonian. The document states those investments were planned for the first quarter of this year.
Because of Stenâs influence, Ramsey has also turned the companyâs sights to Portland.
Sten contacted Ramsey last year with a plan to invest in Portland and seek a Clean Energy Fund outlay. âI was like, âOh my God,â” Ramsey said. âThe light bulb went off.â
Ramsey said he followed the clean energy taxâs progress to the ballot and was a big believer in its potential to assist housing developers.
Through it, he said, âI think that we can marry one of Portlandâs big issues â affordable housing â with what needs to be done in terms of climate change.â
Specifically, Centri Capital aspires to buy large, aging apartment complexes where rents are low because of the unitsâ location or state of disrepair. The company would rehab the buildings, improve their energy efficiency, then commit to keep rent increases modest for decades to come while still turning profits for investors.
Proponents of the clean energy tax never talked about the money being used that way, but they did make clear that energy-saving home retrofits would be a prime expenditure.
Voters were told the money, raised by a 1 percent tax on retail sales by large corporations operating in Portland, would be spent on renewable energy infrastructure, energy efficiency upgrades and green jobs training.
Ramsey had long sought to return to Oregon and liked Stenâs idea of investing in Portland. He hired Sten in January to lead Centriâs Pacific Northwest efforts and set what he described as an âaggressiveâ fundraising target.
The transition was a natural fit for Sten, a longtime affordable housing advocate who during his 12 years as an elected city commissioner served nine years as the official overseeing affordable housing programs.
Sten, in turn, has brought to Centri his business partner, David Thurman, who was treasurer of Portlandâs city government for 10 years.
When he stepped down from city office and left Portland at the height of the Great Recession, Sten founded companies to help homeowners avoid foreclosure; he hired Thurman as chief investment officer.
The firms worked by purchasing junk mortgages from underwater homeowners, which they refinanced with government loans. Ramsey is folding the mortgage businesses under Centriâs operations, Sten said.
Separately, Thurman launched his own capital management firm, where he employed Sten.
Also on the Centri team is Edwards, the former state treasurer. Along with serving in that office from 2001 to 2009, Edwards is husband to powerhouse Nike executive and Portland Public Schools board member Julia Brim-Edwards.
The connections between Ramsey, Sten, Thurman and Edwards are numerous and stretch back many years, according to public records and contemporaneous news reports.
Ramsey and Sten knew each other while in government and through housing activism; in 1999, a foundation operated by Ramsey loaned $20 million to the city to jumpstart a housing project boosted by then-Commissioner Sten. When he was state treasurer, Edwards separately approved issuing $20 million in government bonds to finance another of Stenâs housing initiatives. Sten and Thurman were business partners for years.
Their connection to City Hall: Marshall Runkel.
Runkel was an aide to then-Commissioner Sten from 1996 to 2005. He worked for Ramseyâs tech-focused foundation from 2005 to 2007. And he crossed paths with Edwards and Thurman, neither of whom returned messages seeking comment, during their many years in government.
Runkel is also deeply networked in the clean energy and home retrofit industries that the Portland Clean Energy Fund seek to boost.
In 2008, Runkel became a partner at EcoTech, a construction company that performed energy efficient home upgrades. Along with running the company, he personally installed insulation and helped homeowners weather-strip doors and windows.
Five years later, Runkel was hired as director of contractor services for Clean Energy Works Oregon, which administered federal stimulus and state clean energy funds. Among its notable projects was a retrofit of the governorâs mansion with special storm windows and low-energy light bulbs.
By 2015, Runkel was back to politics, managing the startup campaign of Chloe Eudaly, who won a surprise victory the next year.
In City Hall again, Runkel was a key figure in the campaign for the clean energy tax. Emails show he interfaced with the many private nonprofits that supported the tax and obtained advice on its wording and effects from city lawyers and economists. Runkel relayed the feedback via his private Gmail account.
Portland voters adopted the tax in November 2018 with a 65 percent âyesâ vote. It applies a 1% tax on retail sales by businesses with U.S. sales of at least $1 billion, and city estimates show it may collect $70 million a year.
Tax-financed projects are to primarily benefit low-income people and people of color.
Shortly before the tax passed, Rich Rodgers, an affordable housing developer in Portland, emailed Runkel to discuss what he called the âlast pieces of the financing puzzle.â Rodgers worked with Runkel for many years as an aide to Sten.
In his email, Rodgers recommended the tax be written so 20 percent of its revenues go to affordable housing projects and that a nonprofit administer it. As an example, he pointed to Meyer Memorial Trust, the organization seeded by grocer Fred Meyer. Private capital could also be mixed in, Rodgers said.
By February, Runkel had reached out to Sten to share this idea. Sten then emailed Runkel with information about Centri Capitalâs affordable housing fund.
âI think the model fits nicely with Commissioner Eudalyâs vision and work in support of renters and could be paired with any number of strategies to add additional impact,â Sten wrote.
He raised the possibility that Centri could tailor-make its fund âto align with local strategy and timing.â
Runkel forwarded Stenâs message to Rukaiyah Adams, the chief investment officer of Meyer Memorial Trust. He told her he had been mulling a way âto compete for significant funding from the clean energy fund by aggregating it with other sources of capital.â
Runkel said he knew Meyer Memorial was exploring its own housing investments and suggested he and Adams meet with Sten and Ramsey, the Centri chief executive.
A spokeswoman for Meyer Memorial did not respond to requests for comment and Adams declined to comment.
City officials beyond Runkel have recognized the value of blending the energy tax with cash-laden nonprofits like Meyer Memorial Trust.
Sam Baraso, the cityâs manager of the energy tax, organized a meeting between himself and the many social justice-oriented nonprofits that backed the tax at the Meyer Memorial Trust headquarters building on June 17.
The meetingâs purpose, according to a copy of the agenda, was to explore âpromising leverage opportunitiesâ for the tax funds.
The agenda states those opportunities âcould involve the use of innovative financing techniques and market development tools, often in partnership with private sector funds and/or additional public sector funds.â
Itâs conceivable that Meyer Memorial may play a role in such an arrangement.
According to a senior Meyer official, who was not permitted to speak on the record, the nonprofitâs board has committed $20 million to start a real estate investment trust with development firm Gerding Edlen.
Negotiations are complete, but the trust has not been publicly announced because Gerding Edlen is undergoing an internal reorganization, the official said. The official added that the trust will be structured to invest in affordable housing and Meyer leaders hope for it to grow into a $1 billion publicly-listed fund.
Sten acknowledged talks with Gerding Edlen but declined to give details. Ramsey said Centri has engaged in talks with Meyer Memorial Trust, which he called âa great institution.â
According to Meyer Memorialâs grants database, the nonprofit awarded nearly $600,000 to one of Ramseyâs foundations, One Economy Corporation, in lump sums in 2001, 2005 and 2010. Also formerly employed at One Economy: Marshall Runkel.
Runkel said a partnership between the city government, Centri Capital, Meyer Memorial Trust and others would be a âpowerfulâ enterprise. But he added, âThereâs no âthereâ there yet.â
To be sure, Runkel has no direct power to award Centri Capital or any other firm an appropriation of energy tax money, which is to be allotted by a not-yet-formed committee appointed by the City Council.
He said he has approached would-be recipients of energy tax funds with a helping hand besides Sten and Centri Capital.
As an example, Runkel provided a PowerPoint slideshow he presented in February to a trade group for energy efficient home builders, which implores potential grant recipients to formulate their ideas.
He also provided an April email showing a brief exchange with staff from Living Cully, a neighborhood group founded by energy tax supporters, about the construction of affordable backyard cottages. The possibility of building those units with energy tax revenues was raised at a later meeting, Runkel said.
Itâs far from unusual for public officials to assist business people, said Frank Zerunyan, a professor of governance at the University of Southern California. But Runkelâs status as Commissioner Eudalyâs chief of staff and his close ties to Sten may cause the perception of giving an unfair leg-up.
âThis is not some janitor who knows a couple of people,â Zerunyan said. âItâs a chief of staff who presumably has a strong influence on decisions his boss makes.â
Runkel said in interviews that he was helping Sten because he views his business plan as smart and, if put into practice, good for Portland.
âInvolving talented people who have a proven track record of getting things done? You bet Iâm doing that,â Runkel said. âYou have to start from a deeply cynical place to say this is some kind of insider deal.”
Sten and Ramsey have âsterling reputations and long track records of doing good,” Runkel said. If itâs wrong to help them, he said, âthen I donât want to be right.â
Though Centriâs plans are still aspirational, the company is ingratiating itself with city leaders.
A spokesman for Kimberly Branam, the cityâs economic development director, confirmed she met in March with Sten and Runkel to discuss opportunity zones, the tax-preferred areas Centri wishes to invest in. Sten met Branam again later in March, this time with business partners Thurman and Edwards, to talk more about the tax zones.
Sten then introduced Branam to Ramsey in May. She was receptive to the premise of more affordable housing and private equity capital in Portland, Ramsey said: âWho would not be interested in bringing additional resources to their city?â
Sten also met with Mayor Ted Wheeler to discuss Centri business. He recalled the mayor being âvery supportiveâ of the companyâs aims. Wheeler, Sten said, âasked us what he could do to help.â
The companyâs nascent closeness with key officials is helpful not only to the city, which regularly seeks financing for public housing projects, but is also âattractive to investors,â Sten said.
The former commissioner said he realizes his many connections to Portlandâs elite opens doors for pecuniary ambitions. He insisted, however, that he has always âput the needs of the community firstâ and continues to do so.
âIâm not a person whoâs trying to trade on anything I used to do,â Sten said.
âI may be able to easily get a meeting with the mayor,â he said, but energy tax grants should not be awarded to his or anyone elseâs company âwithout a very scrutinized, transparent process.â
Beyond the city government, Sten sees another potential partner for Centri Capital.
Along with being managing director of the real estate investment firm, he is also a part-time lobbyist at Strategies 360, a multi-state political consulting outfit.
In that role, Sten is an adviser to the Portland Diamond Project, a group of businessmen seeking to bring a Major League Baseball team to Portland. (Sten said he has not registered as a lobbyist for the baseball effort because his work on it is internal rather than with government officials.)
âI donât personally have any relationship to the Diamond Project. Iâm not trying to be cute about it,â Sten said, before acquiescing to the fact that he is âon the baseball strategy team.â
If the baseball effort is successful, its backers will be under pressure to construct thousands of affordable apartments near a Major League stadium as they have promised. Asked if Centri Capital would seek to finance construction of those units, Sten replied, âAbsolutely.â
â Gordon R. Friedman