The developer of the “midtown” project Friday accused Portland of using strong-arm tactics in an attempt to keep the company from building hotels instead of the housing units it had originally proposed in the Bayside neighborhood.
The company’s leader called the city’s recent maneuvers, which included cutting off all communication, politically motivated.
In an unusually detailed message emailed to the media and about 20 parties involved in the project, Federated Cos. CEO Jonathan Cox said the city has improperly voided a contract to sell the 3.5 acres of land to Federated in an attempt to extract new terms from the company, including a moratorium on hotels there and an agreement to pay more of the project’s shared costs.
However, City Manager Jon Jennings said Friday evening that Cox’s message omits how Federated has held the threat of a lawsuit over the city, and inexplicably walked away from the bargaining table early this month after the sides had apparently made progress toward resolving their dispute.
“We have done business in over 40 municipalities from Rumford, Maine, to Miami, Florida. I have never seen anything like what we have encountered in this instance,” Cox wrote in his email. “The City of Portland is the only one standing in the way of progress.”
Jennings, meanwhile, said he believes it is in everyone’s best interest for both sides to return to the bargaining table, but that can’t happen until Federated stops threatening litigation.
“I don’t know of too many people who would negotiate any agreement in good faith under the constant threat of a lawsuit. We are eager to re-engage with Federated if we can do so. But we cannot do that under continued threat of a lawsuit,” Jennings said. “I remain open to meeting with Mr. Cox.”
SPAT SPURRED BY COLUMN
The missive from Cox is the latest public spat between the city and Federated, this time spurred by a column published Thursday in the Portland Phoenix by Peter Monro, leader of Keep Portland Livable.
Monro and his group were architects of a legal challenge to the first version of the midtown development unveiled in 2013, which called for four 165-foot high-rise towers that would have contained up to 800 apartments. Monro’s lawsuit was settled out of court in late 2014, with Federated agreeing to cut the number of apartments nearly in half, to 440, with the maximum building height capped at six stories.
In the column published this week, Monro emerged as an unlikely cheerleader for the developer, writing that the city appears ready to scuttle midtown unless it can get more money and more favorable terms from Federated, seemingly changing the goal posts on a company that has sunk millions of dollars and years of work into the planning process.
“It’s one thing for a citizens’ group like Keep Portland Livable to fight to change a massive development that seeks to bend the city’s land use rules,” Monro wrote. “It’s a whole other thing for the city to turn on the lone bidder it invited to Portland after he gets his approvals and tell him he has to pay more money, tell him he can’t change his intended uses without seeking new approvals, and tell him his contract with no expiration has expired.”
Cox called that column a mostly fair and accurate interpretation of the company’s current situation.
The deal between the city and Federated began to unravel in May, when Federated informally inquired about replacing two of the four apartment buildings it was proposing for the site with hotels, which are typically more profitable than permanent housing.
Shortly after that request, the city voided the land-sale agreement it had made with Federated in 2011, which would have had Federated pay $2.3 million for 2.5 acres on Somerset Street, with the city footing the bill for some required environmental cleanup of the former industrial site.
A SUBSEQUENT DEAL
In a subsequent deal the next year, the city agreed to finance the construction of a $15 million parking garage to support the residential and retail complex.
Patrick Venne, a Federated representative, said the provision of the contract used to void the sale agreement gave the city the option to cancel the deal if Federated did not take possession of the property within 30 days of receiving the last, appeal-able permit from the city.
The city asserts that the final vote of approval by the Planning Board in late April started that 30-day clock and when the company had not begun work by May 27, the city had the right to pull the plug.
Jennings, who was appointed city manager in August, said he had an outside law firm examine the contract and that it affirmed the city’s reading that it could void the deal.
Following the declaration that the contract was void in June, Jennings, who was not yet appointed and on the job in Portland, said he began informal discussions with Cox, trying to soften the ground before he took over in August.
In July, the city delivered to Cox and Federated a list of new terms it sought to allow the project to move forward, according to Federated.
They included: language affirming that the original 2011 contract was negotiated with the understanding that Federated would deliver housing; that Federated acknowledges the city will not invest in a development that included hotels; that Federated would agree to rescind any hotel proposal; that if hotels were to be built, Federated would be responsible for roughly $5 million in infrastructure upgrades and other secondary costs; and that in the event of a lawsuit, the new terms of the agreement could be used against Federated in court.
Responding before a scheduled meeting with Jennings on Aug. 5, Cox sent the city a revised set of terms, which Cox didn’t outline in his email this week.
According to Jennings, that was the last communication the city received from Cox before he informed the city he would not attend the Aug. 5 meeting.
A few days later, Federated informed the city of its intent to sue; Jennings then instructed city staff to stop responding to Federated or its contractors, directing all communication to the city’s attorney.
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