Bare fangs or roll over?
Council debates pier negotiation strategy
By Chris Busby
On Monday night, the Portland City Council voted to negotiate with Ocean Properties to give the politically connected developer rights to build a $100 million mega-project at the publicly owned Maine State Pier. The vote followed nearly two years of rancorous debate over the pier’s future and an unsuccessful attempt to reach a deal with the preferred developer, The Olympia Companies.
Now a new debate is brewing at City Hall, and the central question is this: Should the city play hard ball with Ocean Properties (OP), or take steps to make it easier and quicker to reach a deal with the New Hampshire-based company, one of the largest hotel and resort developers on the continent?
There are early indications that the city will aggressively negotiate to get the best deal possible for the pier, considered by many to be the prime piece of public real estate in Portland. But there are also indications the current economic downturn is pushing city officials into a corner, making it politically difficult for them to do anything that may impede a project that promises new jobs and revenue sometime next decade — even if it’s still unclear what that project is, or should be.
There are councilors and city staff members who advocate adopting a more passive, even cooperative, position in the forthcoming negotiations. Most notably, a faction of the Council supports giving OP a copy of the master development agreement (MDA) city officials hammered out during closed-door talks with Olympia last fall. The classified document spells out the financial terms, conditions and timeline the city sought to impose on Olympia’s project.
Having access to the MDA would clearly benefit OP in its negotiations with the city, and that could potentially put the city at a disadvantage should it seek similar, or stronger, financial concessions from the much larger and wealthier company.
The issue was discussed during a private executive session convened at the end of Monday’s meeting. City Manager Joe Gray said Wednesday that the Council ultimately directed staff not to provide the document to the developer. Gray said he personally agrees with that decision, in part because the MDA was never approved by the Council — Olympia bowed out before it came to a vote.
Councilors reached for comment this week refused to publicly discuss details of the private session, citing its nature. But there are indications that councilors who originally supported the pier plan submitted by OP — and who, in turn, have received political support from the company and advocates of its project — were also willing to give the developer the classified agreement.
For example, just prior to entering the closed-door session, Mayor Jill Duson, a consistent supporter of OP’s plan, noted that the session was being held to address a disagreement she and Gray had over the city’s negotiation strategy. Duson did not return calls seeking comment.
Councilor Dan Skolnik, a staunch advocate of OP’s project, also ignored a request for comment, as did new Councilor Dory Waxman, who was paid to promote OP’s pier plan to citizens and city officials when the two developers were vying for the job. Despite mounting public pressure for her to recuse herself from votes involving her former employer — whose executives and supporters gave generously to her Council campaign last fall — Waxman has refused to step aside.
Councilor Dave Marshall, who joined Councilor Kevin Donoghue in voting to oppose negotiations with OP, also opposes giving the developer the MDA. “Why would we show our cards to Ocean Properties at the beginning, unless we wanted to put ourselves in a compromised situation?” he said.
“It would be horrific for the city,” Marshall continued. “Doing that for Ocean Properties would be a major handout to that company, and that company would use that information against us. They’d know how far we’d be willing to bend over for development before [the talks began].”
The order passed Monday night directs Councilors Cheryl Leeman and Nick Mavodones to lead negotiations with OP, along with Gray or the city manager’s chosen representative. Leeman, who initially supported Olympia’s pier plan, said she is not aware of any support among her colleagues to give the company a copy of the development agreement, but also added, “It was never discussed in public session.”
Mavodones, an early supporter of OP’s project, said he’s “inclined not to release [the MDA] at this point,” but is open to further discussion of the matter. “Generally, when you’re negotiating, you like to keep your information as close to the vest as you can,” he said. “I’m not sure what [releasing it] would do to those negotiations.”
High-powered attorney Harold Pachios, who’s representing OP before the city these days, declined to speak publicly about the city’s decision regarding the MDA. However, it’s generally assumed by city officials and outside observers that OP wants a copy of the document.
Some prominent figures in Portland’s real estate community said they see advantages and disadvantages to giving OP the agreement before talks begin.
Real estate attorney Nathan Smith, a former Portland city councilor and mayor, said giving OP the MDA could “expedite the negotiation process,” but added that there may be positions the city staked out in its talks with Olympia that would dissuade officials from sharing the agreement with the rival developer. Smith said he’s seen broadly similar situations in which property owners have gone either way.
Morris Fisher, president of CB Richard Ellis/The Boulos Company, said, “if it’s advantageous [to the city], you probably want to give it to them.” But he also said he suspects there are financial terms in the document the city would want to keep to itself. Negotiating parties “are usually pretty guarded about handing out any sensitive financial information…. That’s common sense.” Fisher said it’s not uncommon for such agreements to be shared after sensitive sections or financial figures have been blacked-out.
Another matter of debate is whether the city should retain attorney Jamie Broder, who helped lead negotiations with Olympia, to help negotiate with OP. Councilors involved in the talks with Olympia have said Broder — a partner in the Maine firm Curtis Thaxter — did an excellent job and pushed hard for a fair deal. But there’s also been talk of a behind-the-scenes effort to keep Broder out of the negotiations with OP, in part because his assistance doesn’t come cheap — the city is said to have spent over $100,000 during the months it hired him to work on the deal. City legal staff would perform his work, instead.
Broder was traveling and unavailable for comment this week, but Gray said it’s clear to him that a majority of the Council wants Broder “involved” in some respect. He’s scheduled to meet with the attorney later today. The extent of Broder’s involvement is yet to be determined.
A third factor that could either complicate or ease efforts to reach a deal with OP is the extent to which public input is allowed to affect the negotiation process. On Monday, several residents urged the Council to step back and reconsider its goals for the pier and surrounding public land pending further community discussion.
A series of public presentations and workshops on OP’s plan have been outlined by city staff, but the Council did not formally vote to pursue that process on Monday. Furthermore, even if such a process is initiated, it’s expected that it would take place at the same time negotiations for a deal with OP are underway. Councilors reached for comment said they did not know how, or even if, that process would influence efforts to reach an agreement that gives the company rights to build its project.
Leeman said the results of that public process could help shape the project after a deal is signed, during the regulatory period of permit applications, planning board review, and so on.
Talks with OP are expected to begin this month, and it’s possible a development agreement could be finalized and voted on by the end of February, Leeman and others said.
However, Leeman also noted there are still some major policy issues related to the project that have yet to be settled, including the question of how the prospect of building a berth for cruise ships at the city’s neighboring Ocean Gateway marine passenger terminal fits in with OP’s plans to host cruise ships at the pier. In addition to a luxury hotel, an office building, restaurants, retail and parking, OP’s plan includes facilities and extensive security systems for cruise ship traffic.
Both Olympia and OP pledged to build a so-called “megaberth” at Ocean Gateway as part of their pier plans, but Olympia later reneged on that pledge, citing financial issues, and Pachios has said he doesn’t know whether OP is still willing to build it or not. The basis of the city’s talks with OP will be the plan the company submitted in the summer of 2007, not the subsequent project documents submitted that fall, which included a megaberth.
Gray said state officials have recently expressed “some serious interest” in building the megaberth, potentially with money from a federal economic stimulus package expected to come before Congress later this winter. The berth was originally planned to be part of Ocean Gateway, but was dropped when the public facility — which was built using city, state and federal funds — ran over budget.