Jordan Schnitzer, president of Schnitzer Properties, on Wednesday expressed willingness to rework a lease for the campaign office of City Council candidate Rene Gonzalez, after the city proposed fining Gonzalez’s campaign for taking the space at a heavy discount.
Portland’s Office of Small Donor Elections argues a 96% discount on the fair market value of the office space from Schnitzer Properties constitutes a prohibited contribution that the Gonzalez campaign failed to report.
In a tangle of economics and politics, the proposed penalty raises questions about how much downtown real estate is really worth these days when vacancy is sky high and employers are leaving the core, and the circumstances where accepting cut-rate office space in Portland’s election system is verboten.
Gonzalez is running against incumbent Jo Ann Hardesty for the position three seat on the City Council. Gonzalez and Hardesty are participating in the Small Donor Elections program, which limits individual campaign contributions to $250. Schnitzer in May donated $250 to the campaign as a show of support, campaign finance records illustrate.
But a Tuesday letter to Gonzalez indicated that discounted office space the campaign leased at a Schnitzer Properties building counted as a prohibited contribution.
That’s because the campaign paid Schnitzer Properties Management LLC rent of $250 per month for just under 3,200 square feet of office space at 1010 S.W. 11th Ave., along with $540 a month for utilities, according to the letter from the Office of Small Donor Elections. The address matches the location listed on the campaign’s website as its office. Campaigners also received two nearby parking spaces as part of the deal.
The election office argues the office’s advertised fair market value is $6,900 a month, meaning that by paying $250 in rent a month, the campaign is getting a 96% discount. It’s paid rent from May to September.
The city office says the Gonzalez campaign must pay a penalty of $33,250 — the fair market value of the office from May to September — and pay back just as much to “the contributor.” On top of that, the campaign faces $10,640 in penalties for failing to report the discounted space.
“As to what he should or shouldn’t have reported, I don’t have any knowledge as to what political reporting is on in-kind gifts like that,” company president Schnitzer said, adding later, “If there’s some way we need to modify the lease to meet some criteria, we’re certainly amenable to that.”
If the penalties and refund stand, Gonzalez’s camp could be out $77,140. The campaign said it plans to appeal.
“Landlords are desperate to get any kind of compensation for their space because of the city’s failures to address crime and homelessness has made downtown inhospitable to tenants, landlords and visitors,” a statement sent by campaign manager Shah Smith noted. “Landlords are having to offer substantial amounts of free rent months, secured parking and invest in tenant improvements to get tenants to even consider renting downtown right now.”
Smith and Gonzalez helped arrange the rental from the campaign’s side, according to a letter the campaign sent to the Small Donor Elections office. The letter lists a Schnitzer Properties property manager as the campaign’s contact at the real estate company.
Asked who negotiated the lease, Schnitzer said he thought it was the regional management team. “I frankly don’t know what was signed or not signed,” he said.
The amount of time campaigners spend in the office is a factor. The lease term is May 1 through Nov. 30, according to the city’s penalty letter.
Susan Mottet, director of the Small Donor Elections program, said she did look at comparable spaces in the neighborhood. Mottet, who said she consulted commercial real estate brokers, noted she also researched incentives like free months of rent to see what would be available to the general public, and all of them had a requirement for at least a yearlong lease.
“Though campaigns may accept discounts that are available to the general public, a campaign accepting a discount not available to the general public constitutes contribution of the difference between the fair market value and the amount paid,” the city says in its letter.
“Paying $250 month in rent for the 3,185 square feet at 1010 S.W. 11th Ave with two parking spaces, when the advertised fair market value is $6,900 per month, constitutes a 96.37% discount,” the city continues. “The city concludes that all 96.37% of the discount is not available to the general public and therefore a contribution that violates program requirements.”
To the question of making this kind of deal available to the general public, Schnitzer said if another candidate had come along whose views aligned with his, he would have offered them the space, “or if some nonprofit had come and offered to take over the space.”
“Remember, there’s still a for lease sign on the space,” he said. “The agreement was if at any time, we had a prospect for the space, we’d give them, you know, a week’s notice. So there was no downside for us.”
© 2022 American City Business Journals. All rights reserved. Use of and/or registration on any portion of this site constitutes acceptance of our User Agreement (updated January 1, 2021) and Privacy Policy and Cookie Statement (updated July 1, 2022). The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of American City Business Journals.
About Author
