April 2, 2008

State dashes expectations
Committee chairs unconvinced by rural accounts of success

By RODGER NICHOLS
of The Dalles Chronicle

     Editor’s note: This is the second in a series of articles on the defunding of regional investment boards by the Oregon Legislature. The first installment appeared in Tuesday’s Chronicle.

Part II

     Economic planners around Oregon were expecting good things from the 2007 Oregon legislative session.
     Lottery dollar funding of the state’s regional and rural investment program had dropped over 20 years from a high of $25 million down to $7.1 million, but Governor Kulongoski had recommended an increase for the 2007-2009 biennium to more than $11 million.
     The program itself was coming off a budget cycle in which each dollar in state contribution had been leveraged to bring in more than $26 in federal and private funding for economic development projects. (See story in Tuesday’s Chronicle.)
And it had a number of success stories to relate.
     Locally, that included the Canyon Rim Manor assisted living facility in Maupin. The community had a grant to build the building, but not the access road. “The match came from the Mt. Hood Economic Alliance that made that development possible,” said Lee Curtis, former director of Mid-Columbia Economic Development. “It couldn’t have been built without the money to build the access road.”
     The Mt. Hood Economic alliance, comprising Wasco, Hood River and Clackamas counties, is one of the 13 regional investment boards through which the lottery dollars were funded.
     With strong numbers, good stories and the governor’s support, planners expected an increase so that even more could be leveraged.
     Instead, the Ways and Means Committee Cochairs Sen. Kurt Schrader (D-Canby) and Rep. Mary Nolan (D-Portland) were prepared to zero out the budget for the program, but the regional boards had loans on the books that needed to be managed. Sen. Betsy Johnson (D-Scappoose) and others were able to restore a minimal amount of funding at $2 million for the biennium, but had to accept further restrictions on what could be done with the money. Half of it was earmarked to keep the doors open at the 13 multi-county regional investment boards.
     The other half was subject to restrictions in a budget note from Sen. Schrader:
     “For the period of July 1, 2007 to February, 2008, the Subcommittee expects the Regional Economic Development Boards to focus on three key issues,” he wrote. Among the three was to “manage the existing grant and loan portfolios, but cease approving further grants and loans.”
     The other two directives involved developing a needs and issues list and a list of infrastructure development needs for each region, and to help the Oregon Economic and Community Development Commission (OECDD) to develop “a statistically valid and auditable methodology for prioritizing, funding, tracking and reporting on the effect of board grant and loan activities on the state economic development priorities, as set by the commission.”
     These were major undertakings involving meetings with every city, county, port district and other special districts.
     Lisa Dawson is the staff member for the Northeast Oregon Alliance, which includes Wallowa, Union and Umatilla counties.
     “We knew it was coming because the legislature had talked about it,” she said “I remember trying to get a directive from state staff. ‘Can we start working on this?’ and we were told, ‘Absolutely, you may not start working on it until you have a contract.’ There was a lot of confusion.”
     In fact, it took from the end of the legislative session in July until early September to get the go-ahead, leaving only about seven weeks to complete the work before an end-of-November deadline.
     “There was a fair amount of confusion due to the quick timeline,” said Link Shadley of The Dalles, who worked on projects for several counties and the Lower John Day Economic Regional Partnership (Gilliam, Sherman and Wheeler counties). “We got slightly different sets of marching orders from OECDD, Sen. Johnson and Sen. Schrader, especially in terms of prioritizing the Infrastructure Inventory lists. Initially, we were told the list would not be prioritized, which is a painful process for a small town and county. We were later instructed to prioritize the lists, and then found out that the website the state provided to input the inventory used an automated algorithm that assigned priorities. I think only a small number of projects actually made it through.”
     Why the change in direction?
     Sen. Schrader said the reports were designed to see how well the regional boards work and to answer his question: “Are they really making a difference in their communities, or are they just handing out dollars to businesses and friends or whoever that would be coming anyway?”
     Schrader, in a recent phone interview, said he had some specific concerns: “In Ontario, their regional investment board claimed they were responsible for 200 jobs or some very large number, which seemed a little surprising, given Ontario doesn’t have a lot of jobs to begin with. Checked into that; half the jobs were created in Idaho, and I don’t think that Oregon taxpayers are really enthusiastic about helping people in Idaho. Idahoans have their own system.”
     That drew a sharp response from Sondra Lino of the Southeast Regional Alliance, which includes Malheur, Harney and Grant counties.
     “I’d say that is categorically untrue,” she said.
     “First of all, the Southeast Regional Alliance funded no project in Ontario for which we claimed creation of 200 jobs.
     ‘‘Our total for ‘05-’07 was 193 jobs, but that’s for the three-county area, and the major hunk of those, 121 of them, were in Burns.”
     Burns is 130 miles from the Idaho border.
     Harney County Judge Steve Grasty was equally blunt in response to Schrader’s statement.
     “He’s either received bad information or is misquoting information he has in front of him.” Grasty said.
     Doris Penwell, a lobbyist for Associated Oregon Counties, said, “I don’t quite understand. It’s like he pulled something out of thin air. Maybe he was thinking of some other program.”
     Schrader also cited a report “from an outfit in Wallowa” that they had saved more than 100 jobs at a local hospital that were going to go away.
     “It was questionable when we checked into it,” he said. “Were they really going to go away, anyway, and was the investment that the rural regional board made in the hospital critical to it actually staying? The answer is ‘No.’
     “So they’re claiming jobs for something they were probably a very small player in, if at all.”
     Lisa Dawson of the Northeast Oregon Alliance, responded.
     “The Wallowa Memorial Hospital was in a building that the state had determined should no longer be a hospital,” Dawson said. That meant if the hospital continued to stay there, it would no longer receive any sort of Medicare or Medicaid funding. The hospital determined it needed to build a new facility, but grants and USDA-guaranteed loans only accounted for $16 million of the $24 million cost.
     The hospital applied to Northeast Oregon Alliance, which was able to provide $100,000.
     “I agree that the part of the money that went into the project from the Northeast Oregon Alliance and from the state is miniscule compared to the total,” she said, “but it demonstrated to the community and to other potential funders that the region supported having the hospital here, that the state was willing to make a very small investment in this critical piece of infrastructure.”
     Ultimately, the hospital was able to use that commitment in part to secure additional funding, and stayed in Wallowa County.
     But Schrader wasn’t the only skeptic.
     “Sen. Schrader and I wanted to invest in services that make a difference in people’s lives in some demonstrable ways,” said Ways and Means Cochair Mary Nolan. “We had concerns that this program was actually achieving that. We didn’t see any compelling evidence.”
     Asked if she thought their actions indicated any type of urban-rural split, Nolan said, “The entire ways and means committee is fairly well divided between urban and rural.” Then she added, “We have one person, one vote; we don’t give credit for cows and land.”
     But as Mary McArthur of the Mt. Hood Economic Alliance, put it, the program got “blindsided.”
     Faced with no budget for economic development, and compelled by budget provisions, regional boards focused on creating new priority lists.
     The timeline was short and the task difficult. But the regions were motivated.
Bob Repine, director of the Oregon Economic and Community Development Department, said the assumption was if the report showed the worth of the program, it would give Ways and Means an opportunity to re-establish funding.
Sen. Ferrioli agreed. He said after the 2007 session, he was touring his district.
     “And about the time I went to the meeting with the mayor at Rufus,” he said, “it dawned on me that every one of the jurisdictions in my district were in the process or reprioritizing their economic development wish list. And that they were utterly convinced that by doing that, they were going to have access to additional dollars.”
     In spite of enormous amounts of work on the part of the districts, that didn’t happen.
     As Mike McArthur, chair of the Association of Oregon Counties put it, “We’re up against someone who philosophically doesn’t believe in this type of economic development, so it’s ‘Don’t confuse me with the facts.’”
     Next: The program gets nothing from the 2008 legislative session.