From policy rubble, Portland begins to rebuild

From the Daily Journal of Commerce 12/3/19.

On Nov. 20, when the Portland City Council agreed to pay $350,000 in attorneys’ fees, it marked a final defeat for the city’s approach to regulating older brick buildings.

The order to pay legal fees came after the city lost a federal lawsuit brought by landlords who challenged a city ordinance requiring them to post warning signs on unreinforced masonry buildings, which are considered particularly vulnerable during a sizable earthquake.

The placard ordinance itself was a significant retreat from earlier recommendations. The notification policy was a compromise after the council faced a chorus of protests to requiring seismic retrofits – an expensive process that involves girding masonry buildings with a steel skeleton.

Commercial building owners, along with affordable-housing providers, churches and others, fought back. So the council settled on requiring masonry building owners to post a placard with a simple 19-word message: “This is an unreinforced masonry building. Unreinforced masonry buildings may be unsafe in the event of a major earthquake.”

On May 30, federal district Judge John Acosta struck down the council-approved ordinance, writing that it was unconstitutional because it compelled speech from building owners in violation of the First Amendment.

“The more they tried to make it better, the worse it got,” said John DiLorenzo, a Portland attorney who brought the lawsuit on behalf of the building owners. “It became a shadow of its former self. Even then, what was left couldn’t survive First Amendment scrutiny. It was just a total disaster for the city.”

Acosta wrote that the ordinance was “unduly burdensome” and based on a database riddled with inaccuracies. The database of unreinforced masonry (URM) buildings was compiled by city officials and Portland State University engineering students, typically based on a visual inspection of the building exterior and permit records.

In his ruling, Acosta painted a detailed picture of a failure in government regulation. The judge wrote that the city “lacked the political will or public support to achieve its desired goal: mandatory retrofits for URM buildings.”

Now, more than five years after the city began formulating a seismic retrofit policy, city officials are essentially restarting the process from scratch with yet another committee.

The city’s attempts to regulate URM buildings began in 2015, when a committee formed by the Bureau of Emergency Management recommended a mandatory program to strengthen all but the smallest buildings. Scientific advances and national publicity deepened the understanding of the risks posed by a large-scale Cascadia subduction zone quake and lent urgency to regulation. However, city commissioners were unable to agree on a seismic retrofit policy.

Instead, they settled on the placarding requirement – a measure meant to pressure private building owners to pay for the retrofits. The Masonry Building Owners of Oregon responded by launching a lawsuit with DiLorenzo, a Davis Wright Tremaine attorney and lobbyist who often takes on complex business cases.

DiLorenzo found sympathetic plaintiffs. One, John Beardsley, a longtime local real estate developer and investor, owned the Western Rooms building at Southwest Second Avenue and Ankeny Street. The 113-year-old building in 1979 was reinforced via a seismic retrofit. Nevertheless, it did not meet the city’s standards, and the building was placed on the city’s URM database.

Beardsley told the court that the city’s placarding language would make him “a liar.” Acosta’s ruling criticized the city for placing the burden of proving a building did not belong on the URM list on property owners.

Another building owner who testified was Walter McMonies, a retired real estate lawyer who owns several Portland buildings and became president of the Masonry Building Owners. McMonies testified that he spent $1.1 million to upgrade a 36-unit multifamily building in Northwest Portland, but that it still did not meet the city’s standards for seismic reinforcement.

“I’m pushing $2 million to finish it,” McMonies said in an interview. “That’s not a scare story. That’s what it costs.”

In 2017, Enrique Castaneda worked on the seismic stabilization of the Trinity Place Apartments in Northwest Portland. Despite a $1.1 million investment, the building still doesn’t meet city seismic reinforcement standards, owner Walter McMonies says. (Sam Tenney/DJC file)

In 2017, Enrique Castaneda worked on the seismic stabilization of the Trinity Place Apartments in Northwest Portland. Despite a $1.1 million investment, the building still doesn’t meet city seismic reinforcement standards, owner Walter McMonies says. (Sam Tenney/DJC file)

In its defense, the city pointed to Berkeley, California, where the number of URM buildings had been cut from 587 in 1991 to six by 2007. Unlike Portland, however, Berkeley made seismic retrofits mandatory and offered a “suite of options for financing retrofits,” Acosta wrote.

Portland’s seismic policies went through a series of committees that included building engineers, owners, city officials and others. Meanwhile, the city’s leadership changed. Steve Novick, who had originally pushed for mandatory seismic retrofits while overseeing the Bureau of Emergency Management, lost his bid for re-election. In ensuing years, the BEM would change hands to commissioners Dan Saltzman, Ted Wheeler and now Jo Ann Hardesty. Hardesty’s office referred questions to the BEM.

DiLorenzo criticized the role of the city’s staff in pushing the seismic retrofits.

“We have a few city employees who have driven this process,” he said. “It is obvious that the City Council was being manipulated by its staff. … I think this is a real failure of governance, and it was eye-opening to me.”

DiLorenzo said the city’s first committee was packed with engineers.

“It would have been a financial bonanza for those guys,” he said.

A report shows the 2015 eight-member Retrofit Standards Committee included five engineers.

BDS spokesman Alex Cousins said there was no undue influence by professional engineers or city staff on seismic retrofit policy. Cousins noted the final policy committee, which made recommendations to city staff, had 18 members – only one of whom was an engineer.

“It is a mischaracterization to say that the committees were stacked with engineers or that the process was predetermined,” Cousins stated in an email. “The fact remains that seismic retrofits make buildings safer in the event of an earthquake, and structural engineers are best able to understand how buildings perform during these events. They needed to be part of the URM policy-making process as did the rest of the stakeholders involved.”

The BEM is now forming a new committee that will look at possible financing for seismic retrofits, including options such as tax breaks and a revolving loan fund. The URM Work Group will meet for the first time on Dec. 17.

“The focus of this will not be a mandatory program,” BEM spokesman Dan Douthit said.

The city has been conscientious in its desire to regulate URM buildings, McMonies said.

“I don’t think anybody’s a bad actor,” he said. “It’s a difficult problem.”

McMonies was skeptical that the committee will come up with a new solution.

“The new committee is fine, although we feel we really looked under every rock,” he said. “There isn’t any spare money in the city’s budget, with the homeless and the housing crises.”

The work group is expected to examine financing options over a year before reporting back to the City Council.

“A lot of specifics aren’t known,” Douthit said.