The Beginning - A Need

Portland Family of Funds Holdings, Inc. was born out of the need to bring new financial resources to the Portland market. As early as year 2000, the Portland Development Commission was planning for eventual reductions in the availability of its key funding source, tax increment financing. PDC could see that it would soon be reaching the limitation in this traditional funding source and needed to find other sources of funds to assist in financing challenging projects in the community.

A Potential Resource - New Markets Tax Credits

As PDC searched for alternative resources, it identified a new federal tax program called the New Markets Tax Credit ("NMTC") program. The NMTC program was established in early 2001. The program is administered by the Community Development Financial Institutions Fund ("CDFI") of the U.S. Department of the Treasury. The CDFI's mandate is to allocate $15 billion in tax credit eligible investment over a 7 year period as a means to stimulate private investment in businesses located in qualified areas.

Initially, there was little guidance regarding how the program would work, but it was clear from the legislation that it would be complicated and involve privately managed companies competing for a limited amount of NMTC allocation authority. These privately managed competitive companies are called Community Development Entities ("CDEs").

Portland Takes the Initiative

PDC understood that the NMTC process was complicated and outside of its expertise. Furthermore, under the US Treasury rules and regulations only a private entity could apply for the tax credits. PDC also knew that the Oregon constitution prohibited PDC from owning equity in any entity. As a result, PDC could not itself compete for an allocation.

Thus, PDC encouraged the creation of a new private sector entity in 2002 called Portland New Markets Fund I, LLC ("PNMF"). PNMF was created and organized for the purpose of applying and competing for an allocation of NMTCs for deployment in the City of Portland.

Maximizing the Potential

As part of its assistance to PNMF, PDC staff began to seek leadership management and Board oversight for PNMF.  PDC staff began discussions with local business and community leaders willing to craft the vision, mission and management structure for PNMF. Principal among those leaders were Ed Jensen and Carl Talton. Jensen had been the former COO of US Bancorp and CEO of Visa International. He had recently helped establish economic development-driven private equity funds in the San Francisco Bay Area, and was interested in doing the same in Portland with the belief that private sector tools were effective in providing economic development solutions. Talton was a thirty-year veteran of the utility industry and community-focused economic development efforts in Portland.

A series of discussions between Jensen, then PDC Resource Development Director Norris Lozano, PDC Director Don Mazziotti and PDC Commissioners led to the formation of Portland Family of Funds Holding, Inc. ("PFF") on August 27, 2002 as an Oregon Mutual Benefit Corporation, a private sector entity which pays taxes but does not have shareholders.  PFF was formed to:

• Gather the expertise of leading citizens in the form of a board of directors;

• act as managing member of PNMF and thereby strengthen the PNMF application for NMTC;

• Be an umbrella organization established to engage professionals and hire employees to oversee other resource development and financial structuring activities;

• be a strategic partner for PDC that also works outside Urban Renewal Areas to raise investment funding for Portland projects, retain its earnings from use of that capital, and reinvest those profits, all of which create a broader reach than PDC geographically, programmatically and financially.

Applications for NMTCs and the Armory

Once the legal entity structure was in place, PNMF was able to apply for an allocation of NMTCs with PFF as its managing member and PDC as the CDFI Fund-defined “controlling entity.”  PNMF’s first application for tax credits, submitted in 2002, failed. 

In 2003, PFF was asked by the City and PDC to structure the financing for one of its most historically significant buildings, the Portland Armory, by determining if it was possible to obtain a suballocation of another entity's New Markets Tax Credits. It was; working with Goldman Sachs, PFF formed the Portland Historic Rehabilitation Fund I, LLC and structured and closed the $28 million transaction utilizing New Markets Tax Credits. PNMF then reapplied in 2003 for an allocation of tax credits to be announced in the following year.

In May of 2004, PNMF received notice that it had been awarded $100 million in NMTC allocation authority for deployment in the City of Portland through the Portland Development Commission as the "controlling entity."

Success and Forward Motion

PFF was pleased that two other Portland-focused entities besides PNMF were successful in 2003 NMTC applications: Sage Hospitality Resources Hospitality Fund I, whose allocation would be used for renovation of the historic Meier & Frank building, and Historic Rehabilitation Fund I, LLC, whose allocation would be used to restore historic properties in Portland. In the aggregate, Portland-focused entities are now developing transactions to deploy approximately $224 million in New Markets Tax Credits in the region.

PFF has structured and closed NMTC financing for The Oregon Clinic's new Medical Office Building in the Gateway area of NE Portland, and Union Gospel Mission's new drug rehabilitation and job training facility in Old Town. Additional projects are in development. Each of these projects is designed to provide community benefits which include (i) increased local financing capacity and capital formation, (ii) wealth building in minority, women-owned and emerging small business (M/W/ESB) communities, (iii) job creation, (iv) historic preservation, and (v) environmentally efficient design. All of these goals are consistent with PFF's mission and the values of the Portland community.

PFF Mission:
"To create opportunities for profitable investments that enhance social and environmental yields."

In recognition of the foresight and innovation of PFF's founders, PDC was selected as one of the fifty semifinalists nationwide for the Innovations in American Government Awards by the Ash Institute for Democratic Governance and Innovation at Harvard University's Kennedy School of Government.

Milestones

2001

• Community Redevelopment Act, including the New Markets Tax Credit program, is made into law by Congress

2002

• Portland New Markets Fund I, LLC ("PNMF") is formed and certified as a Community Development Entity ("CDE") by the US Treasury
• Portland Family of Funds Holdings, LLC ("PFF") is formed to be the Managing Member of PNMF and incorporated as an Oregon Mutual Benefit Corporation
• Portland New Markets Fund Advisory Board is formed, with community leader Sheila Holden as Chair, and Dick Cooley as Vice-Chair
• PNMF applies for an allocation of New Markets Tax Credits
• 1st Quarterly Board Meeting held, with Ed Jensen as Executive Chair
• Vanport Development, LLC wins RFP for Vanport project

2003

• US Treasury announces first PNMF application for NMTCs was denied
• PFF requested by City and PDC to structure Armory transaction
• Portland Historic Rehabilitation Fund I, LLC ("PHRF") created
• Armory Advisory Board formed
• Goldman Sachs agrees to sub-allocate $28 million in NMTCs for Armory project
• PFF requested by City and PDC to assist in structuring financing for Meier & Frank restoration
• PNMF I applies again for NMTCs

2004

• PHRF closes $28 million Portland Armory transaction; construction begins
• Armory Community Outreach and Experience Design Process
• PNMF I receives $100 million allocation of NMTC
• PNMF I applies in third round of NMTC
• PFF assists in structuring private market participation in Siltronic transaction
• PDC approves New Markets Tax Credits investment in Vanport Square Phase I
• PDC approves New Markets Tax Credits investment in The Oregon Clinic Gateway Medical Office Building

2005

• 9-13th Quarterly meeting of Board of Directors
• Carl Talton elected to succeed Ed Jensen as Executive Chair
• NMTC Collaboration Agreement approved by PDC Commission
• PDC approves PNMF New Markets investment in Union Gospel Mission LifeChange Center and Fremont Building projects.
• Harvard's Ash Institute recognition of PDC efforts to create Portland Family of Funds as an ''Innovation in American Government' - semi-finalist in national competition
• The Oregon Clinic Gateway Medical Office Building: successful $33.5mm NMTC financing
• Union Gospel Mission LifeChange Center: successful $7mm NMTC financing
• The Civic rehabilitation: successful $97.5mm NMTC financing

2006

• 14th Quarterly meeting of Board of Directors
• Meier & Frank renovation: successful $72.5mm NMTC financing through Hospitality Fund I