NOT MANY BANKS HAVE BEEN capitalized with the settlement proceeds of a lawsuit.
But then, not much about the genesis of North/Northeast Portland Development Bank (In Organization) has been typical.
"I've never heard of anything like it," said James Vitarello, a Washington, D.C.-based consultant on community reinvestment financing and regulation. "The idea, as far as I can tell, is unique."
North/Northeast Portland Development Bank is seeking a chief executive to bring it from the idea stage to the formative stage. The bank's mission will be like that of South Shore Bank of Chicago, the model for community development banks; the idea is to serve ethnically and economically diverse region of north-northeast Portland.
In the next six months, the bank's organizing committee will hire a chief executive and begin beating the bushes for money to complete the bank's capitalization. The bank hopes to open by the end of next year, says Jeana Wooley, one of its organizers.
It may well be the first time that a bank has ever been formed because of a dispute involving electric bills.
In the early-1980s, the giant Portland-based utility company Pacificorp was sued in a rate case brought by several Oregon community and environmental groups. Pacificorp lost the lawsuit two years ago, when it settled the case for $4 million.
Pacificorp proposed that instead of paying back the disputed rate money through minuscule refunds to existing customers, it funnel the funds in a lump sum to the north-northeast Portland community, where Pacificorp's electric customers are concentrated.
Some of the $5.1 million settlement went to existing foundations. But $1.7 million, the largest chunk, went toward establishing a community development bank; the state requires $5 million in capital to start a bank.
The $1.7 million was the only part of the settlement money earmarked for a venture that didn't already exist, according to Ed McNamara, head of the Neighborhood Partnership Fund, an arm of the Oregon Community Foundation, which was responsible for implementing the development bank idea.
"We were picked because neither Pacificorp nor the plaintiffs in the lawsuit felt they were qualified or objective enough to find out if this idea was feasible," Mr. McNamara said.
Organizing Committee Formed
After a feasibility study found that a development bank would actually work in the community, the foundation shifted responsibility for the bank to an organizing committee of eight residents and businesspeople. Michael Henderson, executive vice president of the utility, led the committee.
Ms. Wooley, a member of the bank's organizing committee and a specialist in public-sector development, said the $1.7 million left in the Pacificorp settlement fund will become about 20% to 25% of North/Northeast Development Bank's equity.
She said the organizing committee will most likely make up the bank's board of directors. Pacificorp has also agreed to match $1 for every $3 raised by outside investors, bringing to the total Pacificorp commitment to $2 million.
|We Were Lucky'
That equity will be owned in a form of "community shares," the ownership structure of which has yet to be worked out, Ms. Wooley said.
She said the organizers are confident that at least $5 million can be raised from local investors, corporations, and, hopefully, banks.
"We were lucky, because we had a pot of dollars," Ms. Wooley said. "What we've got to do is present our case to those in the community that are still tentative -- the banks and financial community."
