PORTLAND, Ore. — An Oregon judge revoked a $77,000 campaign finance fine against Portland City Council candidate Rene Gonzalez on Thursday. The judge stated that Gonzalez did not violate campaign finance rules by renting a deeply discounted campaign office space.
"The City failed to carry its burden to demonstrate, by a preponderance of the evidence, that the discounted office space constituted contributions (in-kind or otherwise) because its fair market value exceeded the amount paid," Judge Joe Allen wrote in an 18-page opinion. "As such, it is unnecessary to address the City’s allegation that Appellants failed to report the purported contributions timely."
The city's Small Donor Elections program issued the fine in late September, saying Gonzalez accepted and didn't report a significant discount to rent an office space in downtown Portland.
Since May, Gonzalez's campaign has paid $250 a month to rent the space on Southwest 11th Avenue from Schnitzer Properties Management, in addition to paying $540 a month in utilities. The building is owned by real estate mogul Jordan Schnitzer, who has donated directly to the Gonzalez campaign.
Candidates participating in the Small Donor Elections program receive a 9-to-1 match on the first $20 they receive from a donor. That means a donation of $20 could become $200 with $180 from the city. In return, the candidates agree to not take donations of time, goods and services from businesses.
The Small Donor Elections program said the value of the space the Gonzalez campaign has been renting had been advertised at $26 per square foot, equivalent to $6,900 per month. The city said the $6,650 difference — or a 96% discount that likely wouldn't be available to the public — constituted an illegal in-kind campaign contribution under the terms of the program.
However, the judge said an advertisement for a property doesn't represent fair market value, as it represents the starting point for negotiations, rather than an end.
The Small Donor Elections program withheld matching funds from Gonzalez during the appeal of the fine. In a statement, Gonzalez said the action has already hurt his campaign, even thought the judge overturned the fine.
"Upon an exhaustive examination of the facts, it became clear that the Small Donor Program over-reached in its prosecution of its case against our campaign," Gonzalez said. "While we are pleased with the decision, the damage to the campaign has been done. We look forward to receiving the $71,000 the program has withheld as a preemptive enforcement action and putting it to work in the short time we have left."
Portland Elections Commission Chair Amy Sample Ward responded to Thursday's ruling in a statement.
"I am stunned by this decision. This ruling creates a loophole for donors to give enormous in-kind contributions, rendering useless the contribution limits in the program and penalizing those who play fair," Ward said.
Ward said the city could appeal the decision, but instead said the city will amend program rules.
After the fine was issued on Sept. 21, Gonzalez formally asked election officials to waive the $77,000 fine, arguing that the space had been vacant and that the rent was fair given Portland's current market. The waiver was declined and the matter was sent to the Office of Administrative Hearings.
In his ruling, Judge Joe Allen said the commercial real estate market in downtown Portland, based on testimony, is very weak due to "civil unrest, increased homelessness, vagrancy, as well as personal and property crimes."
Gonzalez is running against incumbent commissioner Jo Ann Hardesty in the November election.