Rich donors take major advantage of a loophole in Portland’s public campaign financing system

As the campaign season in Portland kicked off last year, many deep-pocketed investors and developers each gave as much as they legally could to City Council candidate Vadim Mozyrsky: $250.

A part of Portland’s publicly funded election program, Mozyrsky can’t accept anything larger as he vies for the seat held by Commissioner Jo Ann Hardesty. The city program aims to reduce the influence of big money in Portland politics by limiting the contributions participating candidates can accept. In return for capping donations at $250, candidates get their small donations matched nine-fold by the city.

This means the region’s wealthiest business owners and developers can spend no more than they would on a pricey dinner to back Mozyrsky, a candidate who is likely to give business interests a more sympathetic ear in City Hall than Hardesty. The head of prominent real estate firm TMT Development gave $250. So did the co-presidents and vice-presidents of the Downtown Development Group, one of the biggest landowners in the city’s core. The owner and president of real estate firm Killian Pacific, the investment director from Standard Insurance Company, and the head of recycling company Calbag Metals all maxed out at $250.

But, as it turns out, they can — and did — give a lot more to support Mozyrsky.

That’s thanks to a political action committee, or PAC, called Portland United, which began fundraising in April to support Mozyrsky and Commissioner Dan Ryan, who is up for re-election. Campaign finance records show about 70% of the roughly $242,000 the PAC had spent on ads as of early May went to promote Mozyrsky.

The ability to give unlimited amounts to political action committees is, this year’s election shows, a fundamental loophole in the city’s efforts to curb campaign spending — and, in the process, broaden who can run for office. A side-by-side comparison of campaign finance records for Mozyrsky and Portland United shows the extent to which PACs threaten to undermine the small donor program, allowing candidates to claim they support donation limits while rich donors, ostensibly limited to $250 donations, continue to utilize their deep pockets to shape the political process.

TMT Development’s head gave $20,000 to Portland United, 80 times more than she was legally able to give to Mozyrsky directly. Limited liability companies connected to the Downtown Development Group, whose four leaders had maxed out with total donations of $1,000 to Mozyrsky, gave at least $15,000. Killian Pacific, the Standard Insurance Company, and the president of Calbag Metals each gave $10,000.

Since April, Portland United reported 32 contributions from individual donors and businesses. All but ten of those contributors had previously maxed their giving to Mozyrsky

A spokesperson for Portland United declined to comment for this story.

The power of money

The goal of Portland’s small-donor program is simple: reduce the influence of big money in politics.

Accomplishing that has been a more complex endeavor. The city took its first stab at a publicly financed campaign system in 2005, but voters repealed the program five years later after a high-profile case of fraud. The city tried again in 2016 with the Open & Accountable Elections Program (now called the Small Donor Elections Program), intended to amplify the voices of everyday Portlanders in politics.

To do that, the city uses taxpayer money to help a candidate get more mileage out of smaller donations. Under program rules, participating candidates receive a 9-to-1 match on the first $20 they receive from an individual. That means a donation of $20 could be turned into $200, $180 from the city plus the original $20 donation. In return, participating candidates agree to several restrictions, including capping what they can take from an individual donor at $250.

2020 was the first election year in which candidates used the program and the first year big money interests found the loophole.

That campaign, which occurred during the COVID-19 pandemic and in a summer marked by both wildfires and nightly political protests, was tough on Mayor Ted Wheeler, who faced a surprisingly tough reelection challenge from the left by Sarah Iannarone. With one month until election day, business and labor groups formed a PAC called United for Portland to help Wheeler. While many of the city’s power brokers opposed her, Iannarone enjoyed significant success fundraising among the general public under the new financing system.

But she struggled to keep up with the PAC’s last-minute spending on behalf of Wheeler. United for Portland ultimately spent half a million dollars to ensure her defeat, much of it going to bitter attack ads.

Iannarone lost with 40% of the vote to Wheeler’s 46%. Iannarone says she believes the “eleventh-hour” spending by the PAC was a significant factor.

“If we want to have open and accountable elections that are transparent and accessible, what kind of bumpers are we going to have to put around our electoral process so that this can’t happen — or is it even possible?” she said in a recent interview.

It’s happening again

Portland United and United for Portland share more than a title. The two PACs have many of the same donors. They have used the same Chicago-based firm called Elevated Campaigns for radio and TV ads. And they both were created to prop up a centrist candidate at risk of losing to one considerably further to the left.

Pitching himself as a pragmatist laser-focused on building more shelter and hiring more police, Mozyrsky has lagged behind both of his prominent opponents in fundraising. Both Hardesty, the first Black woman elected citywide in Portland who has won over many of the city’s progressives by pushing more civilian oversight of police and advocating for historically marginalized communities, and candidate Rene Gonzalez, who has earned praise from angry Portlanders with his promise to crack down on homeless camps and support the police, have outraised him.

Under program rules, a candidate skilled at fundraising can receive up to $200,000 in matching funds from the city during the primary — a solid indication of popularity among voters. Hardesty hit her limit in late February and Gonzalez hit his a few weeks ago. With a week until election day, Mozyrsky is unlikely to hit his.

So far, the city has given his campaign a little over $168,000 in matching funds. Portland United has spent a similar amount — roughly $175,000 — on advertising supporting him. The PAC has spent another $67,000 to support Ryan, who is also taking part in the small donor program.

People running against PAC-backed candidates say they understand this is legal and outside the city’s control. The Supreme Court has ruled that wealthy interests can pump as much as they’d like into a race as long as they’re not directly coordinating with a candidates, most notably with the landmark Citizen United decision that allowed corporations to spend unlimited amounts on elections. But the candidates say the consistent presence of PACs has made publicly financed campaigns feel somewhat futile.

It is perhaps the one policy point uniting Hardesty and Gonzalez, two candidates about as far apart from each other on the big issues as you’ll find in Portland.

“It is absolutely being undermined,” Hardesty said.

“How can we not call this circumventing the small donor program? How can anyone with a brain ever participate in a small donor program again?” Gonzalez echoed. “Do we either believe in this thing or not?”

It is not hard to imagine Gonzalez getting the support of a business-backed group like Portland United. The longtime tech business owner and attorney counts a deep roster of wealthy Portlanders as supporters. But when it came time to speak with one voice, some of the city’s most prominent business owners chose Mozyrsky. Political observers say that may be because they believe Mozyrsky faces a better chance against Hardesty in the event of a November general election as Gonzalez’s tough-on-crime talk could make it easy for critics to paint him as a conservative — a dangerous label in a very liberal city.

(Gonzalez has said he’s a lifelong Democrat, though he’s voted Republican on occasion in down-ballot races. Campaign finance records show he donated $50 last year to WINRED, an online portal for Republican Party fundraising. He said it was a gesture of goodwill toward U.S. House candidate Nate Sandvig, an acquaintance who joined Gonzalez in his push to reopen schools to in-person learning during the pandemic.)

In a statement, Mozyrsky said he could not say how much impact Portland United was having on his race. But if the small donor program is to succeed, he said, there does need to be more scrutiny on the role outside forces play.

Mozyrsky isn’t talking about PACs. Rather, he says the city needs to examine the “unfair advantage” incumbents often enjoy when it comes to endorsements and support from nonprofits that take government money.

“My opponent has received endorsements and direct support from organizations that did not even make the perfunctory effort of interviewing me, but are now spending considerable time and resources on my opponent’s behalf,” he wrote. “If the small donor program is to succeed in leveling the playing field, we need to provide real transparency on the outsized influence of outside groups that benefit from supporting the status quo.”

Is there an answer?

Susan Mottet, the head of the city’s small donor program, said it’s too early to tell if independent expenditure campaigns are truly undermining aspects of public financing. She said the Portland Election Commission, a volunteer advisory body that oversees the program, is looking into the matter.

“There is a fear that that could be true. I think we don’t know if that’s true,” she said. “I don’t think one race tells us the story on that, but the Portland Election Commission is looking at it and isn’t going to wait until we’ve had five races go badly.”

Amy Sample Ward, the chair of the commission, said the group could potentially increase the match cap — the amount candidates can receive from the city — as one possible way to counter the impact of the expenditure.

Mottet explains the logic of a bigger match cap this way: An independent expenditure campaign will probably only be formed to save a candidate who is relatively unpopular compared with their opponents. If you raise the cap, the more popular candidates can continue fundraising and receive more matching funds from the city, while things remain the same for the less popular candidate. Ideally, the more popular candidates will have enough to counteract the money that the PAC is flooding the race with to ensure their defeat.

“Raising the cap for everyone doesn’t mean everyone hits the cap,” she said. “You have to be pretty popular to keep raising money.”

Hardesty has another idea: Make people choose.

“I think what we could do is we could say if any independent expenditure campaign actually publicizes that they’re going to gather money to spend on your behalf, and you don’t publicly disavow any interest in them doing that, then you’re going to be suspended from the program,” she said.

She says she plans to take this idea to the city attorney’s office when the election cycle is over.

But these are all minor tweaks. Jason Kafoury, a member of Honest Elections, the group that helped pass campaign finance limits in Portland and Multnomah County, said there’s little more Portland can do in the current legal landscape to reduce a PAC’s influence.

“The moment Citizens United said you can’t put caps on independent expenditures, there was never going to be a perfect campaign finance reform structure,” Kafoury said. “I think we’ve done basically all we can to have as healthy a local politics we can. ... I don’t know what else can be done.”