Portland State will not acquire Oregon College of Art and Craft

After testing the feasibility of swallowing OCAC, PSU declines to move forward

After a week of thinking about it—or in the business parlance of our times, after conducting a “feasibility study” or “due diligence”—Portland State University officials informed Oregon College of Art and Craft officials on Thursday (January 24) that the university had decided against acquiring the college and its bucolic acres on Southwest Barnes Road.

That was some pretty fast due diligence (or at least “official” due diligence), because the university publicly announced its interest in OCAC only on January 17. (For those coming to the story late, the arts and crafts college’s discussions with Pacific Northwest College of Art about a possible merger concluded in mid-December without a deal.)


Outside the kiln at Oregon College of Art and Craft/Photo courtesy of OCAC

The key paragraph of the PSU statement, attributed to PSU president Rahmat Shoureshi: “We explored this because we were excited about the potential opportunity that an acquisition would honor the legacy of art and craft at OCAC, support the arts in our region and bolster our own College of the Arts. But our study of different acquisition scenarios, including those involving private philanthropy, showed the potential costs would be too high for PSU.”

I reached out to OCAC to find out the college’s view of PSU’s decision and how the art college might proceed from here. I haven’t received a response from OCAC yet (after holding this story for a couple of days), so perhaps they are still pondering.

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OregonLive’s Jeff Manning has been the chief media contact for PSU in this matter, and he might have phoned in a story with just that information—”no deal because acquisition costs were too high.” But Manning is an excellent reporter, and he didn’t get that way by phoning in stories. So he continued reporting and answered some questions at both ends of the core information: how the idea came up in the first place and what a possible resolution might look like going forward.

The idea came from developer Jordan Schnitzer, who gave PSU $5 million to start a campus art museum in 7,500 square feet over two floors of Neuberger Hall last spring. According to Manning, Schnitzer encouraged Shoureshi to pursue the acquisition of the college, but Shoureshi’s statement indicates that the philanthropic dollars weren’t there to shoulder the costs of absorbing OCAC (or maintaining it going forward), from Schnitzer or anyone else PSU checked in with. (Which would be an interesting thing to know—how extensive WAS PSU’s search for money to acquire OCAC?)

At the other end of the story, Manning revealed that Portland developers Jim Winkler (whose son sits on the OCAC board) and Bob Niehaus had offered to buy the property and lease it back to the school. “A sale-leaseback would give them some time to get their act together,” Winkler told Manning.

I reached out to Winkler for confirmation and elaboration. “I made an offer to purchase and lease back the OCAC campus to the school in order to give the school a longer runway to work out the terms of a merger,” he responded. “My objective was to help the school by providing it a patient and interested landlord. The offer included a right of repurchase by the school. I am deeply saddened by the potential loss of another important arts institution in our community.” He also said that OCAC hadn’t responded to his offer (as of Monday).

The campus is a considerable asset. The college has listed the campus as worth around $10 million on its federal 990 forms, though the Washington County tax assessment for the property is $13,840,620: $5,087,810 for the land and $8,752,810 for the buildings. These days, those assessments seem to run a little on the light side, because real estate values generally are going up.

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In his story, Manning speculates that OCAC could be near the end as a functioning college: “The school has struggled financially, and it’s unclear how long it can continue to operate,” he writes.

I don’t think we have a clear picture of OCAC’s finances, because OCAC hasn’t revealed anything about its financial condition or why it has been pursuing various merger and acquisition scenarios. Therefore, we don’t know to what degree it has “struggled financially.” Most Oregon arts organizations in the state “struggle financially” to one degree or another, of course, but unlike most Oregon arts organizations, OCAC owns a valuable piece of real estate. It also is supported by the Oregon College of Art and Craft Foundation, which had net assets of $1,930,700 at the end of its 2015-16 fiscal year, according to its federal 990 form that year, the last one available to me.

In his first story announcing that PSU was considering the acquisition of OCAC, Manning painted a dark picture of OCAC’s finances: A 2017 budget deficit of $685,649 with a large debt of $1.5 million coming due. But it’s common for companies of all sorts, even nonprofits, to spend more money in a year than they will make in order to invest in revenue-building activities. So, it’s entirely possible, even likely, that in 2017 OCAC invested money in a plan to build enrollment numbers, say, by developing new programs or increasing its recruiting efforts. The deficit number without the context doesn’t really mean much, especially since the OCAC foundation had sufficient funds to cover the shortfall. The same with the loan: It’s also possible, even likely, that the payment on the loan has been forgiven in the past and that OCAC expects whoever holds that note to continue the practice.

Inside the 2017 BFA Thesis Show at OCAC./Photo by Beth Conyers

The reason I’m proposing “even likely” is simply because former OCAC president Denise Mullen, who left the college in September citing personal reasons, has a reputation as a careful administrator, and I doubt that she’d run an unplanned deficit that large with an imminent debt payment of that magnitude. At this point neither Mullen nor OCAC is talking for the record about these matters, so this is speculation on my part.

So, until OCAC talks more about its financial situation, we simply don’t know how close to the edge it is. Manning covers that for journalistic purposes with his “it’s unclear” construction, but the overall impression he leaves through the two stories is that OCAC’s situation is dire. Which it might be—we just don’t have enough information to know. And we don’t know how palatable to OCAC the offer from Winkler and Niehaus might be, just that they haven’t responded so far.

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In my first story about OCAC’s search for partners, I talked a little about why I thought the cultural fit with PNCA was, at the very least, problematic. Still, PNCA and OCAC are both small, independent art schools. They are a little like Portland and Seattle, different in some ways but more similar to each other than they are to most other cities. PSU is the “other cities” in this simile. It’s hard for me to imagine a PSU acquisition scenario that would have preserved any of the DNA of OCAC, in which case the last of Portland’s major design institutions might well have disappeared inside a much larger institution with different ideas about arts education.

3 Responses.

  1. Daniel Wasil says:

    Ah, geez. Not again.

    1. Tell me how visible the Craft Museum’s permanent collection is, now?

    2. DId we ask Sitka?

    3. Can we ask Mayor Wheeler and Arts Commissioner Eudaly what ideas they have to preserve a treasured institution?

    Please stay with this. Thanks.

  2. Barry Johnson says:

    I can answer the first question: Not very.

    Second question: Sitka is far smaller than OCAC (one-fifth or sixth or so in budget size), and though its 990 forms reveal an organization in great financial shape, it’s on a far smaller scale.

    And number 3: We don’t know how dire the OCAC situation is, because they haven’t gone public with it. It might not come to a Museum of Contemporary Craft state, and if it does, we’re counting on OCAC to let us know. And I’m sure the mayor and arts commissioner will be on the email. But at that point a public appeal of some sort would be entirely in order.

  3. Cyrus Khemalaap says:

    Tough timing given stock market and other projections adjusting donor planning and strategies. A tougher pill to swallow is to discuss going for-profit and board the DeVos train with an art charter school in Portland, a masters in arts management, stuff like that, then go back to non-profit status a few years later.

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