Jackson County taxpayers footed the bill for a $654,000 loan to County Administrator Danny Jordan for his east Medford house, granted as part of his salary package negotiated in 2009.
The loan was described in a trust deed obtained by the Mail Tribune earlier this month.
"I'm just speechless, to be honest," said county Budget Committee member Craig Morris when told about the loan. "I didn't know that." He said this type of transaction wouldn't necessarily come up during budget meetings, however.
County officials maintain the loan is legal, was properly noticed and is part of a compensation package needed to keep a highly valued employee. But they made little attempt to let the public know about it.
The agenda item describing the commissioners' vote on the loan for their March 26, 2009, meeting did not mention Jordan's name. The item read, "Order Authorizing the Chair of the Jackson County Board of Commissioners to execute an agreement and lender's escrow instructions with employee, #66-09." The number refers to the board order.
"It was pretty vague," said County Commissioner John Rachor, who was elected to the board in 2010. "Boy, it was really vague."
Rachor said the notice reflects a lack of transparency in government that he would like to improve.
If he had been on the board in 2009, Rachor said, he probably wouldn't have approved the loan unless he had had full confidence in Jordan's abilities. Now that he's had nine months to gauge Jordan's capabilities, Rachor said he would have no problem giving him the loan.
"I would agree with it now," he said.
Rachor said he would have made sure the public knew about the loan, then fended off the anticipated criticism by explaining why Jordan was worth the money.
"The sooner it comes out, the better," he said.
Rachor said commissioners from other counties tell him how much they admire Jordan as an administrator.
"They all think that Jackson County is in great financial shape," he said.
The loan was negotiated between Jordan and county commissioners as part of his compensation package.
Jordan bought the 2,734-square-foot, two-story house in 2005 for $545,000 under a different loan, but he added upgrades such as a pool and spa that increased its value.
The county loan amount was based on the dollar value of the property from an appraisal requested by Jordan and conducted by Lang V. Nguyen Appraisal Management and Consulting Inc. in 2009.
County Assessor's Office estimates of the real market value show the property peaked in 2007 at $650,060, but by 2009 had dropped to $472,060. The most recent information from the Assessor's Office lists the real market value of the property at $369,670, or 56.5 percent of the amount the county loaned to Jordan.
The 30-year loan was financed at a 3.46 percent interest rate, the federal interest rate in 2009. Average home loan rates at the time were 5 percent. The difference shaved nearly $600 off Jordan's monthly payment, which is $2,922.
The balance remaining on the loan is $621,000. Jordan also receives a monthly $1,000 housing allowance as part of his employment contract.
Jordan stated in an email, "I feel there is nothing unusual or improper about this (the loan) as a form of negotiated compensation, and it is a practice by public bodies throughout the United States. It complies with both legal and financial accounting professional standards for the public sector."
Jordan said the interest rate he is paying was higher than the 3.24 percent rate of return on county investments at the time.
Now, because of the decline in interest rates, the county is seeing only a 1.5 percent rate of return on these other investments, he said.
"In other words, the benefit to me is I secured the loan as a part of my compensation, and the county benefits from it by the return of interest, currently at a significantly higher rate than average earnings," he stated.
Jordan declined to speak further about the loan, referring questions to the commissioners.
The loan is described in the county's Comprehensive Annual Financial Report as a receivable on the Statement of Net Assets under Note 16, "related party." (For a copy of the report, go to www.mailtribune.com/financial-report.)
It is not until pages later, when the notes are described in more detail, that the loan and interest rate are outlined.
In July 2009, four months after the loan was approved, the commissioners gave Jordan a 10 percent raise, bringing his salary to $170,060.
Commissioner C.W. Smith, who has been on the board since 2004, said the county approved Jordan's loan to increase his compensation package during a time when he was being courted by other organizations.
"We didn't even know if he was going to stay," Smith said.
Former commissioners Dave Gilmour and Jack Walker approved the loan. Walker is recovering from heart surgery and Gilmour did not respond to phone messages. Smith was speaking before the Legislature and therefore absent when the commissioners voted on Jordan's loan.
Smith said Jordan has been a dynamic and accomplished administrator who helped steer the county away from a budgetary hole to a more stable fiscal path that increased reserves.
When asked about the board order's vague wording, Smith said the county doesn't like to broadcast an employee's salary compensation.
"The point is that we do try to provide some degree of respectful privacy to employees," he said.
Smith said the loan wasn't a secret, but acknowledged it would generate heat from the public no matter how it was handled.
"I don't think we would try to make a big deal out of it," he said. "You're just opening yourself up to everybody coming out of the woods. There's always that segment of the community that isn't happy no matter how you do it."
The county routinely invests millions of dollars, gathering interest on its investments until the money needs to be spent. Unlike those investments, the money from Jordan's loan can't be tapped into as readily.
Cara Fischer, deputy director of the Association of Oregon Counties, said executive compensation that includes house loans is a fairly common practice in the corporate world, but not necessarily in local governments.
"I'm not familiar with any county in Oregon that has taken that step," she said.
In other states, she said loans to government executives are more common. The city of Aspen, Colo., for example, offers loans and has bought houses for employees, she said.
Fischer didn't rule out the possibility the practice could become more common in Oregon, particularly if executive salaries fall below those in other states.
"As government budgets become tighter and tighter, it might be incumbent on government bodies to become more and more creative about compensating employees," she said.
Commissioner Don Skundrick, who was elected last November, said Jordan is worth every penny the county gives him and believes the public has been well served by his leadership.
"In my nine months in office, he continues to just amaze me on a day-to-day basis," he said.
He credits Jordan with making Jackson County one of the most financially successful in the state. While other counties have floundered after the loss of federal timber money, Jackson County under Jordan's leadership amassed a rainy-day fund of $66 million as of last fiscal year. Without going to the voters for more taxes, the county built a 9-1-1 center, remodeled the courthouse, purchased the post office building to consolidate its health services and will build a new sheriff's headquarters in White City.
The commissioners' confidence in Jordan led to granting him new powers in 2008 to sign agreements of up to $5 million in cases of an emergency. Previously, he had the authority to sign off on contracts of $30,000 or less.
Skundrick said Jordan's knowledge and analytical skills compare favorably with even the most skilled executives he's encountered in the corporate world.
"I've told him before, 'When you walk into the room, you may be the smartest guy there,' " he said.
Skundrick said he didn't want to second-guess how the loan was handled, but said the board order regarding the loan could have been more clearly written.
"To the 99 percent of people, that could be a little muddling," he said.
He said he will strive to make the county decision-making process as transparent as possible. Skundrick said the handling of the loan wasn't accomplished in as transparent a manner as he would have liked.
"I might have done it a little differently," he said.
Reach reporter Damian Mann at 541-776-4476, or email firstname.lastname@example.org.