In her first major decision as the elected-in-charge of Portland’s civic life bureau, Commissioner Jo Ann Hardesty has decided to permanently cut city funding from embattled neighborhood group Southwest Neighborhoods Inc.

The nonprofit, commonly known as SWNI, first had its funding thrown into question last summer. City officials said leaders of the group, which oversees 17 neighborhood associations in Southwest Portland, wouldn’t turn over boxes of financial documents that some members of the group believed could reveal financial misconduct. The council unanimously voted to withhold funding for the group until the documents were turned over and an outside audit was completed.

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The audit was withering in its assessment of the group as poor stewards of taxpayer money. In the aftermath, Hardesty, who took over the Office of Community & Civic Life after former commissioner Chloe Eudaly lost re-election bid in November, made a final decision Wednesday to not renew the city’s contract with the group.

Related: Audit finds city-funded neighborhood group mismanaged money

The nonprofit relies on a city grant for the majority of its funding. In 2019, Portland’s $307,000 grant accounted for 85% of SWNI’s budget, according to city documents.

Hardesty first informed the coalition of her decision at a board meeting Wednesday evening.

“This was not a rash decision. I didn’t come in with my mind made up,” Hardesty told members. “What I did was review years of documentation, years of audits, years of non-accountability with how the dollars were utilized. ... It was based on a lot of factual data that tracks a history of financial mismanagement.”

Members at the Wednesday evening Zoom video meeting did not seem shocked by the decision, quickly turning to logistical questions and thanking Hardesty for delivering the news to their faces.

One member was notably less civil in his disappointment.

Richard Freimark, who represents the Bridlemile Neighborhood Association, accused the commissioner of lying, though he did not specify about what, and said she made the decision to pull funding out of spite over the wealth of the neighborhoods in the southwest part of the city.

“Because we pay more taxes than anyone else, you’re jealous,” he said, before other members told him he was out of line.

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Portland City Commissioner Jo Ann Hardesty listens to testimony over a proposed ordinance on April 4, 2019.

Portland City Commissioner Jo Ann Hardesty in a file photo from April 4, 2019. Hardesty has cut funding for an embattled Portland neighborhood group.

Kaylee Domzalski / OPB

Some said they were worried about where the decision would leave their local neighborhood associations. For four decades, SWNI has assisted with community outreach and provided support services for the neighborhood associations in the area.

“SWNI has done so much for my neighborhood association since I’ve been involved with it for around 16 years,” said Michael Charles, who represents the Marshall Park Neighborhood Association. “It sounds like you’ve decided to tear it all down rather than address the issues and problems and work with SWNI to try and solve them — I find that extremely disappointing.”

Hardesty said she plans to bring the services provided by the group into City Hall to assist the Southwest Portland neighborhood associations directly.

SWNI President Leslie Hammond did not appear to be at the meeting and could not be immediately reached for comment. In a December op-ed in local paper Southwest Connection, Hammond wrote that she believed the group had been unjustly maligned and argued many of the accusations of “willful” mismanagement were unfounded.

The group had been hoping to regain the city’s trust — and its funding — by putting together a 10-point plan that said the group would commit to biannual audits, an annual review of financial and personnel policies, and monthly review of financial statements, among other pledges.

In a memo informing the rest of the council of her decision to cut funding, Hardesty wrote the oversight necessary to implement the group’s proposed plan would require too from the city.

“The plan points out SWNI’s inability to self manage their organization in a functional way,” she wrote. “The plan requests a burdensome level of oversight and additional funding from the City, that is entirely inappropriate for an independent outside entity.”

In explaining her rationale for cutting funding, Hardesty made note of some of the more notable points from the audit, including the director waiting five years to report an employee theft of $174,000 to authorities and applying for a paycheck protection loan during the pandemic that was intended for hard-hit businesses while the group was still receiving full funding from the city.

And Hardesty noted one more recent strike against the coalition that had not made it into the audit.

“Most recently, SWNI’s President has communicated an action item to work with the Department of Justice to determine ways in which to exclude some neighborhood associations from the district coalition, a clear indication that SWNI is ill prepared to foster an inclusive environment for all neighbors,” she wrote.

Hardesty does not need council approval to keep city funding from SWNI. But she will need approval to bring the services in-house at City Hall. Hardesty wrote that she plans to bring an ordinance to the city that would authorize two permanent ongoing program coordination positions next week.

As for the fate of SWNI, Hardesty said she’s leaving that in the group’s own hands. The city’s decision to withhold funding last summer left the group financially hobbled. Nearly all staff had been laid off by January, and the group appeared to be surviving largely off donations.

“I don’t know what will happen to SWNI,” Hardesty told members. “That’s up to the SWNI board.”

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