UPDATE (5:58 p.m. PT) — The Portland City Council voted Thursday on $1.6 million in grants to five neighborhood coalitions, nonprofits responsible for supporting individual neighborhood associations and fostering civic engagement within the city.

The vote will mean one more year of money flowing into the embattled organizations after the city delayed a controversial push to change the guidelines for these civic groups in which leadership often leans white and wealthy.

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But while the clash over reducing the influence of the city's network of neighborhood associations is on hold, a new fight over funding one specific neighborhood coalition is breaking into public view.

On Thursday, the Council voted in favor of withholding city funding for Southwest Neighborhoods, Inc., which oversees 17 neighborhood associations in Southwest Portland. The amendment was introduced by Commissioner Chloe Eudaly, who is charge of the Office of Community & Civic Life.

According to that office, the coalition, commonly known as SWNI, won’t turn over reams of financial documents that the group's own board members believe could potentially reveal financial misconduct.

Until the neighborhood group hands over the requested documents, city leaders don't believe they should hand over the six-figure grant on which the group relies. Last year, the city's $307,000 grant accounted for 85% of SWNI's budget, according to city documents.

By Thursday's meeting, the Council seemed to have agreed to provide the coalition with funding again after the group hands over the required records and an audits been completed.

On Monday, Suk Rhee, the director of the Office of Community & Civic Life, sent a memo to the City Council, asking for the change “due to the need to determine the veracity of financial mismanagement allegations against SWNI, and the fact that SWNI has not yet provided requested documents to the City.”

The nonprofit has already had one instance of financial misconduct made public: In 2011, police determined a manager had embezzled $130,000 in the last leg of her 15-year tenure. She was sentenced to just over three years in prison.

Two people with experience on the group’s board — Shannon Hiller-Webb, a current member, and Marie Tyvoll, who left this month — say they want to see documents related to the 2011 embezzlement as well as another alleged incident of misused funds that occurred seven years earlier. Former board member Jim McLaughlin said there was $19,000 of purchases placed on an American Express card tied to the nonprofit that was never investigated.

They have asked board members to hand over years' worth of records — including executive session minutes, emails, police reports and credit card statements.

Hiller-Webb, who sits on the board’s coalition as a representative from the South Burlingame Neighborhood Association, said she began asking for financial records this January, a little over a year after joining the group. She said she’s “not making any claims” about what the documents might show and noted the quest for records began as a matter of basic fiscal oversight — not as a mission to sniff out wrongdoing.

“Only when it's become such a protracted fight that I start to feel like there's something there,” she said. “At every point that SWNI operates in this discovery, they’re telling me there is something to find.”

When Hiller-Webb and Tyvoll asked the board’s executive committee for the records, they say they were rebuffed. So they, along with a group of community members who also wanted to look through SWNI’s records, went to the Multnomah County district attorney’s office. Prosecutors went to the city. The city asked for the documents from SWNI.

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The coalition said they could get the city the records — for a whopping $31,885.50.

SWNI president Leslie Hammond said the high fee was due to the extensive request. She said the coalition has been asked to produce at least 45 boxes of records dating back a decade. According to the neighborhood group’s estimated cost breakdown, photocopy fees alone will cost the city more than $11,000.

Hammond said the group has “substantially complied” with the request and referred the city to SWNI’s website, which has some of the records they asked for. The rest, she said, are on paper in the city archives, which she can’t access during the pandemic. Once the city opens back up, she said she can make all documents available that are not “personnel and privileged communications.”

There is some dispute over what constitutes such a communication. Asked for an example, Hammond pointed to documents related to the 2011 embezzlement.

“These two people want to open all the files and look at them. That’s where I would say they don’t have the right,” she said. “It was done 10 years ago and very well disposed of by professional people, so why would you want to open that up 10 years later?”

While the coalition said they’ve complied the best they can, the civic life bureau says they’re still waiting on 12 of the 15 batches of documents they’ve asked for. The office says not all require access to city storage, and they have not yet been told which ones SWNI considers privileged.

Rhee, the director of the civic life bureau, said the office intervened and asked for the document because they believed board members getting access to institutional records was a matter of “good governance.” But, in the months since, she said, there have been three incidents that alarmed the office.

Rhee said SWNI felt that the terms of the grant, which gives the city access to the coalition's records, didn't apply to them. SWNI falsely said the office was supporting their new program, which they initially said involved redirecting city money to take advantage of the PPP loan the group received. (This loan has raised additional questions by some who believe a neighborhood coalition with a steady stream of funding should not have received money intended for hard-hit businesses.)

And, Rhee said, the office couldn't get answers to some of the basic questions they were asking SWNI about its proposed budget for the upcoming fiscal year.

“You see a pattern emerging of lack of transparency,” Rhee said. “And that is not something the city can take lightly.”

Hammond said if the coalition doesn’t receive its funding for the upcoming fiscal year, they’ll be able to run for a few months off their rainy day fund and then have to shut down. Eudaly’s office has said the neighborhood associations they provide stipends to could still receive the money despite SWNI not receiving its grant. How exactly this would work has yet to be determined.

Even without a potential standoff over records, Thursday’s Council meeting was shaping up to be an interesting one.

As part of the public testimony portion of the meeting, Hiller-Webb and Tyvoll planned to talk to Council about the culture of SWNI, which they have previously described as having “an underbelly of equity suppression and racism funded by taxpayer dollars.”

They had prepared a 74-slide presentation and testimony, which, while expected to touch on lack of transparency, would have made allegations that extended far beyond that. Seventeen Portlanders who have volunteered or interacted with SWNI were expected to come and present about a group some have said is unwelcoming to people of color and refuses to tackle equity issues head on. Last month, the chair of the equity and inclusion committee resigned saying the president had “made it impossible” to do their duties.

But on Thursday afternoon, the Council ultimately decided to table the presentation, saying it was no longer relevant as the Council had reached a consensus around the ordinances and decided to withhold funding.

Eudaly said she'd already reviewed it and found the presentation "enlightening." The remaining three council members said they would be open to hearing the presentation at a later date.

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