[Senate Hearing 107-613]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-613
 
                       BIOTECHNOLOGY IN PORTLAND
=======================================================================

                             FIELD HEARING

                               before the

                  SUBCOMMITTEE ON SCIENCE, TECHNOLOGY,
                               AND SPACE

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 5, 2002

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation






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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
      Jeanne Bumpus, Republican Staff Director and General Counsel
                                 ------                                

             SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND SPACE

                      RON WYDEN, Oregon, Chairman
JOHN D. ROCKEFELLER IV, West         GEORGE ALLEN, Virginia
    Virginia                         TED STEVENS, Alaska
JOHN F. KERRY, Massachusetts         CONRAD BURNS, Montana
BYRON L. DORGAN, North Dakota        TRENT LOTT, Mississippi
MAX CLELAND, Georgia                 KAY BAILEY HUTCHISON, Texas
JOHN EDWARDS, North Carolina         SAM BROWNBACK, Kansas
JEAN CARNAHAN, Missouri              PETER G. FITZGERALD, Illinois
BILL NELSON, Florida











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 5, 2002....................................     1
Statement of Senator Wyden.......................................     1

                               Witnesses

Burger, Denis, Ph.D., Chairman and Chief Executive Officer, AVI 
  Biopharma......................................................    25
Grinstein, Bill, Associate Director, Public Affairs, Pacific 
  Northwest National Laboratories................................    23
Katz, Hon. Vera, Mayor, City of Portland, OR.....................     4
    Prepared statement...........................................     5
Kelley, Gil, Director, Bureau of Planning, Portland, OR..........     6
    Prepared statement...........................................     9
Kohler, Peter O., M.D., President, Oregon Health and Science 
  University.....................................................    29
    Prepared statement...........................................    31
Mazziotti, Donald F., Executive Director, Portland Development 
  Commission.....................................................    40
    Prepared statement...........................................    41
Pernsteiner, George, Vice President for Finance and 
  Administration, Portland State University......................    34
    Prepared statement...........................................    36

                                Appendix

Rodgers, Joanna, Eugene, Oregon, prepared statement..............    55











                       BIOTECHNOLOGY IN PORTLAND

                              ----------                              


                         FRIDAY, APRIL 5, 2002

                                       U.S. Senate,
            Subcommittee on Science, Technology, and Space,
        Committee on Commerce, Science, and Transportation,
                                                      Portland, OR.
    The Subcommittee met, pursuant to notice, at 9:30 a.m., in 
the Council Chambers of the Metro Regional Center, Hon. Ron 
Wyden, Chairman of the Subcommittee, presiding.
    Staff members assigned to this hearing: Jean Toal Eisen, 
Democratic Senior Professional Staff; and Floyd DesChamps, 
Republican Senior Professional Staff.

             OPENING STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. The Subcommittee on Science, Technology, and 
Space will come to order. I am very pleased to have a chance to 
be home and listen to the people of Oregon on this issue of 
special importance to the Oregon economy. And as Chairman of 
the Science, Technology, and Space Subcommittee, I am pleased 
to have a chance to convene this session this morning.
    Next month, Portlanders and other Oregonians will mail in 
their ballots and make a major decision about the future of 
technology and biosciences, specifically, for our state. Ballot 
Measure 10, which I strongly support, will allow our 
universities and research institutions to reap dividends from 
products derived from the bioscience successes that they help 
to develop.
    This measure is just one example of how Oregon can 
incentivize research and stay at the forefront of the 
technology revolution.
    This morning, the United States Senate's Subcommittee on 
Science, Technology, and Space convenes a field hearing to 
explore the appropriate role for the federal government in our 
city's development of its biotechnology industry cluster and 
how this critical Portland initiative can serve as a model for 
our whole country.
    Biotechnology is already revolutionizing both health care 
and agriculture, a sector that is marshaling its forces to help 
protect Americans from bioterror attacks, and we are going to 
examine a number of these issues this morning.
    I am particularly excited about the health care 
possibilities that stem from biotechnology innovation and 
research.
    The fact is, right in our community, there is an 
opportunity to revisit and be part of a revolution in fighting 
disease with research in the biosciences. As part of this 
research, Oregonians can systematically review and research 
major diseases that plague our citizens and wreak havoc with 
their lives and then use that research to help change the world 
for so many people for the better.
    Just for a moment, take the issue of monoclonal antibodies. 
With these new antibodies, this country and our state will have 
a new tool to fight cancer cells and just about any malignancy. 
I think back to my days as co-director of the Oregon Gray 
Panthers when I got started with our good mayor sitting in her 
living room in Portland talking about these diseases that are 
such a scourge for older people. I remember many seniors with 
rheumatoid arthritis and similar inflammatory diseases, 
horrendous diseases. Often, their hands curl. You think about 
the horrible physical consequences of these diseases, and a lot 
of them can be relieved dramatically by pharmaceutical products 
that are the products of the new biotechnology revolution, 
products that revolve around monoclonal antibodies.
    I want to make it very clear this morning, as Chairman of 
this Senate Subcommittee, I am not going to sit around and let 
Oregon pass up the opportunity to take people with crippling 
diseases from their beds to the tennis court. The fact of the 
matter is, that is possible with important innovations in 
research in biotechnology.
    The American public fully expects our country to continue 
as an acknowledged world leader in biomedical research. It's 
the expectation that the biotechnology industry will deliver, 
and Portland already has a foothold in this critical field. We 
have got experts here right now who are developing ways to 
administer drugs without needles, to deliver actual cells and 
proteins to target areas in fighting liver and heart disease, 
and also to promote improvements in agriculture and animal 
health.
    So, today the Subcommittee is going to examine what 
Portland has to offer in the biosciences field to learn why 
some biotechnology entrepreneurs have already set up shop here. 
We also are going to examine the challenges that lie ahead. 
This Subcommittee has put considerable effort in looking at 
biotechnology issues, from the fight against bioterrorism to 
the potential of technology in healthcare, as I mentioned with 
respect to monoclonal antibodies and a variety of related 
illnesses.
    Recently, we heard from biotechnology experts from across 
the country. They related difficulties they faced in offering 
new technology to the government in a number of areas, such as 
fighting the war against terrorism. In response, I have already 
written legislation to provide a portal for the private sector, 
including the biotechnology industry, to offer new anti-
terrorism technology to our government.
    This country has a Strategic Petroleum Reserve. It is, in 
effect, an insurance policy we have when we are dealing with 
problems that stem from a shortage in the oil field. I think it 
is time that we set up a Strategic Technology Reserve, that we 
have an opportunity to call on experts and companies to help, 
and for example, in most communities in this country, there is 
not even a data base of physicians and experts who you would 
call if the community was hit with a bio-terrorism agent. It 
seems to me that is something that we can set up all across 
this country. That is what I am proposing the government to do 
in legislation I have already introduced, the Science and 
Technology Emergency Mobilization Act, that is already before 
the Subcommittee and the Congress.
    For Portland and other communities to build on that portal 
and to be a portal for the biosciences, it is essential to 
provide academic facilities, research facilities, attractive 
communities, and economic assistance incentives to harness the 
industry's potential.
    This morning, we are going to look at how the federal 
government can assist in each of those areas, particularly with 
the high unemployment rate we have got in Oregon, in Portland. 
And with too many Oregonians hurting, biotechnology is an 
opportunity that can be an economic anchor for our state.
    Nobody disputes the opportunities in this field for 
biotechnology growth. Economic development follows that growth 
in a variety of areas, from accommodating educated 
professionals and families and numerous economic spin-offs that 
pay family wages for folks that are out of work.
    I have announced my intention to make job creation my top 
priority in examining requests for federal funds for projects 
in Oregon. Paychecks are the primary need of thousands of our 
families, so they are going to be the primary focus that I have 
as we examine the request for appropriations.
    Oregon communities, agencies, and organizations requesting 
funds are now being asked, not just how many jobs their program 
or project will create, but are those jobs going to create good 
wages and opportunities for our families? I think the 
biotechnology sector offers the kind of jobs Oregonians want 
and need, jobs that pay the good wages that are compatible with 
the spirit of Oregon. For a city dedicated to sustainable 
growth, social consciousness, and civic pride, biotechnology 
offers in Portland the chance to make significant contributions 
to the health and safety of our country and the world.
    Our Governor has established a working group to study the 
access and capital needs of four industries in our state, 
including biotechnology. I commend the Governor's efforts. And 
I also want to note at this point the special efforts of our 
mayor, Mayor Katz, who is working hard to make the federal 
government a better partner in promoting biotechnology for our 
State and this community.
    In closing, we are going to hear from today's panels how 
the federal government can help to develop the potential around 
us and the potential to make a Portland thriving biotechnology 
center for our country. The witnesses today include public 
leaders, biotechnology entrepreneurs, and academic experts who 
share that goal.
    Today, we are going to hear from the Honorable Vera Katz, 
Portland's Mayor; Mr. Gil Kelley from the Portland Bureau of 
Planning; Mr. Bill Grinstein of Pacific Northwest National 
Laboratories; Dr. Denis Burger of AVI BioPharma----
    Voice: How about some opponents of biotechnology?
    Senator Wyden. Let there be order in the room.
    Voice: Opponents with a different perspective.
    Senator Wyden. I would like to make clear that today is a 
Senate field hearing. I would like to state for the record that 
I am doing something nobody has ever done in this state, and 
that is holding open community meetings in every county in 
Oregon to hear from people, all sides. But today is a Senate--
--
    Voice: Opposing voices today. The experts that are----
    Senator Wyden. The Subcommittee will come to order, and I 
am going to direct the staff to take those steps to ensure that 
the hearing can go forward.
    Dr. Peter Kohler of the Oregon Health and Science 
University; Mr. George Pernsteiner of Portland State 
University; and Mr. Donald Mazziotti of the Portland 
Development Commission are here, as well.
    Let us begin first by welcoming the Honorable Vera Katz, 
and she is accompanied by Mr. Gil Kelley of the Portland Bureau 
of Planning. We welcome both of you, and we look forward to 
your remarks.

              STATEMENT OF HON. VERA KATZ, MAYOR, 
                      CITY OF PORTLAND, OR

    Mayor Katz. Senator Wyden, for the record, I am Vera Katz, 
Mayor of the City of Portland. Thank you for arranging this 
field hearing, and I want to welcome all of your staff and 
congressional staff to the City of Portland.
    As you know, Portland is one of the most livable cities in 
this country. We worked hard to achieve, and we worked very 
hard to earn that recognition. At the same time, Oregon, as 
well as this city and this region, has one of the highest 
unemployment rates, as you said, in the country. Livability 
means nothing if people can't support families and find jobs.
    Portland's strong economy during the last 10 years was due 
to our ability to respond to economic opportunities without 
losing our vision of the importance of a quality of life and a 
skilled work force. As we diversify our economy, we kept a 
strong manufacturing base that includes the growth in this 
region and in the State in high technology. We need to continue 
our economic diversification, build on our strength, but 
without sacrificing the quality of life that we so cherish 
here.
    One of the largest employers located in the City of 
Portland is the Oregon Health Science University, and Dr. 
Kohler will describe the range of opportunities possible for 
their future and for ours.
    OHSU has the potential for spawning products and services 
that can be developed right here and in this region. With the 
Health Sciences Center and Portland State University, the 
Oregon Graduate Institute that has merged with OHSU and the 
OSU, Oregon State University, the synergies for application for 
biosciences are limitless. Our goal is to have this emerging 
industry as a force in the state's economy. We have a plan. You 
will hear about it in great detail from Gil Kelley and Don 
Mazziotti.
    We are preparing this city to position itself on the 
cutting edge of the biosciences movement. What this means for 
us is an infusion of high wage jobs, a knowledge-based industry 
that works and supports our institutions of higher education, 
and the opportunity to reclaim the banks of the Willamette 
River, the fish habitat and our citizens. The area that you 
will hear about is the 130-acre site in North Macadam. We call 
it the ``Science and Technology Corridor.''
    It also includes the Health Sciences' main campus that 
employs 10,000 people and Portland State University's expansion 
of their engineering school. This site has a potential to grow 
and to take advantage of the intellectual resources of our 
universities and others in the community involved in the 
biosciences. That fits well with other new economy industries 
of high tech, creative services, and the fact that today--and 
we have branded ourselves as the urban center for a sustainable 
economy.
    But this vision can only happen with focus and commitment, 
commitment of time, commitment of money. And it can only happen 
if we, as a local community, a region, State and the federal 
government, work together.
    To accomplish this vision, we need your help. Funding for 
infrastructure, from streets to high-speed communication links, 
funding for transportation to continue our national leadership 
provided by this city and this region with your help and the 
help of your colleagues in development of public 
transportation, including the first modern streetcar ever built 
in 50 years in this country.
    The geographic limitations you are going to hear about 
today require us to develop very efficient public 
transportation. We also need your help in the cleanup of 
contaminated soils in North Macadam as well as river 
restoration and development of the greenway along the 
Willamette River.
    Making the biosciences part of our economic strategy is 
critical to the vitality and livability of Portland. The city, 
our private and public partners, are ready to work together to 
make this a reality. But Portland and the State of Oregon need 
your help.
    Gil Kelley, the Director of the Bureau of Planning, and Don 
Mazziotti, the Executive Director of the Portland Development 
Commission, will provide you great detail on these 
opportunities and the needs of this community.
    Thank you very much.
    [The prepared statement of Mayor Katz follows:]

   Prepared Statement of Hon. Vera Katz, Mayor, City of Portland, OR
    Portland is the most livable city in the country. Something we have 
all worked hard to achieve and of which we are immensely proud. At the 
same time it currently has one of the highest unemployment rates of any 
region in the state, and Oregon has the highest unemployment rate in 
the nation. Livability ultimately means nothing if talented hard-
working people cannot find quality jobs.
    Portland's enormous positive growth of this last quarter century 
has been because of its ability to respond to economic opportunities 
without losing its vision of being a clean city with clean industry and 
a highly educated workforce. We have proven our ability to perform well 
in supporting a wide industrial base, including the huge growth of high 
tech industry.
    But if our region is one of the hardest hit in the nation by this 
recent recession, then we need to intensify economic diversification, 
building on our strengths while not sacrificing our commitment to 
quality of life.
    Nothing fits this vision of our future better that building on our 
strengths in biosciences, and on the nation's and world's need for the 
type of goods and services that can come from the critical work being 
done in the fields of health research and biotechnology in Portland.
    As Dr. Kohler can tell you himself, the Oregon Health and Science 
University is a center of a wide range of research that can, if 
continued and successfully transferred to the private sector, have 
significant impact on the health of our nation and the world. It also 
has the potential for spawning an unlimited number of biomedical 
products and services that can and should be developed right here in 
Portland and its surrounding communities. With the talent of OHSU and 
our other universities such as Portland State University and Oregon 
State University, the synergies for practical applications of 
biosciences research are limitless.
    And we have a plan:
    The plan involves focussed development in what we have identified 
as the Science and Technology Quarter in the city. Included in this 
area is OHSU's main campus, where it employs 10,000 people. Efforts are 
moving quickly to significantly expand OHSU's facilities on Marquam 
Hill.
    Also included is the Portland State University campus, where 
expanded facilities for its Engineering school are critically 
important.
    Sites exist for biomedical commercialization in several areas on 
the east side of the Willamette, where economic development is critical 
and a workforce stands ready.
    The crown jewel of our plan, is the area we call North Macadam. 
This 130-acre site has the potential to one day be the place where 
businesses come and grow to take advantage of the intellectual 
resources of OHSU, PSU, OSU and others involved in the biosciences. It 
is an ideal location, both because of its proximity to the existing and 
growing OHSU campus, and also because of its proximity to downtown 
Portland and to major transportation arteries throughout the region.
    But such a visionary plan takes enormous focus and commitment, 
commitment of time and money. It is only going to happen if we all pull 
together: at the federal, state and city levels. We are talking about 
building a biosciences community, not just a technology park.

   OHSU and our other research institutions need federal 
        dollars to aid both basic research and the resources necessary 
        to achieve technology transfer to the private sector.

   We need resources for infrastructure required by such highly 
        advanced industrial development: not just streets, sidewalks, 
        water and sewers, but the best in high-speed communication 
        links.

   We need transportation resources to continue the national 
        leadership provided by Portland in development of clean rapid 
        transit. Because of its geographic realities, without efficient 
        public transit, the North Macadam area cannot succeed.

   And we need funds for protecting the environment of this 
        beautifully situated location which has suffered from less 
        well-informed development in the past.

    Don Mazziotti, Executive Director of the Portland Development 
Commission will speak in greater detail about the specific needs of 
developing North Macadam, and of the partnerships the city is 
developing with the private sector to help make our vision a reality.
    Making biosciences a key part of Portland's economic future is 
critical to the continued vitality and livability of Portland. All of 
the City's institutions, private and public stand ready to work 
together to make this a reality, but Portland and Oregon need your 
help.
    Thank you.

    Senator Wyden. Thank you, Mayor. We will have some 
questions in a minute.
    Mr. Kelley?

              STATEMENT OF GIL KELLEY, DIRECTOR, 
                BUREAU OF PLANNING, PORTLAND, OR

    Mr. Kelley. Thank you. Good morning, Senator Wyden. You 
have alluded already to the importance of many of the important 
social benefits of bioscience. I have been asked to describe 
whether a bioscience industry might take root in Portland, and 
why, and what we are doing about it, and how the federal 
government might help.
    I must say at the outset that I am optimistic about the 
potential for bioscience industry developing in Portland and it 
becoming an integral part of the region's economy over the next 
30 years. I also believe that that industry can take root in 
Portland's central city and that the window of opportunity to 
seize that potential is now.
    We Portlanders take great pride in the city we've built. 
Many of the features that distinguish our city from others 
result from thoughtful planning and implementation efforts that 
are effective. Our successes are attributable to taking the 
long view on difficult issues, looking for the best 
opportunities and then assembling the tools and partnerships 
necessary to bring about dramatic changes. This attitude was 
the hallmark of Portland's success 30 years ago in stemming the 
tide of suburbanization and sprawl, in reinvesting and 
revitalizing the core of our city as an economically viable and 
highly livable place.
    When she hired me two years ago, Mayor Katz asked that I 
encourage the City of Portland once again to think boldly about 
future development in the city. And we believe that we can 
build on our past efforts in Portland and actually take them to 
the next level by exploring the potential synergies between a 
healthy environment, a vital and participatory economy, a 
compelling urban form and rich cultural attributes. I believe 
that bioscience and related knowledge-based industries can 
serve these goals well and build upon the strengths and 
investments that are already here in Portland in the Portland 
region. In fact, the city is currently actively engaged in the 
pre-planning efforts that have been known to draw on this 
potential, and these are located within Portland's central 
city. These include a framework plan for a science and 
technology corridor adjacent to the south part of downtown as 
reflected on the drawing to my left. The Marquam Hill Plan, 
which encompasses the site where OHSU now resides, and the 
South Waterfront/North Macadam Plan, which comprises largely 
vacant land and the previously industrial site adjacent to the 
river.
    Before getting into the detail of those, let me set the 
context for bioscience in Portland. Oregon and Portland, 
including the southern Washington area, Portland Metro region, 
have been transitioning away from a natural resource-dependent 
economy over the last 30 years. The first major step in this, 
of course, was the development of an information-based 
technology in Tualatin Valley. Although this industry largely 
began with scientific equipment, then with a computer chip 
manufacturer, it has not only blossomed and has expanded, but 
it has spawned a research sector there that will sustain that 
information technology as that industry grows and changes over 
time.
    I believe that in the case of bioscience, this will occur 
in reverse order. That is to say, while the science and 
technology with regard to information technology grew out of 
corporate research, in the case of bioscience, I believe it 
will grow out of the research conducted at Oregon Health 
Sciences University, and in fact, the merger of these two 
technologies, information and biomedicine, will give Portland a 
relative advantage over other parts of the country.
    Finally, Portland State's aggressive efforts to promote and 
develop engineering expertise in health technology and 
biomechanics furthers the ability for the Portland region to 
develop applications in biosciences.
    While the bioscience industry at the moment in Portland and 
in Oregon is very modest in size, I believe that it can grow 
dramatically over the next two or three decades. I believe this 
can be achieved if OHSU continues its current dramatic 
trajectory of attracting research grants.
    You will hear later from Dr. Kohler about that trajectory. 
But it is indeed dramatic. Their aspirations of reaching the 
top 20 standards for NIH funding seems to be easily within 
grasp. Their strength for Portland relies on initiatives that 
they have already developed and that continue to attract top 
flight talent.
    Rather than proceed with our planning efforts simply on a 
hunch, we commissioned a study by the Battelle Memorial 
Institute of Technology Partnership Practice, and that study is 
appended to my testimony in the record.
    Let me just say briefly that that study found that while 
Portland is already a leader in the digital revolution of 
electronics, computers, communications and informatics, 
Portland and Oregon possess the potential to become leaders in 
important niches of the bio revolution.
    Their findings relate primarily to the existence of that 
research function at Oregon Health Sciences University, as well 
as the merger with Oregon Graduate Institute, and those other 
technologies. They have also found the livability of Portland 
is indeed a factor as well.
    I'm running out of time here. Let me just conclude by 
saying that we are actively engaged in the efforts to ensure 
that the southern end of the downtown and what we're calling 
the Science and Technology Corridor develops to capacity over 
the next 30 years to hold as many as 20,000 to 30,000 jobs 
potentially filled with this industry and its related work. In 
North Macadam and on Marquam Hill, we are actively engaged in 
planning. Those plans are now before the Planning Commission 
and will soon go to the City Council for approval.
    The areas in which the city needs particular help from our 
federal partners involve some the Mayor has already mentioned, 
and Don Mazziotti will talk about in more detail, but those 
involve the transportation infrastructure within that order, 
particularly connections to rapid transit--rapid transit 
systems within the district, as well as connections to the 
regional system that is right at the doorstep; brownfields 
redevelopment, including innovative bank treatments along the 
Willamette River and rehabilitation of industrial sites; basic 
utilities, particularly within the south waterfront North 
Macadam district; creation of incubator space for research in 
emerging technologies; and assistance with capital facilities 
and institutions located or expanding within the corridor.
    I would just say that this corridor possesses a unique 
opportunity to accommodate an industry because it has already 
six academic institutions present in the district. Those all 
intend to stay and expand. We know of at least two others who 
are interested in joining in this area of the central city. It 
can become the incubator for spawning many private applications 
which we hope will also take root in the center part of the 
Portland area. Thank you.
    [The prepared statement of Mr. Kelley follows:]

    Prepared Statement of Gil Kelley, Director, Bureau of Planning, 
                              Portland, OR
    Thank you for providing me this opportunity to share with you some 
thoughts about the potential for development of a bioscience industry 
in Portland. I am optimistic that this and related knowledge-based 
industries will become an integral part of the region's economy over 
the next 30 years. I also believe the bioscience industry can take root 
in Portland's central city, and that the critical window of opportunity 
to seize this potential is now.
    We Portlanders take great pride in the city we've built. Many of 
the features that distinguish our city from others result from 
thoughtful planning and effective implementation. Our successes are 
attributable to taking the long view on difficult issues, looking for 
the best opportunities, and then assembling the tools and partnerships 
to bring about dramatic changes. This attitude was the hallmark of 
Portland's success 30 years ago in reversing the trend of 
suburbanization and revitalizing the core of our city as an 
economically viable and highly ``livable'' place.
    When she hired me two years ago, Mayor Vera Katz asked that I 
encourage the City of Portland to once again think boldly in terms of 
our future development. The Mayor and I believe that we should not only 
build upon successful past efforts but reach new levels of success. 
This should be done by maximizing the potential synergies between a 
healthy environment, a vital and participatory economy, a compelling 
urban form, and rich cultural attributes. Since my hire, I have 
believed that growing the bioscience and related knowledge-based 
industries serve these goals well and build upon strengths and 
investments already present in Portland and the region.
    In fact, the City is actively engaged in three planning efforts 
that draw upon the potential for these industries to grow in the 
central city. These include a framework plan for a Science and 
Technology Quarter adjacent to and overlapping south downtown Portland 
and two specific subdistrict plans within this quarter. The Marquam 
Hill Plan encompasses OHSU's present campus. The South Waterfront/North 
Macadam Plan comprises a large, mostly vacant tract of land on the 
Willamette River where an OHSU campus expansion is being planned along 
with space for other public and private research activities, hotels, 
housing and parks. Before discussing these efforts in more detail, I 
would like to set the context with regard to the potential for 
bioscience development in Portland.




    Oregon and the Portland area, including southern Washington, have 
been transitioning away from a natural resource-dependent economy over 
the past 30 years. The first major step in this evolution was the 
creation of an information technology-based industry, centered in the 
Tualatin Valley. Initially created by producing scientific equipment 
and later by manufacturing computer chips, this industry has blossomed 
and diversified into many areas of information technology. Perhaps more 
importantly, it has spawned an important research sector that will 
enable us to sustain our information-based industries into the future 
as this area of the economy continues to evolve over time. Although 
this research function has primarily existed in corporate venues, it 
has in recent years led to the creation of a more public research 
entity, the Oregon Graduate Institute (OGI), whose activity will serve 
the entirety of the local industry and beyond.
    In the case of growing a bioscience industry here, I believe this 
process will operate in reverse: it will stem from research already 
underway at Oregon Health & Science University (OHSU), and with the 
right set of actions will spin off private applications, many of which 
can be developed locally. The recent merger of OGI with OHSU signals an 
institutional and corporate awareness of an important emerging industry 
trend--a ``mega-trend'' if you will--the convergence of information and 
bioscience technologies. This trend may put Portland at a relative 
advantage over some other areas of the country if both kinds of 
research activities can reach a critical mass here. In addition, 
Portland State University's engineering program with a focus on 
nanotechnology and biomechanics will also contribute to Portland's 
potential to be at the center of revolutionary discoveries and new 
applications in biotechnology.
    While the Portland area's present bioscience industry is very 
modest in size, about 2,300 employees in the year 2000, its potential 
growth in the next decade or two may be very high. I believe this can 
be achieved if OHSU continues its dramatic trajectory in attracting 
critical research grants ($41 million in 1989 to over $200 million in 
2002), and reaches its goal of being one of the top 20 NIH funding 
status within the next few years (from 87th in 1986 to 29th in 2000). 
OHSU already has developed highly respected research niches and 
continues to build upon its strengths in pediatrics, heart, cancer, 
neurosciences, diabetes, bioinformatics/health informatics, proteomics, 
genomics, and biomedical engineering.
    To test the validity of our hunch, the Planning Bureau recently 
commissioned a study by Battelle Memorial Institute's Technology 
Partnership Practice entitled ``Building Bioscience in Portland: An 
Assessment of Oregon Health & Science University's Research Prospects 
and Portland's Bioscience Economic Potential,'' February 2002. 
Battelle, a non-profit research group, is the nation's leading 
consultant on building effective higher education-business partnerships 
for technology-based economic development. The purpose of this study 
was to assess the potential for establishing a substantial bioscience 
industry in Portland and to examine the relationship of OHSU's current 
and planned activities to that potential. Their report is appended to 
this testimony, along with two other reports that examined questions 
about land availability and transportation needs.
    The Battelle Report offers a key finding regarding the economic 
potential for continued scientific innovation in the Portland area: 
``Already a leader in the digital revolution of electronics, computers, 
communications, and informatics, Portland and Oregon possess the 
potential to become leaders in important `niches' of the `bio 
revolution' as well.'' Additional findings include:

   Of the factors needed for developing a successful bioscience 
        center, having a critical mass of research is most important.

   OHSU's research function is approaching critical mass and 
        its goal of achieving top 20 NIH funding status is achievable 
        if OHSU can move forward quickly with adding research and 
        support facilities.

   OHSU has a realistic and comprehensive understanding of how 
        to achieve this goal by building upon its core multi-
        disciplinary strengths and by recruiting ``star'' faculty in 
        emerging areas.

   OHSU's ability to attract further research grants is 
        constrained by their currently limited laboratory space.

   The OHSU/OGI merger and the $500 million combined Oregon 
        Opportunity Fund bolsters the ability to both accelerate and 
        expand research and development opportunities.

   The quality of life in Portland is an important asset in 
        attracting top research talent.

   Bioscience research and many forms of production can locate 
        in a central city location where good transit and other urban 
        amenities exist, even if that means going into mid-rise (5-15 
        story) buildings, particularly where they are proximate to 
        clinical and teaching facilities.

    The Battelle study also concluded that Portland needs to move 
quickly to fill critical gaps:

   Plans and infrastructure to make expansion lands available.

   Wet lab incubator and multi-tenant space.

   Rapid, reliable transportation between Marquam Hill and 
        other parts of the Science and Technology Quarter as well as 
        links to the regional transportation network.

   Stronger networks between researchers, service providers, 
        industries and other groups.

   Increased access to capital at all stages of program 
        development.

   Sustained commitment to education funding.




    I believe the first three gaps can be addressed and Portland's 
advantages captured through the development of a Science and Technology 
Quarter at the southern edge of the central city, based on some key 
factors:

   OHSU is reaching the developable limits of its Marquam Hill 
        campus, and strongly prefers expansion nearby rather than in a 
        more distant part of the region.

   Portland State University (PSU), the university with the 
        highest enrollment in the state, forms a significant anchor to 
        the Quarter. PSU's vision is of an urban university not 
        dissimilar from the University of Washington in Seattle or the 
        University of California in Berkeley. The University District 
        Plan sets forth an ambitious agenda for PSU improvements, 
        including a new building for the School of Engineering.

   Oregon State University and OGI have expressed some level of 
        interest in creating a presence within the Quarter. Several 
        specialized medical schools affiliated with OHSU, including the 
        School of Pharmacy and School of Dentistry, have also expressed 
        interest in expanding and have the potential to develop applied 
        technologies.

   Portland has committed itself to increasing jobs in the 
        central city. A very preliminary analysis of Science and 
        Technology Quarter jobs production indicates the capacity to 
        accommodate between 20,000 and 30,000 new jobs.

   Much of the land at the southern edge of the central city is 
        ripe for redevelopment. An analysis of property values shows 
        that as many as 170 net acres could be redeveloped over the 
        next three decades.

   Creation of new jobs in the central city makes use of the 
        substantial investment in the existing regional transportation 
        system.

   The Quarter's proximity to the heart of the central city has 
        the potential to build upon Portland's biggest success: a very 
        livable and exciting 24-hour, mixed-use urban district.

   Bioscience can be accommodated in a vertical format (taller 
        buildings) rather than a land-intensive industrial park format.

    Our approach has been to sketch out this framework of the Science 
and Technology Quarter and to focus initial planning efforts in the two 
subdistricts where activity would begin and where detailed land use 
policy, infrastructure financing, land assembly and environmental 
improvements are critical. These are Marquam Hill and South Waterfront 
(North Macadam).




    Marquam Hill is located just south of downtown Portland, 
approximately one-half mile west of the Willamette River. The area has 
very limited road access, but is home to over 4 million square feet of 
institutional development, including OHSU, the Veterans Affairs Medical 
Center, and Shriners Hospital for Children. Surrounding this intensive 
urban scale development are hundreds of acres of environmentally 
sensitive open space; some is publicly owned park land and some is 
privately owned undeveloped land. Nestled between these two extremes 
are pockets of single family housing.
    The proposed Marquam Hill Plan presents new policies and 
regulations to allow but limit institutional expansion, protect 
valuable open space and natural resources, and enhance neighborhood 
livability. A controversial but key provision in the plan proposes to 
allow the development of a suspended cable transportation system 
(aerial tram or gondola) linking Marquam Hill with a proposed OHSU 
expansion site in the North Macadam district.




    The proposed Marquam Hill Plan is currently being reviewed by the 
Planning Commission and their recommendation is expected to be before 
City Council early this summer.
    The South Waterfront (North Macadam) district is a 130-acre, 
previously industrial area on the west bank of the Willamette River 
just south of downtown. Current plans would accommodate at least 10,000 
jobs and 5,000 housing units. Buildings could be as tall as 20 stories 
and the district would include a reclaimed riverbank with a broad, 
undulating ``greenway'' as its front yard. Policies call for interior 
parks and plazas, extension of the Central City Streetcar into the 
district, connections to other locations by regional transit, creation 
of hotels, restaurants and conference facilities, and innovative, 
environmentally sound building practices.
    The detailed plan for the district will be before the City's 
Planning Commission for hearings next month and is expected to be 
before the City Council by fall. A group of private investors, North 
Macadam Investors Inc. (NMI), are making plans with OHSU to create an 
OHSU campus, several hundred housing units and a hotel-conference 
facility in the center of the district within the next 3 years.




    The City of Portland and private parties face immediate challenges 
in bringing these plans to fruition. Infrastructure costs are very 
substantial, even for the initial NMI/OHSU development and cannot be 
borne by local sources alone. I believe federal partners will be needed 
to assist with urgent capital needs, including:

   Transportation infrastructure--particularly for rapid 
        transit systems within the Quarter and links to the regional 
        system and Marquam Hill.

   Brownfield redevelopment and innovative riverbank/greenway 
        treatments, particularly in the South Waterfront (North 
        Macadam) district.

   Basic utilities, particularly in the South Waterfront (North 
        Macadam) district.

   Creation of incubator space for research in emerging 
        technologies.

   Assistance with capital facilities for institutions locating 
        or expanding within the Quarter.

        
        

    Don Mazziotti, the Executive Director of the Portland Development 
Commission, will provide detailed testimony regarding these needs.
    In summary, I believe the development of a biotechnology hub in 
Portland's central city is an enticing and very real opportunity. The 
transformative economic development potential, when coupled with the 
opportunity to induce dramatic urban redevelopment, represents the kind 
of threshold opportunity that comes along perhaps only once each 
generation. Fully realizing the potential will be a collaborative 
effort that includes local, regional, state, and federal commitments to 
hard work, good plans, and excellent implementation. I am sure it can 
be done.
    Thank you again for the opportunity to share these thoughts.

Attachments: *
---------------------------------------------------------------------------
    * Attachments have been retained in the Subcommittee files.
---------------------------------------------------------------------------
        Building Bioscience in Portland (the ``Battelle Report'')
        http://www.planning.ci.portland.or.us/pdf/
        mh__biosc__ptld020802.pdf
        Marquam Hill Plan Alternative Location Analysis
        http://www.planning.ci.portland.or.us/pdf/
        mh__alt__location020802.pdf
        Transportation Peer Review Panel Report
        http://www.planning.ci.portland.or.us/pdf/
        mh__trans__peer010402.pdf

    Voice: Again, Senator Wyden, as a citizen of the United 
States, I would like to offer a diversity of opinions, sir. Are 
we engaged in a Dick Cheney energy task force where we only 
listen to the business people? Where is the dialog? Where is 
the diversity of opinion?
    Voice: Right on.
    Voice: I'm leaving because this is just a charade. It's all 
about the people who agree. Where is the debate? Dick Cheney is 
doing the same thing with the energy policy.
    Senator Wyden. Let me just state for the record, I very 
much respect the right of all persons to petition the 
government, and I know people have different views on these 
issues and----
    Voice: And they are not represented here.
    Senator Wyden. I would only state again that on my watch, 
as United States Senator, I have done something nobody has ever 
done in our state's history, and that is to have open meetings 
in every county every year. Nobody has any problem at all in 
our state being heard on issues that are important under public 
meetings open to all.
    Today, however, is a Senate field hearing. We are going to 
have a Senate field hearing. Ma'am, with all due suspect, 
again, we welcome your attendance here, but we are going to 
have to go forward and have this hearing in an orderly way. I 
am going to direct the staff again to take the steps that will 
ensure that the hearing----
    Voice: To ensure our silence.
    Senator Wyden. Mayor, let us begin talking about the job 
creation possibilities in terms of Oregon. In fact, I think 
what I would like to do, perhaps, Mayor, you and Mr. Kelley can 
decide between yourselves how you want to handle the questions. 
These involve the plans that you all have worked on jointly. 
Let's start by talking about the job creation potential for 
Oregon and Portland on these issues.
    As both of you know, there is so much economic hurt out 
there. We are proud to be leading the country in a lot of 
areas. We don't much like leading the country in unemployment. 
Consistently, we find ourselves in just that boat. So, I think 
the first thing we ought to be examining as you all look at 
your initiative is what kind of job creation potential is there 
for good family wage employment as part of your plans? I know 
you have got 18 months in this exercise in terms of making the 
case for Portland and biotechnology.
    Let us start with the thing that I think is first on the 
minds of the citizens and that is what is the job creation 
potential here? And Mayor, however you and Mr. Kelley want to 
do it.
    Mr. Kelley. Yes, I think there are two critical aspects to 
that. One is the number of new jobs that might be created, and 
the second is the quality of those jobs and how Oregonians 
might get access to them, and the second is more difficult.
    This is a collective, well-educated hunch that we are 
asserting, that bioscience will take off from the research that 
is currently primarily at OHSU and OGI. We believe--excuse me--
OHSU now employs 10,000 people in the city and is the city's 
largest employer. A substantial number of those people are 
involved in the three disciplines that really feed the 
potential private sector spinoff from this. And those are 
research and clinical work and teaching. In many cases, the 
highest level of research that may be attracted here on grant 
status will actually engage in all three of those activities. 
Attracting that grant money brings with it the possibility of 
additional research staff, which may or may not come from the 
Portland region.
    The real power, I think, is as applications develop from 
that research. If the right steps are taken with patenting, 
with raising capital for space in the city, the possibility to 
locate the applied research and even predevelopment or 
development activities in Portland is really the prize here, 
and that is why we have taken great efforts to make land 
available, to plan the infrastructure, and to struggle to find 
ways to finance the infrastructure so we have that capacity.
    The job spectrum within these institutions is quite broad, 
and there are entry level and semitechnical and highly 
technical positions. So, I think there is a range of salaries 
and incomes involved. Overall, the average wage in the industry 
is high and would be a good thing for Oregonians if it can 
expand.
    We expect that on a very conservative basis that the amount 
of space that OHSU builds for its own reasons might be 
multiplied two or three times over the 30-year span for private 
industry. I think that is a very achievable number. If we do 
the right things and do them soon enough to make the 
investments, it could go beyond that number. I think there is a 
substantial private spinoff that may be involved here. It is 
not only the biomedical but also other related medical schools, 
the School of Dentistry, the School of Pharmacy, which are, in 
fact, spinning off new technologies for delivering therapies 
and so forth. Those are very important in related fields as 
well.
    Mayor Katz. Let me just add, Senator, that in addition to 
employment opportunities and the expansion of jobs, this is 
also an opportunity to build another community within our urban 
growth boundary. It is over 100 acres where we not only expect 
the expansion of the research and development and hopefully 
spin-offs by the private sector, but also a place for people to 
live and to recreate and to provide opportunities for the 
communities around Marquam Hill to reach the river, which is, 
right now they are completely prevented from doing that. So, it 
has a multifaceted approach.
    Today, we are specifically talking about the employment in 
the future of biosciences, but we are also looking at the whole 
community and the opportunities there.
    Senator Wyden. Let me push you a little bit, Mr. Kelley. 
Give me a number, even a conservative number because I think 
that is what citizens want. I think we all know that due to the 
good work of the Mayor as well as many others that Portland had 
a good win this week in terms of the wind firm. This is a 
chance to build a very exciting trend in Oregon for renewable 
energy and the like.
    Be conservative for a moment but push a little bit so 
people can walk out of here with a sense--even conservatively--
of what might be the number in terms of jobs created.
    Mr. Kelley. Well, I think the lines are blurry between 
bioscience and biomedical and some of the other information 
technology.
    Let me just answer it this way, and I would also ask you to 
ask the same question of Don Mazziotti because----
    Senator Wyden. Fair enough.
    Mr. Kelley.--he is also doing a study at the moment of 
different industry sectors and clusters.
    I would say that we are planning on a capacity basis to 
hold at least 20,000 to 30,000 new jobs in the Science and 
Technology Corridor. How many of those are directly 
attributable to bioscience is difficult to say.
    The South Waterfront or North Macadam District alone 
intends to hold 10,000 jobs over the next 20 years, and I think 
that that number is probably achievable in that timeframe with 
spin-offs from the various educational institutions that I 
mentioned.
    Senator Wyden. We will let you off the hook and get Mr. 
Mazziotti. Mr. Mazziotti is on notice that he gets more 
questions.
    Mayor, I think you made a good point in terms of 
livability. Please amplify a little bit. When you are making 
the case for biotech companies both coming and staying as you 
try to promote this, what do you think are the two or three 
things that are our best selling points in terms of making 
Oregon attractive and viable for biotech?
    Mayor Katz. It's an easy question to answer because it is 
the same with almost every industry and company looking to 
expand or coming into this region, and that's the quality of 
life, because the bottom line is it is their families that are 
going to move and their children that are going to go to the 
schools. It's our educational opportunities, from elementary 
through to university opportunities.
    But if I had--if I had to point to the most critical issue, 
that's a skilled work force. It isn't the taxes. Sure, they 
want us to put packages together of available tools that we 
have at the local level and at the State level, but what they 
want most of all is the availability of a work force that has 
the skills to meet their needs and to meet their needs quickly. 
And one of the things that we are able to offer here is we have 
three community colleges within this region, as well as a 
university system that is ready and prepared, because I warned 
them that if we're going to be successful, they are going to 
have to be ready immediately and prepared to provide those 
skills and to retrain and train people who are either 
underemployed or unemployed or people that want to develop new 
careers.
    Senator Wyden. Why, Mayor, did you all choose biosciences? 
I mean, in effect, when you are talking about your economic 
development strategy, you have got a whole host of things that 
you can look at in areas that strike you as promising and the 
like. Why Portland and the biosciences?
    Mayor Katz. Well, because we have--we still maintain one of 
the few cities in this country that has still maintained a 
strong manufacturing base. We look at clusters of industries. 
We identified the creative services as a cluster several years 
ago. That's grown very successfully. But the obvious answer to 
the question is we have the Health Sciences University up on 
the hill growing, expanding there and ready to expand somewhere 
else in this region. And with them, we have our partners at 
Portland State University. The obvious place for them to expand 
is close to where their medical research and their medical 
services are provided, and that's up on the hill. To come down 
to North Macadam and to provide a transportation system for 
them that works for them in the community is really critical. 
That's one of the reasons that we picked biosciences, because 
we have the foundation here in this community of major research 
accomplishments, a bright future, a growth opportunity for this 
city and for the state because it has tentacles that move all 
the way out to other parts of Oregon.
    Senator Wyden. What, in your view, are the barriers to 
Portland's tapping its full potential as a biotechnology hub?
    Mr. Kelley. That's a very important question, and we asked 
the Battelle folks to look at that question. Let me just 
summarize their six findings in that area. While they said we 
have many strengths and advantages, they did point to six 
weaknesses.
    First is we lack plans and infrastructure to make expansion 
lands available. You've heard today that we're actively engaged 
in remedying that situation. We need your help in that regard, 
particularly on the infrastructure side. There is lack of wet 
lab and incubator space and multi-tenant space in Portland at 
the moment. Effectively they said that OHSU's ability to 
attract new grants is only limited by the available space to 
them, not by their own plan or their own research abilities or 
abilities to attract that grant money.
    The third thing was rapid and reliable transportation 
between Marquam Hill and the expansion area, particularly for 
the South Waterfront and North Macadam area and better links to 
the regional transportation system, directed at the center of 
the region but not extremely well linked.
    The other three are more difficult and take, really, the 
industry and the state legislature playing a major role: 
Stronger networks between researcher service providers, 
industries and other groups relative to other regions who are 
more mobilized in this area; the networks are not yet in place. 
Increased access to capital is very critical, and that will 
need to grow over time. But really, all stages of the program 
development from predevelopment to feed capital in the various 
stages of developing therapies and applications, Portland is 
remote from the major capital markets. And finally, a sustained 
commitment to education in the state. That has changed somewhat 
with the Oregon Opportunity Fund, but it needs to exist at all 
levels of education so that Oregonians do find their way into 
these good, high paying jobs.
    Senator Wyden. I would like to next get you to respond to 
critics of biotechnology. We have had folks here already this 
morning who share those views, who see biotechnology as 
undesirable from an environmental standpoint. They have 
concerns in a whole host of areas from genetically altered 
foods, to animal rights, to pollution, to manufacturing plants. 
How would you respond to those concerns, and why have you 
characterized biotechnology as an industry that would be clean 
for Oregon? That is of enormous importance to the people of our 
state. We have consistently been first, as you both know, in 
terms of clean industry that we can be proud of. So, what do 
you mean when you describe biotech in your plans as being part 
of that clean tradition that is so important to the people of 
Portland and the people of Oregon?
    Mr. Kelley. Well, I think philosophically, like any 
scientific or technological endeavor, there are possibilities 
for misuse, as well as for accomplishing wonderful social 
goods. That really depends on the individuals involved, the 
credibility and the integrity of the institutions involved, and 
frankly, regulatory oversight. This is a highly regulated 
sector of the economy. There are safeguards and checks there.
    We feel that the particular endeavors of Oregon Health 
Sciences University are really geared to the kinds of things 
that you were articulating earlier, that is to say, to curing 
some of the most difficult and plaguing diseases and medical 
conditions that exist now in our population. I think that is 
really their focus, and Dr. Kohler can explain that in more 
detail.
    We're very encouraged by the kinds of research and the 
activity that goes on here. And I think there is a possibility 
of developing Portland niches that are perhaps the most 
socially responsible in the industry.
    Mayor Katz. Let me respond this way. One of the reporters 
asked me how are you going to compete with the Bostons and the 
San Franciscos of the world? And there is no way that we can 
compete with major medical research centers broadly, but we can 
find niches, and we do look for centers of excellence, and 
those are the ones that we are very interested in developing. 
And Dr. Kohler can certainly respond more to those questions.
    And Senator, I need to meet with one of the potential 
candidates for the Superintendent's job in about 10 minutes. 
So, I'm going to have to excuse myself.
    Senator Wyden. We will let you get out the door. We are 
going to keep Mr. Kelley for another two or 3 hours.
    No--I have a few additional questions, but I am going to 
let you get out the door. I think it is worth noting, 
particularly for those of us who are elected officials, we are 
going to have to be able to show at community meetings and 
other kinds of sessions that we deliver in making sure that 
biotechnology is in the tradition of this state, that it is a 
clean industry, that we can address concerns with respect to 
environmental questions and public health questions and human 
rights questions, animal rights questions. And I know you share 
that view, and Godspeed.
    Mayor Katz. Thank you again for bringing the Subcommittee 
here.
    Senator Wyden. Mr. Kelley, let us talk a little bit, if we 
could, about the question of attracting companies versus 
retaining the companies. We are trying to attract 
entrepreneurial businesses, biotechnology businesses. We have 
had some folks leave the state. People have gone to the San 
Diego area. People who have gone to Pennsylvania. People who 
startup in California based on discoveries from OHSU.
    Once you attract these promising firms, what do you have in 
mind in terms of making sure we can keep them?
    Mr. Kelley. Well, I think there are a couple of aspects of 
that that are critical. One is achieving the critical mass here 
of both the applied research within the institutions, and the 
Battelle study concluded that OHSU is very close to achieving 
that critical mass.
    The second thing is to achieve a critical mass of 
industries surrounding and locating in proximity to the 
institutions. That is why we have taken such great pains to do 
the work that we are doing now in the South Waterfront-North 
Macadam area and other parts of the central city to make that 
available.
    Clearly, there has to be a lot of work behind the scenes, 
if you will, in terms of patent-sharing entrepreneurialism on 
the part of OHSU and others. I think there is an important bill 
in the legislature later this year to allow some participation 
in the private benefits on the part of the educational 
institutions. A series of things that have to be done to lay 
the groundwork.
    It is then important for Don Mazziotti's agency to work 
very hard with the--both the institutions and the particular 
private businesses to give them all the encouragement that they 
can to stay and expand here.
    I will have to say that I think there is a third area, 
which is not only to retain and to attract, but to grow our 
own. And I think that's primarily what we're focused on here is 
out of the research that's developed locally, we want to grow 
companies locally from that.
    Senator Wyden. In terms of creating a biosciences 
community, the history of Federal involvement with local 
technology is sort of strewn with all kinds of examples of 
empty incubators that graduate few companies, do not become 
self-supporting and basically get put on that sort of long list 
of boondoggles and failures that sort of involve the 
combination of inept government with pork-barreling and the 
like.
    I know you are very concerned about this. Mayor Katz, in 
her written testimony, referenced making sure that what we are 
going to do is build a bioscience community, not just the 
technology part. I would like you to sort of explain the 
difference, in particular, sort of tell the Subcommittee what 
you have learned from other communities so that we can make 
sure that we are going to have an incubator that makes a 
difference, an incubator that really does allow us to graduate 
self-supporting companies. We want to make a difference and use 
these dollars being creative and innovative.
    Mr. Kelley. Very, very important question because I think 
there are as many as 40 states--maybe more now--that have some 
kind of biotechnology development strategy. We are not using 
the method that ``if we build it, they shall come.'' That might 
be a recipe for success or failure. What we are trying to do is 
ensure a higher degree of success by looking at the activity 
that's already here and the pressing needs that the 
institutions that are here now have for that kind of space. We 
know that space could be used immediately. And so, our plans to 
build that in proximity to the other critical teaching and 
clinical functions is really, I think, our solution to that. So 
that we will start and build over time as the demand occurs, 
but we think that demand is actually going to be highly 
accelerated over the next few years in Portland. We are going 
to have trouble keeping pace with it. Even with federal 
partners, we don't think we will have those kinds of resources 
to achieve that kind of model, and nor should we.
    The other thing that Mayor Katz alluded to, which is very 
important, is that we are not building a sort of sterile campus 
here. We are really envisioning the Science and Technology 
Corridor as a very mixed use district, as an organic part of 
central Portland that will include housing, hotels, conference 
centers, parks, retail, restaurants and a wonderful riverfront. 
So, in many ways, Portland's diversity of its uses in the 
center is its best insurance that it survives over time. And I 
think all we're trying to do is provide capacity within that 
framework for bioscience and other high technology or 
knowledge-based industries to flourish.
    Senator Wyden. Walk us through, if you would, those areas 
where you thought that the federal government could play a 
useful and constructive role for you. Start with the 
transportation piece, then go to the brownfields efforts. There 
probably were a couple of others that were important, but start 
with the transportation and the environmental pieces.
    Give us a sense of what the timetable would be, the cost, 
and again, how you would address those in line with the 
commitment that you and the Mayor are making to ensure that 
this focuses on the clean tradition of industry in Oregon?
    Mr. Kelley. The two areas where we feel the activity will 
initiate in bioscience and related private technologies are on 
Marquam Hill and in the South Waterfront, North Macadam 
district. Those are both highly challenged in terms of the 
topography on the hill and sort of isolated or landlocked 
nature at the base because of the current infrastructure.
    What that means is that access to both those districts by 
car is difficult. So, we are forced into a situation to rely on 
our tradition in Portland of providing a high level of transit 
and non-single occupant-vehicle means of travel. So, within 
that framework, I think there are several critical needs. I 
know Don Mazziotti will speak to these as well. The extension 
of the Portland streetcar, which connects the downtown directly 
to the North Macadam District, is of critical importance. That, 
in turn, connects people to the regional transportation system, 
both with Tri-Met buses and with Max. So, that connection is 
absolutely imperative. Over time, we would like to see that 
extended to Lake Oswego because a lot of the workers coming 
into this corridor will be coming from south and southwest 
parts of the region. And an extension of that to the Lake 
Oswego area is another critical piece.
    We look forward to the south extension of the light rail 
going toward Milwaukie to come either directly into or very 
close to the North Macadam District, and that is a critically 
important project, once again drawing a huge population of 
workers right into the heart of the Science and Technology 
Corridor as well as to the downtown. Those are the top two.
    I would say, in addition to that, there is a possibility of 
participation in some kind of transportation forum between--
directly between the hill and North Macadam. You may be aware 
of a controversial, but, I think, important proposal to provide 
some kind of aerial connection system between the hill and 
North Macadam. I think those are very critical infrastructure 
improvements on the transportation side.
    We need to see the streetcar occurring within the next 3 
years, the rapid transportation between the hill and the base 
of North Macadam in about the same timeframe. The south light 
rail extensions may take a bit longer, but those are in 
planning stages now at Tri-Met.
    So, I think on the transportation side, those are the most 
critical. We obviously have other problems to solve in terms of 
just street infrastructure, which doesn't exist now in the 
South Waterfront area.
    With regard to the riverbank restoration of brownfields, 
that, again, is an immediate need. A number of properties there 
are contaminated as was a formerly industrial site. The whole 
landscape of North Macadam has been manipulated over time and 
needs to be reworked so that it helps us meet our collective 
mandates in the city to restore natural health for fish and 
wildlife.
    We have a very ambitious program in the city under the 
city's River Renaissance Program to restore riverbanks for 
natural values and also to get public access there. So, the 
greenway along North Macadam is really an extension of the Tom 
McCall Waterfront Park metaphorically, but done in a way that 
is more environmentally sensitive and would be given the 
additional challenge of having to deal with those contaminants. 
That's a future tremendous amenity for this district when we 
were looking for kind of a defining feature of the North 
Macadam District, but we will need major investments to pull 
that one off.
    Senator Wyden. Let me begin by way of describing the 
challenge. I have to urge you to take out a sharp pencil, as my 
mother used to say whenever I was asking for various sums of 
money for various and sundry things that I had in mind. It is 
going to be tough to get the dollars needed for the 
transportation, and then environmental remediation work is at 
the top of my priority list. One of the reasons that I wanted 
to chair this Subcommittee, in particular, is to promote our 
opportunities for biotechnology within the kind of clean future 
that Oregonians want. So, we are going to need those numbers.
    Mr. Kelley. We will be doing that--the Portland Development 
Commission. We'll be doing that right away.
    Senator Wyden. Unless you have anything further, we will 
let you go. Thank you very much.
    Mr. Kelley. Thank you.
    Senator Wyden. Next panel, Mr. Bill Grinstein, Associate 
Director of Public Affairs with Pacific Northwest National 
Laboratories, and Dr. Denis Burger, Chief Executive Officer of 
AVI BioPharma.
    Gentlemen, we welcome you, Mr. Grinstein, for your good 
work in Seattle, and Dr. Denis Burger is well recognized as an 
innovator in the field. Gentlemen, welcome.
    We will make your prepared remarks, anything you have, 
formally a part of the hearing record. If you want to talk a 
bit, I might have some questions, and make sure that you get a 
chance to address what is important.
    Mr. Grinstein?

       STATEMENT OF BILL GRINSTEIN, ASSOCIATE DIRECTOR, 
    PUBLIC AFFAIRS, PACIFIC NORTHWEST NATIONAL LABORATORIES

    Mr. Grinstein. Thank you, Senator Wyden. Thanks very much 
for inviting me to participate.
    I'm Bill Grinstein, Associate Director of Public Affairs 
for Pacific Northwest National Laboratories, which is operated 
by Battelle, which you've heard about earlier today because of 
the study on Portland, for the United States Department of 
Energy.
    Our laboratory has major initiatives in biosciences, 
molecular and systems biology, and we have a lot of strategic 
relationships and collaborations with major research 
universities in the Northwest, both in the State of Oregon and 
the State of Washington. We are also actively involved in the 
bio-organizations nationally and in Washington: The Biotech 
Biomedical Association in the State of Washington (WBBA), which 
I serve on the board of. Also, Dr. Adrian Roberts, my colleague 
here, has been very involved in the Portland area activities, 
is very active with the Bioscience and Medical Technology 
Alliance. So, we are, even as a national laboratory at the 
Department of Energy, very involved in health and the biologic 
sciences in the Northwest.
    In addition, we have been involved through Battelle in 
doing a study for the BIO organization which looked at 
bioscience and biotechnology activities across the country at 
the state level. I have been asked today to talk a bit about 
what is going on across the country. We recognize that there is 
an enormous amount of opportunity. It varies from state to 
state, but we thought that might be instructive for you, your 
staff and for the audience today.
    The study that BIO did, which was released in September, I 
brought along. I actually downloaded it so that the staff could 
have a copy. And I know how they like to----
    Senator Wyden. All this free time for reading.
    Mr. Grinstein. Well, there will be a significant test after 
this, but it does include an assessment of initiatives and 
needs of biotech companies and the initiatives states are 
providing. It was mentioned earlier that 41 states have 
programs that are described in the study. So we thought that 
would be of some interest to you.
    As I mentioned, this study is available through BIO, and 
people who want to access it can get it from their web site, 
which is www.bio.org. The needs have already been described to 
a certain extent in previous presentations, but let me 
reiterate. Strong academic research institutions focusing on 
basic research in biosciences. Access to early stage capital. 
Successful tech transfer. We talk a lot of tech transfer, but 
unless the company successfully commercializes that technology 
and makes a profit, we don't consider it successful. 
Specialized facilities; we talked about incubators and science 
parks already. Highly skilled work force and stable supportive 
policy structure. And, as I mentioned, there are several states 
that have significant efforts as well as states that have 
lesser efforts. Let me quickly describe a little of that so we 
get a flavor of that.
    Fourteen states have done bioscience strategies. Some of 
the significant ones are Arkansas, Hawaii and Michigan--States 
with very different engagement in bioscience. Interestingly 
enough, Michigan's strategy resulted in a $50 million a year, 
20-year program that appropriated funds from the tobacco 
settlement creating a life sciences corridor in the State of 
Washington--excuse me; I need not to be such a geographic 
chauvinist--in the State of Michigan.
    We have seen a lot of increases in state funding for 
academic research. Let me just cite some examples for this. 
These are all State appropriations: California, $100 million 
for the life sciences out of $400 million program to be matched 
by $200 million of private dollars including three institutions 
in the U.C. system; Delaware Biotech Institute, $85 million; 
Illinois, three programs including the Genome Institute, 
Biomedical Research Institute and the Imaging Center. Three 
different universities, all part of a $2 billion venture tech 
initiative for the State of Illinois. In New York, the four 
Bioscience Star Centers, $15 million each. Georgia, $300 
million, which includes endowments for faculty support, 
research budgets and facilities.
    In addition, we have seen several states who are actually 
directly financing bioscience activities on the venture and 
investment banking side. Some have small funds, some have large 
funds, but California, out of their CALPERS Retirement Fund now 
has earmarked a portion of that for a venture in the 
biosciences.
    Five states have established funds, including 
Massachusetts, North Carolina and several other states 
including Ohio are under development. In facilities, nine 
states fund directly incubators in science parks, and the 
concerns that you raised earlier about their success is 
relevant. What are we getting out of them? Twenty-six states 
have research parks with some public involvement that have 
bioscience participation.
    We have active trade associations. Of course, the Oregon 
Bioscience Association is a great example of that. We have them 
in 35 states, many states having more than one trade 
association. The existence stresses importance of networking 
and communication, and hopefully, you are hearing from some of 
these associations.
    Many states are now funding state level commercialization 
centers to facilitate technology transfer. California, 
Oklahoma, Maryland and Virginia are great examples of this. We 
are just beginning to start this in the State of Washington. In 
the workforce arena 14 states now have A.A. degrees in the 
biosciences, and that does include Oregon. We are seeing very 
active partnerships with 4-year schools in many states, and the 
research institutes outside of the universities, such as the 
Fred Hutchinson Cancer and Research Center in Seattle and 
industry--we are seeing very active collaborations in that 
arena.
    Obviously, there are concerns from the biotech community, 
and the venture side and investment banking side, about the 
predictability of investment, and a lot of it is related to 
regulatory issues. So, there are strong interests in genetic 
privacy laws and the impacts of cloning legislation----
    Senator Wyden. We're just going to have to move on 
summarizing, Bill.
    Mr. Grinstein. I'm actually finished with my formal 
discussion. Just as I said, to give you a flavor that there is 
a lot of activity around the country, and it is a very 
competitive environment.
    Senator Wyden. Well said. We are glad you are here.
    Dr. Burger?

STATEMENT OF DENIS BURGER, Ph.D., CHAIRMAN AND CHIEF EXECUTIVE 
                     OFFICER, AVI BIOPHARMA

    Dr. Burger. Senator, thank you for the opportunity to 
testify today. I am Denis Burger, and I am the Chairman and CEO 
of AVI BioPharma. I am really representing today the private 
biotech sector. After 18 years at OHSU, I have been involved 
the last 15 years in the private biotech sector, been involved 
in cofounding a couple of biotech companies. I sit on the board 
of two publicly traded biotech companies in the San Francisco 
Bay Area, cofounder of a company that is currently public in 
Dublin, Ireland which employs about 500 people and is a 
financial success.
    Here in Oregon, I run AVI BioPharma. We are a publicly-
traded NASDAQ company. We have a market capitalization of about 
$250 million. Over the last 10 years, we have raised about $125 
million to fund the company. We currently employ about 85 
people. We have our own manufacturing facility. We expect our 
employment to increase. We have doubled over the last year and 
a half and will double again over the next year and a half. We 
currently have six drugs in late stage clinical development, 
ranging from phase one to phase three clinical trials, and one 
of the principal reasons that Portland works for us today is 
the availability of clinical sites in the region from the 
private hospitals to OHSU where we, at four different 
institutions, currently have ongoing clinical trials.
    The key issue that I am often asked as a representative 
from the private sector is what is it that is attractive about 
Portland and Oregon. And when we are out trying to fund our 
Oregon company nationally, we are always asked, ``Can you 
recruit to Oregon? You are not Seattle. You are not San 
Francisco. You are not San Diego. How do you recruit? Wouldn't 
you be better off in one of those other centers?'' So, I look 
at it in a little different perspective because I have to 
explain this to the financial folks. And we have a proximity 
here right between a very high cost of living and a high cost 
of doing business in Seattle and San Francisco. And Oregon has 
a huge, huge cost of living advantage. The answer to that 
question is we can recruit from San Francisco, or from San 
Diego, or from Seattle any time we want for the principal 
reason that these are high paying jobs. And in San Francisco 
and Seattle, even those in high paid jobs can't afford housing. 
Here, our scientists can own their own homes. So, it is a huge 
advantage here.
    And in the last several years, I have been asked again and 
again in San Francisco, what's the climate like? What if we 
moved our biotech firm to Oregon? So, I think you are going to 
see that in the future; firms not only originating here but 
moving here to take advantage of those costs and 
considerations. As capital becomes more restricted, more 
difficult, it becomes more important to manage every dollar. To 
run our program in San Francisco would cost us approximately 
twice what it does to do that here.
    So, on a positive side for us, there are the clinical 
centers that are going to reach stages of monoclonal 
development, the access of public capital which is here, 
although the private sector may be more difficult. The city 
infrastructure, all of that is terrific. No complaints 
whatsoever.
    On the negative side, we see always the lack of graduate 
education. Despite OHSU, despite PSU, Portland doesn't have the 
big graduate level educational facility. Also, the lack of 
funds that go to tech transfer I.P. at the university settings. 
With better funding of those offices, tech transfer could be 
achieved much better for the private sector.
    Senator Wyden. OK. Gentlemen, thank you. That is very 
helpful. And let me start with you, if I could, Dr. Burger.
    You talked about the advantages, and clearly we have lots 
to work with. What I want to do is talk about areas where 
certainly some have suggested we need some shoring up. Let us 
start by having your assessment of why we lost out on a few of 
those key examples.
    I think you heard me go through several of them. The 
Northwest Neurologic moved to San Diego. The Bioject moved. The 
firm went to Laguna Niguel in California. Why do you think, 
without getting into any of the specifics, why do you think we 
have lost out in some of those areas?
    Dr. Burger. I think a certain amount of loss is going to be 
expected, and I think if we were having this discussion in 
California, you would see just as many firms moving elsewhere. 
And the San Francisco Bay Area now is concerned about Biotech 
moving to Redding; if we can't compete with Redding, something 
is wrong.
    So, I think there is a lot of shifts and movement. This is 
a very small community. We don't yet have here, in Oregon, a 
big private biotech sector success. We hope we are going to be 
one of them. But right now, there is not the Amgen, Genentech, 
or Immunex here yet. A company that is not only providing the 
core but also is spinning off other small biotech interests. 
So, I am not so concerned about the couple of examples we have 
of moving. At early stages, sometimes companies move because 
they think the capital setting is better elsewhere. I have 
often heard the criticism that there is not enough venture 
capital or early stage capital in Oregon, and that may be true. 
I basically take the feeling that good projects are going to 
get funded, and capital--there are a few exceptions, certainly. 
But capital, I don't think, cares that much about where you 
locate as long as you have accessibility.
    Senator Wyden. That was really my second question, the 
private capital question because I do hear again and again that 
private firms question whether there are places they can go to 
get capital. They have shared their ideas, their views over the 
years that good ideas find their way where people are 
interested. That is the way the market supports, the way the 
free enterprise system works. It does seem that we do have some 
difficulties in getting access to private capital. What efforts 
are underway to try to change that?
    Dr. Burger. Well, I think if you look at how to raise 
capital, we have to go out of state. At the private sector, we 
raised some capital in-state, but most of our money before we 
were public came from out of state. So----
    Senator Wyden. As the bio associations network private 
companies, have you all had some kind of meeting with the 
various venture firms to discuss what it is going to take?
    Dr. Burger. There is a plethora of meetings with the 
venture capital firms and organizations from various levels. 
So, I don't think there is a lack.
    Senator Wyden. No shortage of meetings? I urge you to take 
that back. That is an area I would like to help with. We do not 
need any conventions or the like, but we do need to get risk-
takers to put dollars into this community rather than looking 
so often elsewhere. I think more can be done in that area. I 
would like to help with it.
    A question for you, Dr. Grinstein. One of the incentives 
that the new entrepreneurial businesses adopted was the New 
Venture Capital Bank. Do you all think that that kind of 
incentive, a state venture capital bank, can make a meaningful 
difference?
    Mr. Grinstein. Well, we have some issues in the State of 
Washington related to lending of the full faith credit with the 
state and constitutional restrictions, which limits some of the 
opportunities that can be done, but certainly, there is some 
attention paid to this.
    There are banks which characterize themselves as venture 
banks coming out of other parts of the country, Silicon Valley 
Bank is one example of this. We know there is a strong 
interest. This is something we have explored in the state other 
than folks who have come into the state.
    Senator Wyden. One other question for you two, some who 
look at the field, examine the possibilities for biotechnology 
argue that having a critical mass of biotechnology firms makes 
everybody more competitive and serves as a magnet for others. 
Do you share that view, Dr. Burger? And if so, how are we doing 
in terms of becoming that critical mass, and what can we do to 
accelerate?
    Dr. Burger. Sure. A critical mass is crucial, and we 
consider ourselves part of the Pacific Northwest biotech 
critical mass. So, I don't try to distinguish myself as Oregon 
biotech, but Pacific Northwest biotech. And with today's 
technology, I'm as close to companies in Seattle and San 
Francisco as I am to those in Beaverton or Tigard.
    So, I think it's how you position yourself and how well you 
can communicate. Critical mass for us is OHSU. And the more we 
have access to OHSU, the better they're funded, the better tech 
transfer, the better I.P. and those offices are funded, the 
better it is for us.
    Senator Wyden. What would be your suggestions on tech 
transfer?
    Dr. Burger. Those offices have to be well funded. If you 
look at where biotech sprung up: San Francisco, Seattle, San 
Diego, Boston research triangle and where it didn't: New York, 
Los Angeles, Chicago. The reason was good tech transfer. And 
good tech transfer happened because the tech transfer offices 
were really well funded. They didn't have to extract up front 
money. They didn't have to ask small companies to pay for I.P. 
They could back end load it. Therefore, transfer of technology 
got to the community. And where the tech transfer offices are 
poorly funded, they have to ask the small startups to pay for 
the I.P., give them up front funds, and the small companies 
can't do it, and tech transfer bogs down.
    Senator Wyden. Do you want to add to that?
    Mr. Grinstein. Certainly. Dr. Burger suggests where there 
are strong tech transfer offices and universities, you see the 
results in terms of licensing royalty income. You also see 
foundations established at universities which allow them 
foundations to take equity interest in technologies that 
innovations that come out of that university.
    What we're seeing in very different ways across the states 
how we fund that, sometimes it's a decision by regents and 
trustees. Other times it's a direct appropriation from the 
legislature. And where we've seen some real problems, of 
course, we are really seeing it now in funding higher education 
with the budget crisis across the states, that there are 
certain things that are considered elective, and the tech 
transfer, in some cases, is considered that way, and the 
regents are more concerned about faculty retention, as well it 
should be in some instances. So, it depends on where the 
decision is made.
    I think states can play an active role. We certainly 
facilitate, through the Department of Energy, technology 
transfer because as a national laboratory we have a tech 
transfer office. We work closely with the universities, and we 
actually fund technical assistance to small companies trying to 
commercialize the technology; it doesn't do any good sitting in 
somebody's laboratory.
    Senator Wyden. I could go on some length on this tech 
transfer issue. Many in the biosciences know I have got strong 
views on it.
    One of the reasons I am really excited about Ballot Measure 
10 is it gives us a chance to set up a model that could really 
work--a homegrown model to connect companies, universities, and 
research facilities together in a fashion that would make 
sense. I happen to think that the tech transfer statutes in 
this country have not served us very well. They have not served 
the companies well, and have not served the universities well, 
have not served the taxpayers well. I just think it really is 
just that explicit.
    I share your view that certainly, you have to properly fund 
the offices that do exist, but we will make that the subject of 
another hearing focused on making Portland the hub that we have 
talked about today, a model for the country.
    Gentlemen, is there anything else that you would like to 
add?
    Thank you. Our next panel is Dr. Peter Kohler, President of 
Oregon Health and Science University; Dr. George Pernsteiner, 
Portland State University; and Mr. Donald Mazziotti, Executive 
Director, Portland Development Commission.
    Dr. Kohler. Do you have an order of preference here?
    Senator Wyden. No. Why don't we begin with you, Dr. Kohler? 
You seem ready, and we welcome you. We know the great work you 
are doing at Oregon Health Sciences University. We speak with 
great pride to people from all over the country talk about the 
innovative work and pioneering research that you are doing. You 
proceed as you like.

        STATEMENT OF PETER O. KOHLER, M.D., PRESIDENT, 
              OREGON HEALTH AND SCIENCE UNIVERSITY

    Dr. Kohler. Thank you, Chairman Wyden. I want to thank you 
for holding these hearings. I think this is a very important 
topic, and we need to have public attention directed to it 
because of the potential for the state.
    Several of the speakers have actually covered OHSU fairly 
well. So, I can abbreviate my remarks somewhat, but I do think 
that one point has been made over and over that is a correct 
one. To really launch something like biotechnology, perhaps in 
converse to high tech, you need a very strong scientifically-
based university to lead that.
    And I would say that we are very close to being there. We 
are, in my mind, not quite in the very top echelon yet. We are 
moving upward, and we are very close. One of the things that we 
look at, for example, is NIH grant awards. We are in the top 
30. We are headed, we believe, to the top 20. So, we hope to be 
a world class institution.
    Our current research support is related to some of the 
other questions you have had. We currently bring in in terms of 
awards $220 million a year. And you can look at a grant of 
approximately $100,000 almost like a small business. If you go 
back to our becoming a public corporation in 1995, since that 
time, we have added 4,500 people. 4,500 people. A large amount 
of that was related to the research growth that we have 
enjoyed. We have expanded tremendously, as you have heard, on 
the research side.
    Each small grant employs generally two to three people. So, 
you can do some calculations there. If you expand by $150 
million, how many additional employees might you expect to have 
as a result of that? And that does not include those who spin-
off as small businesses, which we think is a very important 
aspect of that as well.
    We intend to keep growing our research programs by a rate 
of about 15 percent per year, which is what we have done 
historically over the last 7 years or so, which would put us in 
the $300 million per year range by the year 2005. That would 
help generate approximately 6,000 additional employees over the 
next decade. So, a lot of our growth is going to be related to 
our research.
    You have asked about the key ingredients. Our take on it is 
that capital is very important early on. I will say that we can 
be blamed also for not funding tech transfer adequately in the 
early stages. Our first director of tech transfer is in this 
room. As I recall, we asked her to earn all of her own money. 
It is the venturing spoon approach that I think universities 
have tended to take when they are trying to make it on their 
own.
    Management experience is very important. I think that is a 
key ingredient. The biggest one for us right now is space, 
space for our research programs, space for the companies that 
might be spun off to be housed. We need more Denis Burgers in 
Oregon. I think we need a culture of biotechnology in this 
state, not just the Northwest, but in the state, centered in 
the metropolitan Portland area. I think as more companies are 
created, then become successful, that, in fact, will occur.
    The merger with OGI makes us a unique institution. To have 
graduate engineering and computer science added to the 
bioscience base is a very powerful combination. In addition, we 
collaborate extensively with other institutions such as Mr. 
Pernsteiner's Portland State University. There is a 
metropolitan collaborative model. We expect that to continue to 
grow. He will talk more about that later.
    The Oregon Opportunity is a very important piece; the 
funding from the state can be expanded if Measure 11 passes. 
Using the State tobacco settlement money to expand that to 
approximately $200 million, rather than 165 million that we 
would get from a Revenue Bond. So that is important. We are 
raising gift money to supplement that so that we will have 
about half a billion dollars with which to work when it is all 
said and done.
    We need new space. The plans for expanding to the 
riverfront are very exciting. We clearly need to eliminate 
bottlenecks by building additional research space and adding 
some capacity, such as imaging, to what we currently do.
    We believe there are a few places where new leadership can 
be recruited in as we build programs, but I think that all of 
these are coming together in a way that can be very important 
to the state. If you take a look at where biotechnology is in 
this country today, it is somewhere in the range of a $50 
billion dollar a year industry. That is perhaps old data. It 
may be larger than that, and I would defer to Don Mazziotti in 
terms of what it is.
    Oregon's percent of the population is about 1 percent. If 
biotechnology grows to what we predict it will be in about four 
or five years, it will be in the range of a three-fold 
expansion. If we capture one percent just based on our 
population, that should make the enterprise in Oregon a billion 
dollar-plus a year industry. We think with the scientific 
expertise we have, we can do far better than that.
    I would like to see biotechnology become a 1 to 3 billion 
dollar part of the Oregon economy in the next 5 years and 
increase from there. We believe that discoveries like those of 
Brian Druker are phenomenal. The commercial value of that will 
be probably about $500 million a year but will not be realized 
in Oregon in any important way. We think when the next Druker-
like discovery comes along, we want to be able to commercialize 
it right here and retain that as a very important part of 
Oregon's economy.
    [The prepared statement of Dr. Kohler follows:]

        Prepared Statement of Peter O. Kohler, M.D., President, 
                  Oregon Health and Science University
    Chairman Wyden, thank you for coming to Portland to hold this 
hearing on a subject of great importance to Oregon's future. For the 
record, my name is Peter Kohler, and I'm the President of Oregon Health 
& Science University (OHSU). The question of what factors are needed to 
make Portland a biotechnology hub has been very much on my mind and 
those of my colleagues for the past several years, and I appreciate the 
opportunity to testify here today.
    The short answer is that industry development is in some ways 
analogous to the scientific process itself. Science is an uncertain 
endeavor, involving experimentation, trial and error. Similarly, there 
is no single recipe for regional biotech success. On one ingredient, 
however, experts are unanimous: the presence of a world-class research 
institution is an absolute must. At OHSU, we are working diligently to 
become just that: a world-class institution with respect to medical 
research and biotechnology.
    The second primary factor that will determine our state's success 
in this area is the ability to cultivate a culture of biotechnology. By 
that, I mean the presence of venture capital funds, management and 
technology transfer expertise, incubator space, and so on--a 
biotechnology infrastructure, if you will. I believe this is the bigger 
challenge for Oregon.
    In my remarks today, I would like to start with some of the efforts 
being made at OHSU to achieve a major leap forward in our research 
programs. I will then return to the need to develop a culture of 
biotechnology here in Oregon.
OHSU as a research institution
    Let me begin with the importance of OHSU continuing to grow as a 
research institution. A recent study by the Milken Institute of Santa 
Monica concluded that ``research centers and institutions are 
undisputedly the most important factor'' in incubating high-tech and 
biotech companies.
    The relationship between the thriving Seattle biotech industry and 
the University of Washington is a case in point. The chart that I've 
attached to my testimony shows the correlation between research dollars 
and company development. I think it is particularly interesting to note 
that the rate of company growth has increased over time, as UW's total 
research grew. In other words, it is important for a research 
institution to reach a certain size, sometimes referred to as critical 
mass, at which point returns on investment become even higher. For 
instance, the UW experience shows that company development really began 
to take off after 1991, as UW crossed the $300 million threshold in 
federal research dollars.
    At OHSU, we are beginning to approach critical mass. We have 
increased our research tenfold over the last two decades, to nearly 
$220 million today. During that time, we have surpassed a number of 
other academic health centers, moving from #87 in 1986 to #29 in 2001. 
We expect to surpass $300 million by FY 2005 (based on 15% annual 
growth in total research grants). We have also improved the quality of 
our research, as evidenced most notably by Dr. Brian Druker's 
internationally recognized work targeting the molecular basis of a 
specific type of leukemia that has implications for the treatment of 
all cancers.
    To further our drive for research excellence, OHSU has in the past 
year merged with the Oregon Graduate Institute of Science and 
Technology (OGI). The faculty at the new OGI School of Science and 
Engineering at OHSU are very strong and enjoy a high level of research 
funding productivity, comparable to national research leaders on a per 
faculty basis. The strengths of OGI--computer science, engineering, 
environmental science, biochemistry, molecular biology, electrical and 
computer engineering, and management in science and technology--
complement those already in place at OHSU.
    OHSU and OGI are well ahead of most academic institutions in 
recognizing and acting on the growing synergy between medicine, 
computer science and engineering. We believe the merger will create 
significant competitive advantages in the commercially important fields 
of functional genomics, proteomics, and bioinformatics. Oregon is ahead 
of the trend in this area.
    The merger has also allowed us to begin developing a program in 
biomedical engineering, many of the component parts of which existed 
prior to the merger and can now be brought together with a concerted 
effort on program development. As we move forward, we expect to do so 
in coordination with Portland State University, through their College 
of Engineering and Computer Science. OGI and PSU have long been 
partners in expanding engineering education opportunities in the 
Portland area--for example, they jointly list their class offerings to 
better serve the high technology community. This is just one area of 
our overall partnership with PSU--known as the Metropolitan 
Collaborative Model--that we expect will continue to grow over time. 
You'll be hearing more about this productive collaboration with PSU 
from their Vice President for Finance and Administration, George 
Pernsteiner.
    OHSU is poised to achieve critical mass, but the missing ingredient 
is space. We are above the ninetieth percentile nationally in research 
awards per square foot. That puts us in a good position to continue our 
dramatic climb up the NIH rankings, but we must build state-of-the-art 
laboratory space to enable this future growth.
    To address this situation, OHSU developed an initiative called the 
Oregon Opportunity. The Oregon Opportunity is a $500 million public-
private partnership to support major investments in OHSU's research 
infrastructure and thereby achieve a major leap forward in our research 
program. It is important to note that we intend to raise the bulk of 
the Oregon Opportunity investment--$300 million--through a private 
campaign run by our foundation. I should add that we have already 
reached the $100 million milestone, well ahead of schedule.
    In addition, we asked the state for a $200 million bond. During the 
past legislative session, the Legislature and the Governor committed to 
OHSU a fixed revenue stream from the tobacco settlement. This revenue 
stream will allow OHSU to secure a bond of up to $200 million dollars. 
I should also note that the state referred a measure--Measure 11--to 
the May 2002 ballot that would authorize the use of general obligation 
bonds for the Oregon Opportunity. If passed, this measure would mean 
the full $200 million rather than the $165 million that would result 
from selling revenue-backed bonds. A committee has been formed to run 
the campaign, with Senator Hatfield and Governor Kitzhaber as co-
chairs.
    To fully realize the goals of the Oregon Opportunity, OHSU will 
build at least 179,000 square feet of new research space as well as 
purchase and remodel existing space for research laboratories, offices 
and support space. OHSU will build a new Biomedical Research Building--
currently in the planning and design stage--on the Marquam Hill campus, 
at a cost of approximately $98 million. The new building will provide 
highly efficient wet bench space and associated lab support and 
conference areas, expanded facilities for animal research and a core 
research imaging center. This building is vitally important to help us 
clear out what might be best described as bottlenecks in our current 
research infrastructure.
    We also plan to recruit leading scientific investigators and their 
teams--a total of approximately 350 new researchers--to Oregon. In our 
recruitment efforts, OHSU will prioritize areas of study that mirror 
and enhance clinical excellence. We will focus our investments in 
medical research in areas such as advanced imaging, cancer, genomics, 
bioinformatics, heart disease, neuroscience, women and children's 
health, hearing research and aging.
    The proposed North Macadam development is also integral to the 
growth of OHSU. We are rapidly running out of space up on Marquam Hill, 
and to preserve the synergy between research, education and patient 
care, it's vitally important that we are allowed to grow within 
Portland's central city area. Connecting North Macadam to Marquam Hill 
with an aerial tram will help us maintain and enhance that synergy. And 
of course with OHSU on the waterfront, we believe the North Macadam 
area will naturally be attractive to biotech companies looking to 
partner with OHSU and to spin off OHSU discoveries. But you will hear 
much more about North Macadam from others here today.
Cultivating a Culture of Biotechnology
    That brings me to the state of the industry. Today, Oregon's 
biotech sector is best described as emerging. But we believe it could 
eventually be the third leg of Oregon's economic stool--if we can 
develop a culture that nurtures and supports new biotech companies.
    Presently, Oregon's biotech industry pales compared to those of San 
Diego, San Francisco or Seattle. But we need not--nor can we afford 
to--think of biotech as the exclusive province of our larger neighbors 
to the north and south. San Diego, a community of similar size to 
Portland, has more than 250 biotech companies. San Diego succeeds where 
Portland lags because the community as a whole strongly supports the 
local academic institutions such as Salk, Scripps and UC-San Diego. 
Here in Oregon, things are moving in a very positive direction. State 
passage of the Oregon Opportunity bond authority and private 
philanthropic support in excess of $100 million suggests that our 
community understands the importance of medical research and 
biotechnology.
    That's the good news. The bad news is that Oregon currently lacks 
the necessary infrastructure to retain and utilize the intellectual 
property created at OHSU and elsewhere. We have often been forced to 
sell or lease the intellectual property before it can develop real 
value for Oregon. One example of this is the research of Dr. Brian 
Druker.
    Fortunately, there are a number of potential breakthroughs in the 
OHSU pipeline. Dr. Gail Clinton is in the early stages of developing a 
breast cancer treatment called herstatin. Based on preliminary results, 
we think herstatin could generate a billion dollars a year in economic 
activity. When Dr. Clinton is ready to commercialize her discovery, I 
want Oregon to be ready to run with the results. This will require 
elements of a biotech infrastructure not currently in place in Oregon. 
If we cannot put these elements in place, we will effectively be 
sending yet another economic windfall to another country like 
Switzerland, or another state, like California.
    To address this situation, OHSU has intensified its search for 
partners in venture capital, technology transfer, and project 
management--to enhance our ability to commercialize scientific 
breakthroughs. The process of commercializing a discovery involves a 
few discrete steps: select well from among competing discoveries, fund 
the most promising, and manage the transition from research to 
production and marketing. As accomplished as OHSU scientists are, they 
are not trained as managers or entrepreneurs.
    Given the large number of recent discoveries on campus and a wealth 
of existing research in the pipeline, the lack of venture capital and 
tech transfer capacity could have serious economic consequences for the 
state. Up until now, discoveries in Oregon usually run out of venture 
capital funding after the first round. The rights are then sold for a 
few million dollars and victory is declared. But that's short sighted. 
Where would Oregon be if Jack Murdock and Howard Vollum had sold 
Tektronix to investors in California after the first wave of venture 
capital dried up?
    On one of my trips around the state, someone said that selling or 
licensing our intellectual property is like selling raw logs instead of 
processing them to add value. In the case of medical research and 
biotechnology, I would have to say that the economic loss would be far, 
far greater.
Conclusion
    In closing, I'd like to say that it's a real pleasure to testify in 
a forum that begins with the assumption that Oregon should work to 
develop a robust biotechnology industry. The question that we debate 
today is not whether to have an industry, but how to do it. I can 
assure you that this has not always been the case.
    And, at the risk of preaching to the choir, I'd like to share a 
small piece of our vision for what biotech can mean to the Oregon 
economy. As reported by Ernst & Young, the biotech industry created 
more than 437,000 new American jobs in 1999, generating revenues 
approaching $47 billion. And that's just the tip of the iceberg: 
genomic results are only now beginning to pour in. Financial analysts 
project the biotech industry to grow at a 35 percent annual rate for 
the foreseeable future. Based on conservative economic estimates, we 
believe Oregon could have a $1 billion annual industry by 2006.
    Let me talk a little bit more about that number. If OHSU captures 
just one percent of new biotech growth between now and 2006, excluding 
the industry as it stands today, that represents $1 billion. The one 
percent figure is roughly parallel to Oregon's percentage of the 
overall U.S. population, so we consider that a fairly conservative 
estimate. It assumes that the quality of research is the same in every 
state, which is far from true. OHSU is a growing national leader in 
medical research. With the high quality of intellectual property coming 
out of OHSU, we believe that $1 billion figure could eventually be 
significantly higher. But, as I've said, we still have a ways to go in 
building a culture of biotechnology.
    Once again, I thank you for the opportunity to testify and applaud 
your willingness to come to Portland to study such an important issue. 
We think biotechnology can be part of a very bright economic future for 
Oregon, and we appreciate your help in making this future a reality.
    Thank you.

    
    

    Senator Wyden. Very well said, Dr. Kohler. We will have 
some questions in a moment.
    Mr. Pernsteiner, we welcome you. Let me also just make very 
clear that I think Dr. Bernstine, the President of Portland 
State, has made a very significant commitment to technology and 
biosciences. He has spoken to me personally on several 
occasions. We know the significance Portland State has in this 
area. We welcome you, and please proceed with your comments.

STATEMENT OF GEORGE PERNSTEINER, VICE PRESIDENT FOR FINANCE AND 
           ADMINISTRATION, PORTLAND STATE UNIVERSITY

    Mr. Pernsteiner. Thank you, Chairman Wyden. I appreciate 
very much the opportunity to be here. President Bernstine would 
have been here, but he is at the moment officiating the 
groundbreaking of our Native American Student and Community 
Center in downtown Portland. I want to thank you, Senator, and 
the other Members of Congress for your support for that project 
and for the Institute of Tribal Governments, which is so 
intertwined with it. So, thank you very much, and I am sure he 
will be thinking of you as he turns that shovel.
    I am here today to talk a little bit about this from the 
point of view of Portland State University, which is Oregon's 
urban university. Dr. Kohler mentioned a little bit of the 
story. Let me add a little of our perspective.
    In 1995, Portland State had about 14,000 students. Since 
that time, we have grown to 22,000 students. We have doubled 
our funded research in a very short period of time. Part of 
that is due to this state, and part of that is due to the 
faculty we have hired and part of it is due to the cooperation 
and collaboration which we have enjoyed with Oregon Health 
Sciences University. We have a strong commitment to helping to 
serve the economic needs of the region. We are focusing, as you 
have said, in areas of bioscience and biotechnology among some 
of the others. We view this as a long-term investment. This is 
not something that's going to happen in a short period of time, 
and then be gone.
    And what I want to talk about a little then is what we are 
doing that is really long term. The first is to look at what is 
happening with the enrollment because that really is generating 
the educated work force which will serve this industry and 
serve the research that will go on.
    I mentioned our enrollment was up some 8\1/2\ percent this 
year over last, which in higher ed is phenomenal, but more 
importantly than that for the purposes here, engineering, 
computer science is up almost 21 percent with more than 30 
percent at the graduate level. The enrollment in biology is up 
16 percent and that of the sciences is up overall 13 percent in 
1 year. That follows the year of double digit growth in each of 
those the prior year.
    We are beginning to build the kind of capacity that some of 
the prior speakers said that we lacked in the Portland 
metropolitan area. We also view this as long term in that it 
will take the cooperation of the community colleges and the 
cooperation of the grade and high schools in this region to 
make this a sustainable long-term educated work force in this 
arena.
    So, we are working with OHSU in the Saturday Academy. We 
are focusing our MESA Program on junior high and high school 
students. We have created new cohorts to train teachers in 
math, to teach in math and science. And in part, that's funded 
by NSF grants to those students to be able to study, to be able 
to learn how to teach in the high schools and middle schools.
    We are building our research capacity largely with the 
funding from private businesses in this area, from the federal 
government, foundations and from our own resources. They are in 
various areas that relate to this in biology and chemistry and 
in things as esoteric, if you will, as life in extreme 
environments where we try to learn what it is that allows life 
to sustain itself in thermal vents at 30,000 feet below the 
ocean's surface and in the Yellowstone geysers.
    We are looking at those things because that really is the 
basic research that some of the prior speakers had talked about 
that can lead to the improvements in this arena that we all are 
seeking. We also find the confluence of mechanical engineering, 
physics, biology and medicine coming together in developing the 
kinds of both research and products which will lead to the 
improvements that will sustain this kind of industry and this 
kind of research. We are doing that in collaboration with 
mostly OGI and OHSU.
    The metropolitan collaborative model which Dr. Kohler 
mentioned basically combines Oregon's largest university, PSU 
with its most successful research university, OHSU. We are 
working together in curriculum, research, planning. They will 
now do our tech transfer which has been mentioned before, but 
we are planning not just the programs, but also the facilities, 
because as with OHSU, we are in dire need of facilities.
    And we thank you for your support in the last session for 
Northwest Center for Science, Engineering and Technology. We 
look forward to further support in that arena. But we also are 
looking and planning at what amounts to a research triangle. 
Portland State University, Oregon State University at Marquam 
Hill, and North Macadam region where OHSU and PCC and PSU are 
now trying to plan a future are only about a mile apart, and 
they are very close geographically. We are trying to link them 
with the organizations which we will build.
    If we were to ask--if you were to ask me what I would like 
from you, it would be three things. The first is a federal 
commitment that this is an important long-term investment for 
the future of America and the future of Oregon.
    The second would be a federal participation in the 
infrastructure and development, both the research facilities 
for the academy and the transportation links that the Mayor and 
Gil Kelley talked about that would make that triangle a 
reality.
    And finally, sustained increased support for programatic 
research in areas, you know, that follow the new NIH model in 
various agencies of government. We would hope that those would 
be the kinds of things over a long period of time that would 
really help us build this industry in Oregon.
    Thank you.
    [The prepared statement of Mr. Pernsteiner follows:]

 Prepared Statement of George Pernsteiner, Vice President for Finance 
             and Administration, Portland State University
    Chairman Wyden, thank you for the opportunity to talk with you 
about bioscience and biotechnology in Oregon and Portland State 
University's work in this field. I appreciate the opportunity to be 
here today and your commitment to this vitally important industry. 
President Bernstine sends his regrets. He is unable to attend this 
hearing because the campus is engaged in another very exciting 
activity--we are breaking ground this morning on construction of a 
Native American Student and Community Center.
    Portland State University is Oregon's urban university. We are the 
state's largest--serving nearly 22,000 students--and most diverse 
campus. PSU is located in the center of the state's key economic 
region. Several of our colleges and schools have direct roles in 
meeting the needs of the region's businesses, particularly those 
engaged in bioscience and biotechnology. Today I want to focus my 
comments on three areas: 1) PSU's program efforts in bioscience and 
biotechnology; 2) An exciting approach to collaboration we have 
developed with the Oregon Health and Science University; and 3) 
Recommendations for ways in which our work in bioscience and 
biotechnology can be enhanced and supported through Federal action.
Portland State University and Bioscience/Biotechnology
Meeting the workforce needs of industry
    Portland State University is now the principal education site for 
knowledge workers in the bioscience and biotechnology industries in 
Oregon. Enrollment at the campus is growing at unprecedented rates--in 
the neighborhood of 8 percent a year--and at this rate we estimate a 
total enrollment of more than 35,000 students in the next ten years. 
Portland State University also has the largest graduate enrollment in 
Oregon. Enrollment this year in the College of Engineering and Computer 
Science has grown by more than 20.7 percent and enrollment in our 
science programs is up about 13 percent.
    We believe responding to the workforce needs of the high technology 
and bioscience industries begins with enrollments in these two critical 
program areas and have worked hard to not only feed the pipeline of 
students, but also to recruit and retain outstanding math and science 
oriented students. As part of our commitment to helping high school 
students prepare for study in this area, we sponsor two important 
feeder programs: The Math, Engineering, Science Achievement (MESA) 
program, and Saturday Academy. In addition we have co-admission 
agreements with the region's community colleges and National Science 
Foundation funding to help students complete their engineering 
education--to help students in the last two years of their educational 
program, to work with Portland Community College to help transfer 
students in engineering, and to support nontraditional students study 
engineering. Finally, Portland State University's Graduate School of 
Education prepares the most teachers in Oregon and is directly focusing 
on math and science teachers. The faculty in the College of Liberal 
Arts and Sciences works with students interested in teaching math and 
science to make sure that they are well prepared in their content 
areas. In addition, PSU is a partner in two important initiatives: the 
Oregon Collaborative for Excellence in the Preparation of Teachers 
(OCEPT) and the Center for Learning and Teaching (CLT). Both of these 
programs involve collaborating institutions--in Oregon, Montana, and 
Colorado--and focus on preparing highly effective teachers in math and 
science and in supporting them in continuing development programs. 
These initiatives receive substantial funding from the National Science 
Foundation.
    In summary, while higher education is key to the workforce needs of 
this industry, we believe that true investment in this important 
economic development priority begins with K-12 education and also 
involves community colleges.
Supporting industry through research
    The bioscience and biotechnology industries require support from 
highly talented and productive faculty who can work in tandem with 
companies on new discoveries and innovation. The University is 
increasing its faculty research base at more than 12 percent a year and 
we have every expectation that this growth will continue in the future. 
The administration at Portland State University has made investment in 
the program areas of engineering, science, technology, and business a 
priority. Let me highlight some of the progress we have made with 
regard to bioscience and bioengineering.

   Bioinformatics and information technology. PSU faculty have 
        expertise in computer privacy and security issues. This is an 
        important aspect of working in the field of bioinformatics and 
        medical technology because of the sensitive nature of the data. 
        In addition, PSU faculty are also working with OHSU on the use 
        of the high speed Internet2 and its application in research and 
        producing medical quality videoconferencing to support research 
        and health care delivery.

   Fundamental biological processes. Faculty at PSU are 
        involved in research related to the regulation of fluid volume 
        and the impact of alcohol on biological processes. Much of the 
        funding for this research is from the National Science 
        Foundation. We also have a faculty member in chemistry doing 
        grant-funded research on chemical detection technology to sense 
        airborne chemicals associated with particular diseases or 
        medical conditions. Additionally, faculty are studying, with 
        NIH support, the neurobiology of hearing and sensory processing 
        to determine how the brain functions, and in particular how the 
        brain assembles sensory information into an accurate picture of 
        the world.

   Viral infectious diseases. PSU is building research capacity 
        in this area. The University has a new faculty member in 
        biology who was formerly with the Centers for Disease Control 
        and does research in the area of disease mechanisms and 
        control, particularly the hanta virus. Another new faculty 
        member specializes in viral infections of archae bacteria and 
        the use of virus mechanisms to moderate the genetic composition 
        of the archae. His research on these mechanisms provides some 
        considerable promise in being able to both isolate and identify 
        the expression of genetic characteristics and to modify genetic 
        characteristics to create new organisms with commercially 
        desirable characteristics.

   Nanoscience and nanotechnology. PSU faculty members are 
        working on developing a better understanding of the properties 
        of materials. Morphology, crystal structure, chemical 
        composition, interface structure, surfaces and defects all have 
        a strong influence on the properties and behavior of materials. 
        PSU has recently acquired a high resolution Scanning 
        Transmission Electron Microscope (STEM), an indispensable tool 
        to materials research and related disciplines, including 
        geology, mechanical engineering, chemistry, and life-science 
        areas. The STEM will be used in collaborative projects with 
        local industries, including LSI Logic, Intel, Fujitsu, 
        Novellus, Planar System, Wafertech, SEH America, TriQuint 
        Semiconductor, Industrial Design Corporation, and KLA-Tencor. 
        Users of the new STEM work in a variety of basic and applied 
        scientific disciplines spanning the physical and life sciences, 
        both at PSU and in local research institutions including Oregon 
        Graduate Institute, Oregon Health Science University, Oregon 
        State Public Health Laboratory, Department of Veterans Affairs 
        Medical Research Center, University of Oregon, and University 
        of Washington. There is only one other instrument of this type 
        on the West Coast, and because of its uniqueness, PSU will be a 
        central international training site for users of this 
        technology. The University also plans to make the instrument 
        available to others through the use of Internet2.

   Life in extreme environments. Faculty from disciplines such 
        as biology, geology, and chemistry are involved in 
        interdisciplinary research in an important and emerging field: 
        the study of life in nature's most inhospitable places such as 
        the boiling pots of Yellowstone, deep-sea thermal vents, and 
        glaciers. Our faculty members and their work in this area have 
        been featured on CNN, and in Science, Nature, Time magazine, 
        The Christian Science Monitor and The Oregonian. Recently the 
        Keck Foundation affirmed our work in this area by awarding a 
        $750,000 grant to support the development of a field-based 
        research instrument to study microbial communities in their 
        natural environment and to continue building Portland State's 
        genomics capabilities. The field instrument will enable 
        researchers to perform in-depth analysis in real time and under 
        true-life conditions, rather than attempting to simulate these 
        extreme conditions in the laboratory. Keck gives grants to 
        ``exemplary institutions where outstanding people are doing 
        bold and important work.''

   Intelligent robotics. Portland State University's 
        Intelligent Robotics Laboratory, part of the Electrical and 
        Computer Engineering Department, applies machine learning and 
        data analysis algorithms to solving practical problems in the 
        areas of data mining, robotics, and human-machine interaction. 
        This research has obvious implications for the field of 
        biotechnology.

   Biomedical signal processing. Portland State University has 
        a programmatic focus in biomedical signal processing. The 
        mission of this program is to advance the art and science of 
        extracting clinically significant information from physiologic 
        signals. The objectives are to develop new methods of signal 
        processing that extract useful information from physiologic 
        signals, to provide students with a solid foundation in 
        statistical data analysis and signal processing, to teach 
        undergraduate and graduate students about the process of 
        knowledge discovery and research, and to serve the needs of the 
        Portland metropolitan area.

   Materials science. Faculty are involved in research related 
        to biomedical materials. This research is in partnership with 
        Legacy Hospital, and OHSU's dental and pediatrics programs. 
        They are currently engaged in a discussion about establishing a 
        graduate program in biomedical engineering that would include 
        coursework in biomaterials, biomechanical engineering, and 
        biomedical instrumentation.
The Metropolitan Collaborative Model
    The region's economic vitality depends on a strong higher education 
infrastructure to support workforce development and research. 
Increasingly, business and civic leaders are saying that a great city 
like Portland needs to have a great, nationally recognized university. 
These same leaders have decried the lack of a top research university 
in the Portland Metropolitan area, citing studies linking the sustained 
economic development of urban regions and the states they serve with 
the presence of such institutions. Further, many in the business 
community have called for Oregon higher education to double the number 
of graduates in certain high technology and science-affiliated fields.
    Portland State University and the Oregon Health and Science 
University (and its OGI School of Science and Engineering) have 
responded with a plan called the Metropolitan Collaborative Model 
(MCM). Working together, PSU and OHSU, along with the region's 
community colleges and other higher education institutions, have the 
breadth of programs, quality of faculty, numbers of students, and 
strength of research activities to not only support the high technology 
sector, but also the developing bioscience and biotechnology 
industries. In addition, this collaboration has the elements of a 
nationally recognized research and teaching comprehensive university. 
The goal is to provide the region with research and teaching capacity 
that competes effectively with the top-tier engineering and science 
schools in the nation.
    The challenge to achieving the educational programs the region's 
leaders are calling for requires more than a strong commitment by PSU 
and OHSU to work together. It will require new facilities, new 
resources, and a willingness by the region's leaders to accept a model 
of educational services that is different from that traditionally 
associated with top-tier schools. OHSU is working with the City of 
Portland on its master plan for development of Marquam Hill and the 
North Macadam area. That plan must be supported and funding allocated 
to make those dreams possible. PSU has developed its master plan with 
the City of Portland called the University District. The next step in 
the implementation of this plan is construction of the NW Center for 
Engineering, Science, and Technology. This research complex will serve 
as a magnet for bioengineering, biotechnology, and other high 
technology businesses needing close access to high quality faculty and 
students. Senator Wyden, we are grateful to you and your colleagues in 
the Oregon delegation for your support of this initiative and hope that 
Congress will be able to assist us in meeting match requirements for 
$26.5 million in bonds authorized by the 2001 Oregon Legislature. The 
master plans of both OHSU and PSU complement each other by forming what 
some people are calling a science and engineering triangle in the south 
end of downtown. In accordance, while both OHSU and PSU need additional 
resources, we believe it is time for us to co-locate some of our 
mutually compatible and joint research endeavors. That is why PSU has 
pledged to both the City and OHSU an interest in a collaborative 
research facility at North Macadam.
Recommendations for Federal Action
    In the past, Congress has played a key role in assisting higher 
education institutions in their development of research facilities. 
Funding for these types of projects is, as you know, very limited and 
difficult to secure. In Oregon, we have often been able to secure at 
least 50 percent of the funding for construction through state bonds. 
The institutions have been responsible for raising the rest of the 
funding. Federal funds may be used as part of the match and help 
institutions such as Portland State University make new construction 
projects work. We know finding funds for construction is difficult, and 
we appreciate the work you and others in the delegation do on our 
behalf, but if construction and facilities programs are not authorized 
it is very difficult to secure appropriations for these projects.
1. Recommendation: Evaluate opportunities within Commerce and other 
        agencies for authorizing support for the development of 
        research facilities and then secure appropriations to make the 
        programs a reality. We would recommend that these programs be 
        targeted, at least initially, to those areas of the country hit 
        the hardest by the recent recession.
    Much of the research done at PSU has been possible through grants 
supported by the Federal government through agencies such as the 
National Science Foundation, National Institutes of Health, National 
Aeronautics and Space Administration, Defense, Energy, and others. We 
are especially appreciative of the significant funding increases for 
NIH and hope that this year's appropriations process supports growth in 
research funded by other agencies. As you know, research funding spurs 
innovation and discoveries, which often lead to commercialization of 
new products, health cures, and more.
2. Recommendation: Support increased funding for research in federal 
        agency budgets, particularly in the areas of science and 
        technology.
    In closing, as the region builds its biotechnology and bioscience 
initiatives, we do face opportunities and challenges. The opportunities 
are many and I know that the higher education institutions in the 
region are ready to meet them; the challenges are formidable, but with 
the help of local, state, and federal partnerships we will be 
successful.
    Thank you again for the opportunity to be a part of this important 
discussion. Thank you also for your leadership in this area. Portland 
State University intends to be a full partner in the region's plans for 
expansion of bioscience and biotechnology business development.

    Senator Wyden. Very good. Mr. Mazziotti, welcome. And you 
may begin your testimony knowing that you were forewarned a 
little bit that you would be pushed on the number of jobs and 
the economic potential. Knowing your good work all these years, 
I know you are up to that grilling.

STATEMENT OF DONALD F. MAZZIOTTI, EXECUTIVE DIRECTOR, PORTLAND 
                     DEVELOPMENT COMMISSION

    Mr. Mazziotti. Thank you, Senator. Can you hear me OK? 
Thank you, Senator.
    For the record, my name is Don Mazziotti. I am Executive 
Director of the Portland Development Commission. I had the 
opportunity to work with your colleague, Senator Specter, when 
I was Secretary of Commerce in Pennsylvania, and we developed 
the Biotechnology Center at Penn State, and then later, the 
Bioscience Technology Park in West Philadelphia.
    I know what these things can do in terms of jobs and 
research and educational opportunity, as well as building on 
the resources that that state and our state have.
    I really want to--I don't want to repeat the excellent 
comments made by the Mayor or Gil Kelley, Dr. Kohler, and 
George Pernsteiner. They said things much better than I can. I 
guess I would like to summarize on the funding side of this 
issue and talk about the challenges that we have, try to 
explain them a little bit to you.
    I think we have a tremendous opportunity to create a center 
for this industry's growth right near in the downtown of 
Portland in the North Macadam area. I think that North Macadam 
represents the last significant redevelopment area in the 
central City of Portland, and one of Oregon's most important 
economic development opportunities on a state-wide basis.
    Despite North Macadam's fantastic waterfront location, the 
site has remained blighted, vacant and underutilized for many 
years. This reflects many challenges faced by North Macadam, 
including environmental contamination, the absence of 
infrastructure and limited transportation access, which you've 
heard a bit about today, but the opportunities far outweigh the 
challenges.
    I want to talk about the challenges and how you and the 
committee might assist us. I think there are three major 
funding challenges which we would like to ask for your help.
    The first is, to launch the OHSU development or any other 
significant development in the district will require 
approximately 60 to 73 million dollars of infrastructure in the 
central district of North Macadam's area. In the written 
testimony that I have provided to you are not only maps, but 
also a detailed budget of what those costs add up to and the 
kind of infrastructure that would be supported by that number.
    Second, the funding challenges for environmental cleanup 
costs, which I recognize, Senator, is one of, if not, your top 
priorities. The district's former industrial uses have left a 
legacy of contamination throughout the area. Much of the area 
is considered brownfield. And although most of the 
contamination is concentrated in the northern part of North 
Macadam, there are hotspots of contamination sporadically 
throughout the district. And it really does require substantial 
assistance on the federal side to give us what we need to clean 
up the contamination. Recent passage of federal legislation and 
appropriations for that purpose could be very helpful.
    For many of the property owners, it will be necessary for 
the public sector to offer assistance on their cleanup through 
loans and grant programs or to invest public dollars to 
accomplish that.
    The third obstacle is really the other piece of the money 
challenge overall, which is to find the private dollars 
necessary to invest in the private organizations and companies 
that will generate the taxes necessary in the long run to 
provide the investment capital to get the whole development job 
done. For that purpose, as you know, we have visited with your 
staff in Washington and in Portland to discuss the new Market 
Tax Credit Program, which we believe offers an enormous 
opportunity for us to focus private sector resources on 
investment in North Macadam in all of the bioscience-related 
categories that the Battelle Institute folks have talked about, 
Dr. Kohler has discussed briefly with you.
    It seems likely over time that every major Oregon medical 
research organization or bioscience-related institution will be 
located at North Macadam with headquarter or satellite 
facilities at that location. Given the magnet force that North 
Macadam appears to represent, based on discussions that we have 
held with all of those institutions, it seems to me that the 
critical mass that Gil Kelley mentioned is, in fact, building 
in the abstract. Now, we have got to make it real by 
identifying funding sources and strategies which will help 
North Macadam kick off and be successful, not unlike the effort 
done 30 years ago when we recruited Bob's Electronics to an old 
industrial site, or when we took out Harbor Drive and put in a 
park, or when we took out a parking lot to make way for Pioneer 
Courthouse Square. These are all redevelopment opportunities 
that lie before us. I know, Mr. Senator, that you can help us 
in that regard.
    [The prepared statement of Mr. Mazziotti follows:]

    Prepared Statement of Donald F. Mazziotti, Executive Director, 
                    Portland Development Commission
Introduction
    Mr. Chairman and members of the Subcommittee, I am Don Mazziotti, 
Executive Director of the Portland Development Commission, the City of 
Portland's economic development, housing and redevelopment agency. I 
would like to express my deep appreciation to you, Senator Wyden, and 
to members of your Subcommittee for inviting us to address one of the 
most critical jobs and redevelopment opportunities the City of Portland 
has seen in nearly three decades.
    With the nation's highest unemployment rate, we in Oregon must work 
to build and further diversify our economy--and we must do it in a 
manner that maintains and builds upon this region's unparalleled 
livability. Like the role high technology played in building our 
strength in the last two decades, biotechnology, health research and 
biosciences can and should be our focus now and in the decades to come. 
We have a tremendous opportunity to create a center for this industry's 
growth right near the heart of downtown Portland--in our North Macadam 
area. My goal today is to explain that opportunity, its challenges and 
what is needed to turn this opportunity into reality.
Background
    North Macadam represents the last significant redevelopment area in 
the Central City of Portland. This 130-acre district lies south of 
downtown, extending about 1.2 miles along the West Bank of the 
Willamette River to John's Landing. Oregon Health Sciences University 
(OHSU), one of the City's largest employers, (with more than 10,000 
direct employees) as well as established neighborhoods lie to the west. 
Nearby, Ross Island provides natural habitat and is home to Bald Eagles 
and many other species. In the next few years, Ross Island Sand and 
Gravel will donate it to the City for reclamation into extensive 
habitat.
    The North Macadam district consists largely of vacant and 
underdeveloped land although some light industrial uses still exist. 
Currently the entire area is privately owned by twenty-two individual 
owners including seven riverfront owners. (See the attached ownership 
map.*)
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    * The ownership map has been retained in the Subcommittee files.
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    Despite North Macadam's fabulous waterfront location, the site has 
remained blighted, vacant, and underutilized industrial land for years. 
This reflects the many challenges faced by North Macadam, including 
environmental contamination, absence of infrastructure, and limited 
transportation access. Beginning in 1997, an extensive public 
involvement process involving hundreds of citizens addressed 
transportation, open space, greenway, jobs, housing, and land use 
needs. This culminated in approval of the North Macadam District 
Framework Plan and the North Macadam Urban Renewal Plan in August 1999. 
These plans call for the creation of an exemplary, mixed-use 
neighborhood that will provide jobs for 10,000 employees and housing 
for 3,000 residents over the next 20 years contributing to the region's 
focus on compact growth. The vision for the area is a state-of-the-art 
biotechnology and science center with OHSU as its founding healthcare 
and science research entity. (See the attached Framework Plan map.**)
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    ** The framework plan map has been retained in the Subcommittee 
files.
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The Opportunity
    OHSU presents opportunities to develop biotechnology and bioscience 
business development in North Macadam with City-wide benefits. OHSU's 
central campus growth plans combine Marquam Hill and North Macadam. In 
the plans are 1.2 million square feet in new campus development for 
administrative, research and development activities in North Macadam. 
The North Macadam facilities are proposed to be integrated with current 
facilities on Marquam Hill with an innovative Aerial Transportation 
linkage, a proven technology, but the first of its kind in an urban 
area on the West Coast.
    North Macadam Investors, LLC (NMI) and Oregon Health Sciences 
University (OHSU) have agreed to jointly engage in a major 
redevelopment of over 30 acres translating into 28 blocks of 
redeveloped property in the heart of the North Macadam district. OHSU, 
coupled with NMI, is expected to be the genesis of the new North 
Macadam neighborhood, forming a new commercial, bioscience and 
residential district. Over the next several years, a ``core'' 
concentration of residential and office development (phase I) will be 
developed followed by additional future development including a hotel/
conference center and a bioscience facility.
    NMI/OHSU is proposing an innovative approach to developing the 
riverfront Greenway by re-grading the currently steep bank to a gradual 
slope for a 100-foot wide Greenway. Construction on this project is 
expected to begin this year and be completed in 2009.

From 2002-2005 OHSU/NMI intend to complete the following:

300,000 sf for an OHSU Administrative Building and other
150,000 sf for Bioscience Office space
175 units of Market-Rate Condominiums
200 units of Mixed-Income Apartments 30,000 sf
30,000 sf for a Possible Biotechnology Incubator Center
25,000 sf of Retail
East/West streets and pedestrian accessways within the 28 block area
Regrading of the riverbank for a 100-foot wide Greenway
Environmental remediation of contaminated soils

The Funding Challenge

    To launch the OHSU/NMI development, or any other significant 
development in the district a minimum of approximately $60 to $73 
million of infrastructure are critical to complete the following key 
projects for the NMI/OHSU development, beginning immediately:

     1. LBond Street construction from Gibbs to Bancroft ($6 million)

     2. LBancroft Street improvements ($600,000)

     3. LCurry Street improvements ($500,000)

     4. LHarrison Street construction ($3.2 million)

     5. LStreetcar to Gibbs Street, or RiverPlace at a minimum ($13 to 
$23 million)

     6. LAerial Transportation Linkage to OHSU Campus on Marquam Hill 
(partial funding--$16 to $20 million)

     7. LPublic Parking Facilities ($4 million)

     8. LGreenway Phase I Improvements & Master Plan Work for NMI site 
($2 million)

     9. LBioscience Incubator ($9 million)

    10. LRiver Parkway--Phase I ($.5 million)
                      TOTAL $59.3 to $73.3 million

    Current obstacles limiting public resources for these investments 
include the recent Oregon Supreme Court decision in Shilo v. Multnomah 
County et al, limited early tax increment funds and significant 
infrastructure cost burdens, and a lack of new development which will 
generate new tax increment, as well as the state of the local and 
regional economy. In addition, PDC's tax increment resources in North 
Macadam are anticipated to be only $50 million over the next 10 years, 
far less than the infrastructure needs of the district.
    The City of Portland has many other important goals for the area 
that we may not be able to address for several years, including 
affordable housing, parks, stormwater management and jobs programs. We 
are actively pursuing alternative funding. Three recent examples of 
these efforts involve applications to EPA and EDI.
    PDC staff has submitted two grant funding requests to the 
Environmental Protection Agency and is awaiting a decision. The first 
request of $200,000 was made through the Supplemental Assistance 
program for level II assessments and development of planning-level 
concepts for remediation. We are very appreciative of the assistance 
the Oregon delegation has provided with these efforts. The second 
request of $65,000 was made for discretionary funds for restoration of 
a portion of the riverbank in the Greenway with native plantings that 
will provide habitat for wildlife and aquatic species.
    PDC staff has sought up to $2 million in federal assistance in the 
past and were successful in acquiring $50,000 for Greenway pre-
development activities from the U.S. Department of Housing and Urban 
Development Economic Development Initiative account. These funds will 
be used to develop a Planting Plan to restore habitat along a portion 
of the riverbank as well as development of a greenway design concept 
for a recreation trail intended for local and regional use.
Environmental Obstacles
    The district's former industrial uses have left a legacy of 
contamination throughout the area. Much of the area is considered 
brownfields and although most contamination is concentrated in the 
north of the district, hot spots of contamination occur sporadically 
throughout the district. Of the two heavily contaminated properties in 
the north, one is development ready and the other is participating in 
the DEQ voluntary clean-up program. The property owner currently 
participating in the DEQ program is addressing 35 years of Navy ship 
building and dismantling and the hazardous substances that came along 
with this task. To date, the property owner has spent roughly $1.5 
million to determine the extent of the pollution and clean-up costs 
could be as high as $20 million, although no hard numbers will be 
available until the investigation is deemed complete. The threat of 
environmental contamination has made developers wary of investment in 
the district.
    Site contamination issues are not easily resolved since clean-up is 
the responsibility of private property owners who must bear the 
financial burdens of remediation before moving forward with 
redevelopment. For many property owners, it will be necessary for the 
city to offer public assistance with clean-up through loans and/or 
grant programs or to invest public funds in infrastructure to reduce 
the overall costs of development and ultimately spur private 
development.
Summary
    Like the City's vision for downtown Portland, the North Macadam 
District's vision comprises important ideas that create a vital 
biosciences center for Portland right in the heart of a lively, urban 
neighborhood with a diverse population, integrated jobs and housing, 
accessible and well-crafted open spaces, active streets, pedestrian 
scale, convenient transit and quality urban design.
    Federal assistance is necessary and makes good financial sense in 
terms of public and environmental benefit.
    The North Macadam biosciences center vision embraces the Willamette 
River and redefines how a dense, vibrant urban environment can 
peacefully coexist with natural habitat in a riverside setting. The 
vision includes the genesis of a world renowned health and biosciences 
research facility coupled with new housing, retail, a restored 
riverbank, increased habitat for wildlife and aquatic species including 
the threatened salmon and steelhead species, and a pedestrian/bicycle 
trail that will provide the missing link in a 140-mile recreational 
trail system through the city.
    In short, there is tremendous opportunity to create something with 
a significance unsurpassed by anything this City has done for the past 
30 years. Like taking out Harbor Drive and putting in a park, or taking 
out a parking lot to make way for Pioneer Courthouse Square, the vision 
of the North Macadam District has the potential to put Portland on the 
map for innovative thinking, biosciences job creation, and 
environmental reclamation.
    We are currently working to bring the New Markets Tax Credit 
Program benefits to Portland and are looking at several other 
government-sponsored programs. We sincerely urge you to work with us in 
identifying and securing federal funds to help us achieve the vision 
for biosciences in Portland.
    Thank you.

    Senator Wyden. Well said. Excellent panel, and a good one 
to wrap up with. Let us begin with you, if we could, Dr. 
Kohler.
    The first panel, I think, put a special focus on Portland 
finding a niche or maybe a couple of niches in the biosciences 
field.
    In your view, what are the most promising niches that 
Oregon Health Sciences University and Portland should go after? 
This is a chance for you to sort of frame your kind of vision. 
I thought it was interesting, I think it was Mr. Burger talking 
about some of the differences between Seattle and San 
Francisco. Obviously with that economic development, Mazziotti 
is ready to grow on the number of jobs and the like. Finding 
that niche is going to be key.
    Take a minute and give us a sense of what you think the 
best niches are for Portland and Oregon in the biosciences 
field.
    Dr. Kohler. I really think there are two major categorical 
niches that I can describe. Of course, any time I mention one 
thing, I'm leaving out some of the others where we have 
strength as well, but maybe not of the same magnitude.
    The first is in the area of cancer, oncology. I think we 
have great strength in a number of places there addressing 
cancer-related issues. We have opportunities, not only at the 
basic molecular level, but then to apply these to clinical 
research, to do the testing that needs to be done as well.
    Second is the broad area of the neurosciences. One of the 
problems with neuroscience is it is so broad, but we have very 
great strength in areas of Alzheimer's disease, Multiple 
Sclerosis, Parkinsonism and so forth, areas where we are 
tantalizingly close to treatments for the future.
    At our own institution, we have tremendous strength in 
neuroscience, but it is not coalesced. Our sister institutions 
in Portland and around the State also have strength in 
neuroscience. So, I think that is another one where great 
strides can be made.
    Finally, the area of molecular medicine. You take some of 
our research programs and the complementary ones that exist at 
the other institutions, in molecular medicine at the genetic 
level. We can use the information we have from the clinical 
activity that we do, and it gives us a chance to address a 
number of diseases and conditions at the molecular level. That 
sort of research crosses over many boundaries from one 
discipline to another.
    Those, to me, are our best possibilities for future growth. 
I will agree we can't do everything. We are not going to try to 
do everything. But those are areas in which we either already 
have or can easily achieve excellence.
    Senator Wyden. I am really pleased to see you single those 
out. It is along the lines of what I was talking about earlier 
in terms of what I saw back in the days of the Gray Panthers 
which made a difference with people.
    You mentioned cancer. Just this morning, someone talked to 
me about the benefits. The last time I had a gavel in my hand, 
I was in the House. I chaired the Small Business Subcommittee. 
It was probably the most important thing we did there was made 
sure the Taxol got on the market. When our Subcommittee began, 
the federal government was basically treating the source of 
taxol as a trash tree. They were burning it up and wasting it 
and basically acting as if they did not understand what they 
had on their hands.
    We basically, through the congressional Subcommittee, 
drained the swamp and got the federal agencies, Bureau of Land 
Management, the Forest Service to treat it as an extraordinary 
treasure. It was the initial source for taxol. Just this 
morning somebody talked to me about the benefits the taxol 
offers for her in the areas you have singled out: cancer, 
molecular science. I think these are tremendously important and 
make a lot of sense to me.
    Pick up on that and talk to me, maybe playing off a 
question of what the promising niches are, what are the areas 
you would really like to see funding from the federal agencies 
in the next few years and clearly with NIH work, NCI work. You 
work with a variety of federal funders. What are the really key 
areas that you hope to tap for federally funded research?
    Dr. Kohler. First of all, let me say, I appreciate your 
support for the NIH budget. I mean, this is the best time; we 
are going to look back and say, ``These were the best days for 
biomedical research ever.''
    Senator Wyden. We finally got a nominee to head NIH. The 
longest running ballot since the Trojan War.
    Dr. Kohler. Congratulations, and he is not confirmed yet. 
That's pretty good. The NIH budget overall is very important.
    One of the areas that has lacked, I think, funding at the 
NIH level is the infrastructure. What is happening at our place 
is a perfect example. We have brilliant scientists. We have 
lots of opportunities. We are very competitive. We recruit 
people very easily here, people who can get their money through 
the individual grants and incentive grants. We don't have so 
much support for the infrastructure, for the expensive 
equipment, which I know comes through the National Center for 
Research Resources, or for important areas that are developing 
right now like imaging. The ability to do imaging studies goes 
very much in parallel with the biological approach to disease 
treatment. For example, being able to take a mouse that you are 
trying a drug that might treat Parkinson's or Alzheimer's; 
keeping that mouse alive and seeing what goes on in the brain 
requires imaging techniques that aren't widely available. So, 
that is an area that I hope will continue to get attention. I 
know it has more recently. I have actually been on the council 
for that center. I think that's a very important direction for 
funding. Thank you.
    Senator Wyden. The grants and imaging are important for 
NCI, NIH and others. Are there other areas besides imaging that 
you would like to do?
    Dr. Kohler. I think heavy equipment in general is a very 
important area. We're getting to the point now with this whole 
bio-informatics area that correlating the clinical information 
with the genetic is going to become increasingly important. 
That will require a combination of hardware and software which 
is not fully yet developed.
    Senator Wyden. I am very interested in working with you. 
You probably saw the announcement just a couple of days ago 
about the Mayo Clinic where they are going to take essentially 
the genetic information they have on thousands and thousands of 
people and pull it into their files. I think we are seeing in 
the private sector exactly the kind of efforts you are talking 
about to provide these links involving genetics.
    Dr. Kohler. If I could add something that you can do that 
doesn't cost money but is a big issue. As we're looking at the 
HIPAA implementation and the privacy steps that need to go with 
that, we, of course, want to protect individual data as much as 
we can, but we want to make sure we can use it to advance cures 
and prevention. So, it's important that the Privacy Act not 
impede research. And trying to make sure we have policies that 
make that logical are very important to us.
    Senator Wyden. I will work with you on those HIPAA issues. 
As you know, those are matters that people feel very strongly 
about. I want to get with Senator Allen. His capable staff is 
here. As you know, the changes that the President made in HIPAA 
that were announced recently are very controversial and are 
matters with respect to individual's information that can now 
be made available without their consent. It is going to be very 
contentious.
    The point that you are making about how to address these 
HIPAA issues in a way so as to ensure research and at the same 
time protect the rights of individuals is very important. I 
want to get with Senator Allen. This is an area we are going to 
spend some time talking about and looking at.
    On another front, you all have made lots of headway in 
terms of biotechnology in healthcare issues. What we also know 
is that these kinds of advances rely on discoveries in other 
disciplines: engineering and computer sciences, in particular.
    I would be interested if we can get you into this also, Mr. 
Pernsteiner. What is underway at Oregon Health Sciences 
University and at Portland State to try to ensure that we are 
enhancing our capability in these other scientific fields as 
well so as to ensure our best prospects of being successful?
    Dr. Kohler. I will just make a comment and turn it over to 
Mr. Pernsteiner.
    The interface between scientific disciplines is often the 
area where the greatest discoveries occur. Applying techniques 
from one to another is a way where we can make advances that 
would not occur otherwise.
    This is the reason that the collaboration with PSU, OSU and 
the other components of higher ed and the Oregon Graduate 
Institute are extremely important in terms of advancing 
bioscience. Data base management is an area of bio-informatics 
which requires prodigious storage capacity. If the genome has 
three billion pieces of information, you have to go into some 
computer storage area to compare normal to abnormal. This is 
quite a feat technologically. It's the engineering, the 
computer science applications that are going to allow 
bioscience to move forward.
    The other thing is that so much of what we are going to be 
doing in the future in terms of diagnostics, as well as 
therapeutics, is going to rely on chip technology. OGI, for 
example, has a chip making capacity that could be used for 
biologicals that our genetics people said, ``Gee, we didn't 
know you could approach it that way.'' The people in high tech 
have been using it all along. It doesn't matter whether it's 
silicon or whether it's biological.
    So, I think, again, this interface and the mergers and 
collaborations we can achieve are going to advance the field 
much more rapidly.
    Mr. Pernsteiner. Thank you. A couple of notes here. This 
state has made an investment in doubling the number of 
engineers and improving the engineering education throughout 
the state. And part of the reason that we have seen this major 
increase in the number of students majoring in engineering, and 
computer science has been because of the investment of the 
state.
    What that has meant is we have been able to hire 
significant numbers of additional faculty. We have been able 
then to use those faculty; they have been using their time also 
to do research since many of the areas that Dr. Kohler talked 
about, some of them focus on bio-informatics, computer 
security, and biological information. We have between us--
between OHSU and PSU, our Internet link to the world is a joint 
one. Our computer science departments at Portland State and at 
the OGI work closely together and basically have a common 
curriculum and a common approach to dealing with both students 
and research.
    I think one thing that we found at PSU over the years is 
that we have focused for 30 some years on the interdisciplinary 
aspects of science, both in environmental science, physical 
sciences, and biological science. We are beginning to see also 
the bringing in of engineering into all those same areas. We 
are facilitating that in every way that we can, both ourselves 
and in conjunction with OHSU, but the state's investment in 
engineering education has helped us have money to make that 
happen.
    Senator Wyden. Mr. Pernsteiner, you talked about increased 
federal funding for scientific R&D. This is something that our 
Subcommittee, Senator Allen, myself, our Subcommittee had made 
a special focus of our work and certainly will support the 
development of federal research facilities as well as other 
matters that you touched on. I think it would be helpful to 
understand where Portland State would like to go. Are you all 
looking to have a federal laboratory in Portland? Is this your 
judgment about where a new Federal effort ought to be?
    Mr. Pernsteiner. Mr. Chairman, actually, I have not thought 
of that myself. It's actually a wonderful idea. What we had 
been looking at is assistance in building the capacity, both in 
terms of facilities and equipment and ongoing faculty grants, 
but this is news to me. It sounds intriguing.
    Senator Wyden. Well, I was a little bit unclear where you 
all were hoping to head. We can have more discussions about 
that. I think what we would like to know is where you think the 
new federal effort can best be focused, and we can certainly 
have other discussions on that.
    Another question for OHSU and Portland State as well. We 
obviously know that the lack of a large base of well trained 
biotechnology workers from lab technicians to Ph.Ds to post-
docs is a factor in our ability to grow and to build the 
biotechnology industry that we want. Tell us a little bit about 
what your institutions are doing to build that biotechnology 
work force that is going to be so important.
    Dr. Kohler. May I make one comment about your last question 
before we move to that?
    Senator Wyden. Sure.
    Dr. Kohler. We have been talking to our friends at Pacific 
Northwest National Laboratories about collaboration with them. 
They have equipment there that is very attractive for some of 
the things we want to do. We would love some of it to be closer 
geographically to us in the Portland metropolitan area. I know 
Andrew Roberts is in the room, or was, and he might want to 
comment on that later on as well. But I think, again, access to 
this very important equipment is a key ingredient in making 
sure that we can move forward.
    With regard to the work force issue, we are working with a 
variety of educational institutions to try and make sure we 
create the right kind of work force. That includes community 
colleges, the system at large. As we have expanded our work 
force so substantially over the last seven years, we have had 
to either recruit or retrain people who are qualified 
laboratory workers. It is something of great interest to 
educational institutions in the area, and this includes 
community colleges around the State as well as in the Portland 
metropolitan area, providing a training program that would 
qualify people to go into the laboratory and take these jobs 
which are relatively well paying. So, there is a great deal of 
interest there.
    There are curriculums that have been created. George can 
comment on Portland State, but I know Portland Community 
College, for example, has a program to train people.
    Mr. Pernsteiner. Thank you, Senator. As has been mentioned, 
PCC does indeed have an Associate's Degree that I think 
pertains directly to this. We try to, as I mentioned before, 
focus on the areas of middle school, high school teacher 
training, and then baccalaureate and graduate degrees. We think 
that the work force involved in this, as with the work force we 
have seen in high tech, covers a whole variety of types of jobs 
that requires different levels of training and education in 
different disciplines.
    But what our focus has been is to try to increase the 
number of people who have the Baccalaureate and Master's level 
education in engineering and science. And we have had, I think, 
pretty good success in the last several years in building that 
enrollment. And then we want to keep that up, which is why 
we're having programs in the middle schools and high schools as 
well.
    Senator Wyden. Mr. Mazziotti, with a full two hours to 
prepare for what you were told would be the question, talk to 
me about the number of jobs that we can tell our constituents, 
the people of Oregon, at a time when there is so much concern 
about the economy where we are headed, where the jobs are going 
to come from. Give us your best estimate at this point in terms 
of where the jobs are, how many, what fields. Paint the 
economic picture in just as detailed a way as you can.
    Mr. Mazziotti. Senator, I appreciate the license that you 
have given me. My estimates are based on some assumptions, and 
the assumptions are critical. So, I would like to just review 
those quickly.
    One of the assumptions is that we are, in fact, successful 
in securing the funding necessary to build the infrastructure 
which is essential for the development itself to occur.
    So, for example, I am assuming that we will be able to 
identify within the Service Transportation Act reauthorization 
of ISTEA, a significant amount of federal assistance for 
transportation improvements that qualify on North Macadam.
    I am assuming that we will be successful in securing 
several hundred million dollars in federal tax credit 
allocation to fuel the private sector investment necessary to 
generate the tax increment dollars which are essential for the 
long run to build the district out.
    Third, I'm assuming that the institutional configuration 
that has been mentioned here by Dr. Kohler, anticipated by 
George Pernsteiner, described a bit by Gil Kelley, comes 
together, that in fact, we have the opportunity to bring first 
to OHSU as the anchor tenant, if you will to that district, 
followed by OGI and Portland State and Oregon State and 
certainly other institutions.
    Now, if all of those easy things are done, then I think 
that in the first 3 years of this development--and let's start 
with right now, from 2002 to 2005. It is possible to consider 
that there would be somewhere around 6,000 jobs created in that 
timeframe--permanent, full-time jobs in a whole number of 
sectors, which I will talk to in a moment, excluding the 
construction work which, of course, would be necessary. And 
there, we are probably talking about 800 to 1,200 construction 
jobs during that first initial phase of construction of a 
middle district, if you will, of North Macadam.
    Senator Wyden. What kind of positions are they?
    Mr. Mazziotti. Well, Peter probably can speak to that 
better than I can certainly for OHSU, but we would estimate 
that at their build out--at least build out of their first 
phase, which is a 300,000 square foot administrative and 
related dry research activity, that somewhere between 2,200 and 
3,200 jobs could be accommodated at that location once buildout 
occurs. I would have to refer to Dr. Kohler because he's got to 
sign each one of those checks, which is a prodigious task. Then 
there is 150,000----
    Senator Wyden. I will help him sign the checks.
    Mr. Mazziotti. There you go.
    Senator Wyden. If Oregonians are going to get family wage 
employment, we can get a good bipartisan effort toward signing 
the checks.
    Mr. Mazziotti. And these are good family wage jobs that 
will average somewhere around $55,000 a year as an average for 
this area.
    Then, there will be 150,000 square foot--this is in the 
first 3 years of bioscience--office space, public and private 
space to accommodate both spin outs from the patent and 
technology transfer program that OHSU has generated, but also 
some in-house office space will be necessary for special grant 
project programs. That would be as many as 1,500 jobs.
    Third, there would be 175 units of market rate condominiums 
which would accommodate about 50 jobs, 200 units of mixed 
income apartments, which is about 30,000 square feet which 
would require another 50 full-time positions to support that 
facility. There would be 30,000 square feet for a biotechnology 
incubator center that would be all private, assuming that we 
can get the private capital necessary to generate it, and there 
we are talking around 3 to 400 private sector permanent jobs. 
25,000 square feet, at least, of retail for supporting services 
in the surrounding area for another 150 jobs.
    So, we're talking about a variety of jobs, an average of 
about 50 to $55,000 a year in terms of income, which is 
considerably above the national average for a total of about 
6,000 jobs in the first 3 years of this development.
    Now, when you look at the long term, the estimates that we 
have gotten from Metro, for example, on the assumptions they 
have made in the 20/40 plan will be an office for 10,000 full-
time jobs in this area in the next 10 years. They are also 
looking at somewhere between 3,000 and 4,000 new residents--
permanent residents in the area. We think that may be a bit 
modest depending on how the housing market responds. We are 
talking about the development of 28 square blocks--square city 
blocks of space in that 10-year period.
    This is the largest development project that Portland will 
have ever undertaken in any period of time, and it is going to 
require that we orchestrate all of this very effectively. If 
you would like to assume leadership of that, that would be 
wonderful.
    Senator Wyden. That is, in effect, why we are here. I 
didn't want to come and bring the Subcommittee to exercise my 
larynx. I wanted to do it because this seems to me to be an 
opportunity that goes into the history books. This is a time 
when a lot of Oregon is really hurting, a lot of Oregon; 
everywhere I go. I made mention earlier about the community 
meetings, the open meetings. That is what people are looking 
for, some new economic lifelines. Clearly, the strategies are 
different in different communities. But I think that the idea 
of really lasering in on the opportunities for biotechnology 
that was the answer that I hoped to get from you. And I think 
it is fair to say it is based on a hunch and assumptions, and I 
wrote those down.
    As you know, I served on the Environment and Public Works 
Committee. We are already beginning our efforts to look at what 
the surface transportation reauthorization ought to look like. 
I will be working very closely with you and the Mayor and Mr. 
Kelley, in particular, so that we wring out of that Surface 
Transportation Act every single dollar and every opportunity we 
have in order to promote biotechnology and the types of 
projects that you are talking about. So, that was very helpful.
    Take a minute, if you would, Mr. Mazziotti, to talk about 
the environmental cleanup questions for the private property 
owners. What are we looking at in terms of cost here? And 
again, to the extent you can be as specific as you can, given 
the information you have, the assumptions that have to be made, 
that would be helpful.
    Mr. Mazziotti. I appreciate that opportunity, Senator. As 
you may know, there are 21 major property owners in this area, 
some of them holding large parcels 20, 30 acres which is, of 
course, very unusual for, in effect, a central city location of 
contiguous owners. But you have there Schnitzer Investment, ZRC 
Realty, U.S. Bank Trust, North Macadam Investors. They are 
occupying together about 60 acres of land which is in the 
northern part of North Macadam, which at one time or another 
was either the host to a variety of industrial uses that used 
caustic materials and processes, or they were part of the 
Liberty Shipbuilding process in World War II that ZRC Realty 
have already settled with the Navy and EPA on cleanup issues 
related to that part of their history.
    But we're looking at a very big number in terms of the 
environmental cleanup in the first 10-year process. We would 
guess that there is $50 million of cleanup that's necessary. 
That $50 million figure is frankly, both a public and private 
number because obviously, the owners are primarily responsible 
if the proximate cause can be demonstrated. Most of them have 
acted very responsibly, but they are going to need, frankly, 
assistance to bring their land up to standard. And so, we are 
working to get supplemental assistance for tier two or stage 
two environmental assessments completed on the properties as we 
work through the development plan.
    But the number is big. It's not impossible. The recent 
legislation for brownfields could be of great help to us, and 
we intend to pursue that in tandem with the property owners so 
that we can capture enough to begin the cleanup process, and I 
trust that you will help us there.
    Senator Wyden. There are several brownfields initiatives 
that are moving through the Congress. We examined the Jeffords 
Bill recently in the Environment and Public Works Committee. 
Let me say again this is an area where I plan to work with you 
on an ongoing basis. This effort is central to the issue that 
was talked about earlier, and that is keeping this effort to 
promote biotechnology in sync with the clean Oregon tradition. 
We are not going to compromise in terms of environmental 
protection or quality of life issues. I know that is your view 
as well.
    Just one last question, Dr. Kohler. There has been at 
length some discussion of the question of wet lab space. And I 
think most of America probably would not be aware of wet labs 
even are, but apparently, it has been cited as a challenge for 
you. I understand that the Oregon Opportunity Fund is going to 
possibly be making dollars available to remove that obstacle. I 
want to know if that actually is the case, and where do we 
stand on that?
    Dr. Kohler. Well, again, this relates to the vote that's 
coming before the public in May, Measure 11. The wet lab space, 
for purposes of definition, is laboratory space that includes 
running water, a few of those things that you would need to 
handle hazardous chemicals, the traditional laboratory, whereas 
dry lab might have computer activity going in there, but there 
is no need for the various utilities to be added to it.
    The wet lab space is what we're critically short of right 
now. It keeps us from actually hiring and recruiting people. We 
have talked about the need even to find some temporary housing 
right away before building can be started. But what will happen 
with the bond vote is that we will actually launch construction 
of a building, if it's approved by the City, on the hill to 
accommodate these various laboratory needs that we have. That 
would start almost immediately as we are working on what can 
occur on North Macadam.
    Senator Wyden. That is, in your view, and again, I was 
asking because I am not completely clear on that, will be best 
boosted by the other Ballot Measure that is----
    Dr. Kohler. 11.
    Senator Wyden.--Ballot Measure 11, with 10 being the 
question of promoting research.
    All right. Anything you gentlemen want to add further?
    Dr. Kohler. Can I say something that's a little bit off the 
point here?
    Senator Wyden. You can, and I will have some concluding 
remarks as well.
    Dr. Kohler. I want to make this very brief. In addition to 
what else can go on in North Macadam, I think there are 
exciting educational opportunities down there that will 
complement the others.
    Again, the advantages of having the education in proximity 
to the research is substantial. That's the reason rapid 
transportation back and forth is important. We see that as a 
place for something like a regional dental school in the 
future, for example, as well as what we currently have on the 
hill.
    Senator Wyden. Well, you all have made an excellent 
contribution, and it leaves me with great pride to have a 
chance to reflect for a minute or two on what you have said. 
Dr. Kohler, people from around the country talk to me about 
some of the pioneering research that goes on at the Oregon 
Health Sciences University, building on a tradition, by the 
way, that Senator Hatfield did so much to promote. Now, we are 
going to take it to another level with biotechnology, with the 
focus on cancer and neurosciences and the areas that you have 
touched on.
    I think that is very helpful, and particularly to see you 
teaming up with Portland State in the way that you have 
described and Dr. Bernstine's interest makes a huge difference 
as well, as you both know.
    In a decent chunk of the country, it can be pretty hard to 
get the universities to get to the same table to work together 
on substantive matters. The fact that the two of you are so 
interested and Dr. Bernstine has a great interest in this field 
is, I think, is a very big plus and leaves me feeling very good 
about what we have heard at that side of the table.
    Mr. Mazziotti, the fact that you have walked us through the 
economic possibilities here, and what this can mean for Oregon 
when we are hit so hard economically, is an important way to 
wrap up.
    Once again, we are showing up on the list of the top 10 
places in the country to live. I think there a couple of the 
national publications that have us right up there on issues 
that are on the newsstand now. What you have laid out is 
essentially a game plan that the city wants to follow to ensure 
that we can bring thousands of good family wage jobs to 
Portland, to the State of Oregon, and do it in line with the 
priorities that we have had in the State, priorities we have 
certainly had since I have been here--I came to Oregon 30 years 
ago--that were laid out by the Republican Governor Tom McCall, 
who said that we can have the quality of life that people in 
this state want and do it in line with the tradition of 
economic opportunity as well.
    We are going to pull out all the stops to make this work 
and to bring together the various industries, universities, and 
governmental bodies to do it in line where we can show the 
taxpayers that we are being very tough-minded in terms of the 
way their dollars are being used, that we are being cost 
effective.
    I know the Mayor and Gil Kelley answered that question I 
asked in a thoughtful way. We do not want this project to go 
down as one where people fritter away a lot of money. We want 
it to go down as one where people say this was a model for 
using taxpayer's dollars effectively to make a great 
difference.
    There is a lot of work to be done here, but it is work. It 
is high stakes work at a high stakes time. I thank you for the 
excellent presentations you have given this Subcommittee, which 
I am proud to be chair of, a sense of what it is going to take 
to make a program like this work for Portland, but also to be a 
national kind of model.
    Thank you very much for your contributions. We will be 
working with you in the days ahead. We will excuse you at this 
time. The Subcommittee is adjourned.
    [Whereupon, at 11:37 a.m., the hearing was adjourned.]
                            A P P E N D I X

          Prepared Statement of Joanna Rodgers, Eugene, Oregon
    I am writing in response to the testimony that Senator Ron Wyden 
gave on 
April 5, 2002 regarding the future of biotechnology in Oregon. Unlike 
Senator Wyden, I strongly oppose any legislation or measure which will 
encourage such development. There are many reasons for this and I will 
outline a few below.
    Not too long ago, I was like most people when it comes to 
biotechnology: indifferent or, if anything, hopeful. But I have had a 
quick education in this area that led me to first understand on an 
intellectual level the hazards of biotechnology and then to feel the 
fear of this growing danger on a gut-level. It is being touted as a 
cure to many of the problems we face today such as disease, starvation, 
and scarce resources. While these benefits sound unarguable, the 
dangers (real and projected) are large enough to merit much caution.
    Basically, we simply do not know what exactly genetically 
engineered products may do. Many experiments have predicted outcomes 
which do indeed come true--except for one or two individuals. These 
``exceptions to the rule'' are all that it takes to have things get 
beyond our control and wreak irreversible damage. This is true for 
genetically-engineered food as well as other products such as trees.
    Genetically-altered foods are already being consumed at an enormous 
rate--in fact, more than half the food found on grocery shelves contain 
genetically modified ingredients. Study after study, experiment after 
experiment, and product after product have demonstrated that when it 
comes to biotechnology, one needs to expect the unexpected. However, 
many of the ill effects are already known. For example, several toxins 
have been found in foods containing G.E. foods, an increased resistance 
to antibiotics is possible due to the `marker genes' utilized in G.E. 
foods, new diseases can be created by the new strains of viruses and 
bacteria used, and an increased rate of cancer is also developing 
(particularly due to the genetically modified growth hormone used in 
cows).
    Biotechnology is a fast-growing field which threatens much more 
than is commonly recognized. The potential benefits of this development 
are touted while the serious potential impacts are hardly acknowledged. 
In my opinion, this is the ultimate sell-out of our humanity in the 
name of progress and economic gain. While biotech corporations and 
related industries have everything to gain, society and indeed life on 
Earth as we know it has everything to lose. The fact of the matter is 
that we do not know what, exactly, our bio-engineered products will do. 
While some would say that this is all the more reason to try it out and 
see how it works, in my opinion, we need to err on the side of caution. 
We are literally talking about rearranging the building blocks of life 
which have taken eons to form. We are not operating on the time scale 
that nature has for our trial and errors. While the immediate impacts 
may seem inconsequential (e.g., some cell mutation in a tomato that has 
pig cells spliced in), the long-term or more insidious results may not 
be knowable now.
    Senator Wyden said in his testimony that, ``No one disputes that 
biotechnology is an industry with a bright future.'' I dispute this. In 
fact, I would say that it could be a very dark future for us if the 
biotechnology industry is allowed to grow. We cannot continue to make a 
healthy economy the bottom-line when the trade-off is an unhealthy 
people and environment.
    Thank you for your time and consideration of my thoughts. I truly 
hope that this letter will count for something to counter the many 
other voices that are voicing just the economic and one-sided positive 
potentials of biotechnology.

                                
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