April 7 (Bloomberg) -- Former U.S. Treasury Secretary and multimillionaire Henry Paulson spent much of his last year in office trying to save global capitalism.

His son, Merritt, spent much of the last year trying to bring Major League Soccer to Portland, Oregon. His job seemed much easier -- until last month.

Paulson is using $50 million of his father’s fortune for the $129 million project. The problem is that Paulson wants the city to sell $65 million of bonds to turn the downtown home of his Portland Beavers minor league baseball team into a soccer stadium that meets major league requirements, and erect a brand new park for the Beavers.

Building two new stadiums for the son of a millionaire is a tough sell in a town hit hard by a recession that deepened in part because Henry Paulson’s efforts to stave it off at the U.S. Treasury were unsuccessful. Oregon’s unemployment rate hit 10.8 percent in February, third-highest in the nation after Michigan and South Carolina, according to the U.S. Labor Department.

“We have many more challenging issues right now,” said City Commissioner Amanda Fritz, a soccer fan who grew up in Leeds, England.

The five-member city council, which includes Fritz, voted 3 to 2 on March 11 to work with Paulson on getting a team. Nine days later, Major League Soccer awarded Paulson a franchise -- the league’s 18th --for $35 million.

$15 Million Hole

The bad news was that Paulson could get a third vote on the council only after commissioners agreed to strip out a plan to create a new urban renewal area around the existing stadium and sell $15 million of bonds backed by taxes generated within the new district.

That left a $15 million hole that Paulson says must be filled by Sept. 1, or the stadium won’t be done in time for the 2011 MLS season. He says he can’t commit any more family money. He and his father are paying $35 million for the franchise and $12.5 million for the stadiums. They’re also guaranteeing rent and ticket taxes for 25 years and will pick up construction overruns beyond $2.5 million.

“We’ve ended up putting a lot more on the table to make this thing happen,” Paulson, 36, said in an interview in his office overlooking a rainy baseball field.

His father amassed about $500 million before becoming George W. Bush’s Treasury secretary in 2006, a job he took after seven years as chief executive officer of Goldman Sachs Group Inc.

Late Bloomer

At 6-foot-4 (1.93 meters), Merritt Paulson looks like an ex-jock eager to stay involved. To the contrary, he was short until his senior year in high school and spent most of his time playing tennis and skiing at his grandparents’ chalet in Keystone, Colorado.

“I was a very late bloomer,” Paulson said.

He studied English at Hamilton College in Clinton, New York, before earning an MBA at Harvard. He managed HBO’s on- demand service at Time Warner Inc., then went to work in marketing at the National Basketball Association. He started hunting for a franchise in 2004. Three years later, he bought the Beavers and the Timbers, Portland’s minor league soccer team, and moved his family from New York.

Paulson’s allies on the city council are Mayor Sam Adams and Commissioner Randy Leonard, a former fireman. Adams and Leonard say MLS will create jobs and bring visitors from rival cities. The Seattle Sounders started playing this year and sold out 22,000 season tickets. Vancouver will field a team in 2011.

School Protest

To foot part of the city’s bill, Adams agreed to draw the new urban renewal area around the existing baseball stadium. That part of the plan drew complaints from Ted Wheeler, chief executive of Multnomah County, which includes Portland and shares its tax base, and from Trudy Sargent, co-chair of the Portland School Board.

They protested because once a new urban renewal area is designated, the amount of tax the county and schools get from property there is frozen. Any increase from higher property values goes to pay off bonds sold to make improvements in the area, such as a new stadium.

“Creating a new urban renewal area could add to our fiscal crisis,” Wheeler said at the March meeting.

His criticism prompted the council to amend the soccer plan so they didn’t commit to the new area.

Paulson says Portland wouldn’t be the same without urban renewal. The program helped turn a seedy industrial area into a condo-and-restaurant district called the Pearl, and funded a light-rail line to the airport.

‘Politicized’

“This is a city that owes a tremendous amount to urban renewal districts,” Paulson said. “It’s become very politicized. That’s clear to me.”

After the city council vote, Adams said the amendment doesn’t preclude a new urban renewal area. It means that he must negotiate with Wheeler and the school board before designating the boundaries of one.

“We left the hearing with a broader array of potential funding sources,” Adams said.

Paulson is betting Adams can pull it off. If he can’t, the millionaire’s son will stay in the minor leagues.

To contact the reporter on this story: Anthony Effinger in Portland, Oregon, at aeffinger@bloomberg.net.

Last Updated: April 7, 2009 00:00 EDT