City of Portland’s financial position deteriorating

by Dave Lister

The office of Portland’s independently elected auditor, LaVonne Griffin-Valade, recently issued a report on the long-term sustainability of the city’s finances. Its examination of the past 10 years of the city’s revenues and expenditures shows a disquieting trend.

Like a business slowly losing market share with a weakening balance sheet and a converging assets-to-liabilities ratio, the report shows the city’s financial position deteriorating, with its debt growing faster than its revenues. The report summarizes the city’s situation by describing Portland’s current financial condition as “stable and satisfactory,” but cautions that “increasing debt and liabilities weaken the city’s ability to provide existing services on an ongoing basis.”

The audit recommends that the city’s Office of Management and Finance develop a system to annually monitor the debt, prefund a portion of the police and fire disability system, and take care of the city’s current infrastructure assets before acquiring new ones.

Rather than embracing the report, which was compiled from its own data, both Ken Rust, the retiring head of the Office of Management and Finance, and his successor, Jack Graham, have taken exception to the city’s finances being described as anything but stellar. In a July 13 memo, Rust and Graham rebuked the audit with the criticism that, because it did not compare Portland’s finances with those of other cities, it really wasn’t meaningful.

“The city has a long-standing and well-deserved reputation for financial excellence,” the memo reads in part. “The city’s credit ratings are uniformly excellent, have not been subject to ratings downgrades, and include the gilt-edged AAA rating that has been in place for more than 27 years.”

In other words, the Office of Management and Finance’s position is that we have a platinum card, so why worry?

Portland’s AAA credit rating is often quoted by Mayor Sam Adams and members of the City Council as one of the reasons we’re the city that works. But there’s a dirty little secret about that rating of which even they may not be aware: Even though the city’s general obligation debt is rated AAA, only 14 percent of its bonded debt is rated AAA. The remaining 86 percent is rated lower.

And when you see that urban renewal debt is claiming 24 cents of every property tax dollar and the fire and police pension fund is claiming 25, it becomes crystal clear that the audit’s conclusion that the city will have difficulty providing basic services in the future is indisputable.

As far as the audit lacking comparisons with other jurisdictions, Griffin-Valade offers the following: “The bottom line is, it does not really matter whether Portland is in better shape — or worse shape — than any other given jurisdiction. Our audit shows that over time, the financial position of the city has weakened. Our report gives decision-makers the opportunity to take a holistic view of the various indicators of financial health and consider the broader picture going forward. One could say that the report is a reality check for the council.”

The audit team did consider comparing other cities, but because they had different revenue sources, provided different services and had different systems of governance, the team decided it was apples and oranges. And anyway, if my neighbor’s home went into foreclosure six months before mine, does that make me fiscally sustainable?

Adams and the council will consider the auditor’s recommendations at a work session. They need to remember that the figures in the audit came from the Office of Management and Finance and set aside any hard feelings on the part of the office. They need to act now to ensure the future sustainability of Portland’s finances.

Dave Lister is a small-business owner who served on Portland’s Small Business Advisory Council.

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  • Dogface

    PDX could fix all of this with a new computer system. I would not go out to bid, I would pick someone who has never done it before, and then spend at least 200 million. Then, when it all comes together, PDX will finally be able to track everything and get its fiscal house in order.
    It is always the computers.

  • Rupert in Springfield

    Don’t worry, all those green jobs will start kicking in soon to save the day!

    • Anonymous

      Hey Rupert, Portland could hire people to clean up the bums fecal matter from the sidewalks…and they could compost the fecal matter. Green job!

      • Lulz

        joel!  no more pooping on sidewalks.  u promised.

    • the real valley person

      Or maybe we can go back to a declining timber economy like Springfield? 

      • Rupert in Springfield

        If nothing else, at least the Timber economy actually employed people. Now most of the wood comes from Canada. I guess it would be ok, you guys chuckling over an industry you destroyed, but when the industry you tried to create, green jobs, is such a colossal flop kind of makes you look like a bunch of knuckle heads.

        Timber at least provided a substantial number of well paying jobs. The dopey green jobs thing? Not so much. Well, at least Canada got some jobs out of the deal.

        • the real valley person

          I destroyed? Sorry, you picked the wrong liberal. I make part of my living in the timber industry developing forest management plans. I even published a book on this. I have no economic incentive to destroy timber jobs.

          Most of the timber jobs in Oregon were lost due to mechanization. As we say, “1 feller buncher does the work of a bunch of fellers.”  The decline in timber employment locally is also attributed to free trade, and that is not exactly a leftist program. Its cheaper to grow Radiata pine in Chile, New Zealand, and Australia that it is to grow Doug fir in Oregon, so we have lost market share. Canada by the way, also has a steadily declining number of timber related jobs and a lot of dying towns like Springfield. So don’t feel bad. Community decline is apparently a byproduct of the success of international capitalism.  Go with the flow.

          Timber harvest, done right, IS a green job Rupert. But it can’t produce the number of jobs it once did.

          According to the Oregon employment department, we have over 50,000 jobs classified as “green.” I believe that exceeds the remaining number of timber jobs in the state, and the former is growing while the latter is declining.

          You should also know that some of the new green jobs are logging and restoration forestry. The timber industry in Washington state is trying to get various tax credits for a huge biofuels plant that will process wood waste into diesel. Forestry is no longer all about 2 by 4s, and the timber industry knows this.

          • Marvin McConoughey

            Thank you for an astute and accurate statement on lost timber jobs.  The mechanization trend is changing many jobs that were once labor intensive.  Quality improvements also matters for the labor market: few cars now need greasing, and oil change intervals keep getting longer, etc.

          • Well I’m SO glad no timber jobs at all were lost to that Spotted Owl Thing awhile back..  If there were any lost jobs, I’m sure they all got them right back when it was found that a competing Owl had more to do with the decline of the Spotted Owl..  And of course we all remember the apology of the Left for their attempt to shut down the timber industry with their unproven theory of what was causing it…    I sure can remember their apologies for clubbing Salmon to death at hatcheries and for daring to say there was a Genetic difference between wild and hatchery Salmon..   Yep, we have NOTHING to fear from those who make wild claims but correct themselves just in time so no one looses their jobs over it…

  • Bob Clark

    Kind of ironic a city hall which governs with the mantra “keep Portland weird” simultaneously argues it is not unique but actually comparable to other cities.  O.K.  If this is your story, stick with it.

    Mayor Adams’ response to the city auditor’s report was more respectful, but the Mayor also blames the economy; and further says the solution to addressing the auditor’s concerns is economic growth.  Unfortunately, it’s Adams’ economic policies using the city’s finances to subsidize risky developments and ventures that actually results in negligble economic gains while ballooning the city’s debt and expenditure.  Echoing the dubiousness of the Mayor’s economic policies is the Oregonian article, “Portland’s redevelopment agency writes off $9.6 million in loans since 2000,” August 6, 2011.  This article reports the Portland Development Commission (the PDC, a city agency) wrote off more than 6% of its loan portfolio, and more writeoffs are to come.  The article compares this against a lower rate of write off by the banking sector in the most recent mortgage write down episode.   PDC officials go on to say they are not a business (geez, that doesn’t exactly inspire financial confidence).  What’s worse nearly a third of PDC’s write downs are for a loan to Multnomah Commissioner Shiprack’s condo development company (no recourse loan).  Then there’s the suspicion of major fraudulant activies by Portland’s parking manager, suspicions which are said to have been apparent for much of Adams’ years as Mayor and Transportation Commissioner.

    City Auditor Griffin-Valade seems to be bringing a very needed dose of reality to city governance (just as one lame duck city councilor heads for his PERS bounty).  Griffin-Valade is to be complemented.  The previous auditor did produce a few reports which raised similar concerns, but he did not push such concerns forcefully.  In fact, (if I recall correctly) he noted in a 2006 report the mounting PDC urban renewal debt was a concern and the PDC projects financed seemed to have very negligible positive job impacts.

    This all said I am much more worried about TriMet’s finances than the city’s finances; TriMet does not have an independent elected auditor like Portland’s, but one appointed by the TriMet Board member club.  Businesses are getting tired of feeding the insatiable, fat, and financially hemoraging TriMet beast with escalating payroll taxes.

    Given Portland city’s onslaught on personal conveniences like plastic bags and once-a-week garabage pickup; combined with densification (“smart” growth), the war on car travel, the ever mounting per capita debt load and reduced local economic prospects as the government sector faces austerity;  you can’t really blame folks for jumping “weird” stump town for other, more inviting places to live. 

    • Mark Duff

      portland will financially collapse in 5 years…

  • Anonymous

    Well it’s obvious isn’t it that the City of Portland is failing because people are using the Internet. It’s just like newspapers and retail stores. People are using Cityville rather than using the City of Porrtland.

  • Mmcconoughey

    A situation where debt grows faster than revenue is not sustainable, absent a perpetually rising economy.  And even then, other criteria must be met for the disparity to be sustainable.  

    The reaction of Rust and Graham is less than intelligent, given the unfortunate trends of cities generally in the United States.  The auditor’s advice should be taken to heart, implemented, and managed to ensure continuing compliance.  Portland deserves prudent management of its debt and its future.

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  • Mark Duff

    the liberal/commie elite in Portland are the problem….oh, they are all upper middle class and dont have to live in areas their policies destroy….

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