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.