Audit Calls Portland's Long-Term Financial Position "Problematic"

Portland Auditor Mary Hull Caballero cast doubt on Portland's long-term financial health Monday, saying the city's current finances are "stable" but that its long-term prospects are "more problematic."

In a 46-page audit released Monday, Hull Caballero raised questions about the financial burdens being put on future taxpayers.  

Highlights of her report include the following:

1. City revenues have increased 17 percent, from $1.4 billion in 2005 to $1.6 billion in 2014.
2. That includes property tax revenues, which have increased 14 percent, from $397 million in 2005 to $454 million in 2014.
3. A smaller percentage of those dollars are going to the general fund, however—44 percent in 2015 compared to 48 percent in 2005. Meanwhile, a bigger percentage of that revenue stream is going toward paying off debt from urban renewal—26 percent in 2014 compared to 19 percent in 2005.
4. Utilities are collecting more. Sewer bills brought in 31 percent more money, rising from $242 million in 2005 to $316 million in 2014. Not surprisingly, the Water Bureau also collected more; revenues jumped 44 percent, going from $101 million to $146 million in the same 10 years.
5. The city had about the same number of city employees in 2014 as it had in 2005, decreasing slightly from 5,679 to 5,562.
6. The city has more debt, however—$3.4 billion in 2014 compared to $2.7 billion in 2005. While the city's population has grown, the city's debt per person has also grown. It increased 14 percent since 2005, rising to $5,630 per resident in 2014.
7. A lot of that debt is due to water and sewer infrastructure projects funded with revenue bonds.
8. Other kinds of debt decreased. Bonds backed by the city's largest pot of discretionary money—its general fund—decreased 22 percent from 2005 to 2014, from $839 million to $654 million.
9. Meanwhile, unmet maintenance needs—think road, parks and sidewalks—and unfunded pension obligations for policemen and firefighters are shifting huge costs to future taxpayers. 

Two of the city's top financial officials responded sharply to the audit in a written statement that followed the report.

Portland's elected auditor first started issuing reports on the city's financial sustainability in 2011. City financial officials blasted that first effort, which was led by former city Auditor LaVonne Griffin-Valade. 

Ken Rust, who in 2011 had just retired as Portland's chief administrative officer, told The Oregonian "this is one of the worst audits I've seen done."

Rust returned to the city in 2014, this time as its chief financial officer, and he struck a softer tone when critiquing the 2015 version of the audit. In a joint statement, Rust and Fred Miller, the current chief administrative officer, called it "probably the best to date" but said there was "still lots of work to do."

Most pointedly, it called the report's analysis of the costs being shifted to future generations "deficient." 

"It could be argued that our current generation is reaping huge benefits from the investments of previous generations," Rust and Miller wrote. "The same may well be true of future generations. To treat inter-generational equity as if it begins today without evaluating the implications of past investments misrepresents the issue. Additionally, it was commented that incurring long-term debt could burden future generations. Generally that is the objective. Debt financing is used for capital projects that will be used years into the future and requires the users and beneficiaries of those projects to repay the bonds. This is not a problem; it is the intent."

WWeek 2015