Hose Festival

The City Auditor says spending on unrelated programs may be soaking water and sewer ratepayers.

A new audit questions recent decisions by the Portland City Council to spend funds collected from water and sewer users on city programs such as scholarships and model homes.

Taken together, these discretionary budget items are mere drops in the bucket of the Water and Environmental Services bureaus' combined annual budgets of $478 million. In addition to the scholarship program for high-school graduates to attend community college, and an energy-efficient model home to show off water conservation methods, the ratepayer money also has been spent on a program to police off-leash parks so dog excrement doesn't run into streams.

All of these programs may constitute sound public policy, City Auditor LaVonne Griffin-Valade notes. But funding for several of them bypassed the city's complete budget process, city auditors concluded in their report released Wednesday, March 30. 

That is a concern, but not because the dollar amounts on the projects are huge. "There's less of a chance for public scrutiny," says Drummond Kahn, director of audit services.

The report also found that the mayor and city commissioners don't always pause to explain to ratepayers the rationale behind their spending decisions. That leaves ratepayers—who last year saw their water and sewer bills increase 12 percent and 6 percent, respectively, and this year are expected to face increases of 14 percent and 6.5 percent—to wonder whether the budget moves were appropriate. A move last year to support the Bicycle Plan for 2030 with funding from Environmental Services (often called the "sewer bureau”) serves as one example. 

"While the total dollar amounts in this category are relatively small, we found an increasing number of Council policy choices to spend ratepayer money where the benefits and costs to ratepayers were not well defined," the report says.

Finally, city code, state law and bond covenants require that ratepayer money go toward ratepayer services. When it doesn't, money collected from water and sewer users for purposes unrelated or loosely related to the utilities could be considered an "unauthorized tax," Griffin-Valade writes in the 28-page report.

The takeaway, according to the auditor?

"This is a considerable risk for the city," Griffin-Valade says, citing the prospect of legal challenges to such spending.

The projects she highlighted in her report would be familiar to close observers of the news.

In 2009, Commissioner Randy Leonard crafted a deal with the Portland Rose Festival to lease a city-owned building on the waterfront to the festival's foundation for $1 a month (see "City of Thorns," WW, Jan. 14, 2009). The exchange included a deal to renovate the building, formerly McCall's Waterfront Cafe. The audit says that cost more than $1.5 million.

The festival foundation has agreed to repay what it and the city decided was the foundation's portion of the bill over the next 25 years, a sum of $200,000. The auditor points out that ratepayer money will fund future maintenance at the building. (In a response to the audit, Leonard said most of the renovation costs were employee salaries, which the Water Bureau would have paid regardless of whether the remodel occurred.)

A scholarship program from Mayor Sam Adams to send high-school graduates to Portland Community College has drawn 139 applicants for fall 2011. But money for the grants, which will come in part from the budgets for Portland's Water and sewer bureaus, never underwent scrutiny from either bureau's budget advisory committee. In fact, the program wasn't included in either bureau's original budget.

Between 2006 and 2011, the amount of money parks and planning programs received from the city's sewer bureau grew from $200,000 to $1.3 million, though the public benefit of using ratepayer money for the programs—to control invasive plant species and to police dog parks—was ill-defined, the audit says. Unlike other programs, these spending decisions did go through the normal budget vetting, however.

Among the report's recommendations: that commissioners develop a process for assessing new projects' impact on water and sewer rates in the future.

A spokesman for Adams says the mayor hasn't had a chance to discuss that proposal.