A new city audit of Portland Streetcar says City Hall is breaking state law in how it allows the streetcar's private operator to control public money. 

City Auditor LaVonne Griffin-Valade also says the city has never made a strategic plan to fit the streetcar into its larger transportation spending, since creating the streetcar system in 1995.

"The City's decisions have resulted in a structure that is not readily transparent to the public," writes Griffin-Valade, "does not reflect an actual level of City control to match its contractual responsibilities, and raises concerns about related-party relationships and perceived conflicts of interest."

Griffin-Valade's new audit slams the Portland Bureau of Transportation for allowing private operator Portland Streetcar, Inc. to manage two funds of city money—revenue collected from fares, sponsorships and parking revenue.

The audit says that money was spent by Portland Streetcar, Inc. in violation of Oregon law—and that while the city has made gestures toward compliance, it still hasn't finalized agreements allowing the streetcar operator to use the money legally.

The report also criticizes the city because it "does not fully report Portland Streetcar operations and maintenance costs."

More than a year ago, Griffin-Valade slammed the City Council and the Portland Bureau of Transportation for spending on capital projects without having the money to pay for road maintenance.

Now, 15 months later, the City Council is hunting for new taxes and fees to fund transportation projects.

But Griffin-Valade's latest audit, released today, says PBOT still hasn't followed through on the auditor's recommendation that it decide which transportation projects are the most important.

"In our 2013 audit on transportation funding, we agreed with the City Budget Office's recommendation that PBOT develop a transportation strategy to prioritize and reconcile potentially competing transportation priorities," Griffin-Valade writes. "PBOT has yet to create a written strategic plan."

The admonition arrives at a particularly damaging moment.

Mayor Charlie Hales and City Commissioner Steve Novick are trying to rally support for a $12-a-month "street maintenance fee" that would deliver as much as $52 million a year to the cash-strapped transportation bureau.

The audit suggests that City Council not approve any further streetcar expansion until it develops "consistent goals" and a strategy to link the streetcar to its larger mission.

UPDATE, 7 pm Thursday:

In his written response to the audit, Novick agrees Portland Streetcar's deals with the city need to be clarified and the transportation bureau should prioritize better.

He also contends it needs more revenue.

"We share your concern about the portion of PBOT discretionary resources directed to the streetcar—although in our view the problem is rooted in the size of the denominator," Novick writes. "The streetcar can be an important feature of a strong transportation system, but it should not be the only strong link in a crumbling system."