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Wednesday, June 28, 2006

Last licks on the auditor's PDC report

Before taking the Portland city auditor's report on the Portland Development Commission off my desk, there are just a couple of additional passages that deserve a few words. I've alluded to the point made by these passages before -- that the PDC either doesn't know whether its programs are actually any good, or isn't telling what it does know about that. And some of the "data" it is passing off about its "accomplishments" is suspect at best.

In particular, the report found fault in this regard with the PDC's Economic Development Department. It noted:

During fieldwork, we determined that we could not fully assess the efficiency of the Department's strategies, such as cost per job created, due to difficulty in obtaining financial information on a refined program basis and the lack of readily available actual jobs created and retained data in most programs....

Data for some reported measures is unreliable: We reviewed 30 out of 152 total Business Finance and E Zone participant files. We traced data on projected loan leverage, projected jobs, loan commitment amounts and QJP average wages. Data for projected loan leverage, loan commitments, and projected jobs did not match source documents, such as Enterprise Zone precertification and loan application reports, in over half of the cases. This is important because data from the ACT! database is used to generate reports to the Commission and the public. We found data for E Zone leverage and loan commitment amounts reliable when checked against source documents.

In addition, we also learned through interviews that some of the jobs created/retained that were attributed to efforts of the Business Retention and Expansion program and entered into the database were based on the best judgment of staff. While these estimates may be reasonable, the data lacked any source documents to support the estimates.

Some published performance data are estimates, not "actual" performance results and their current labeling may mislead readers: We found that some performance measure data presented in Department reports and the Commission budget document were not clear in terms of what the data represented. Two prominent measures the Department routinely reports, for example, are the investment leveraged as a result of business finance loans and the number of jobs created or retained. PDC staff indicated, and we found this published data to be based on initial project estimates, and not on actual program results. This was not clearly disclosed in the documents we reviewed and would likely mislead readers. The absence of actual performance data for comparison to projections hinders the ability of decision makers to make meaningful program assessments....

[T]he number of jobs reported by the Economic Development Department as "created" or "retained" are jobs projected to be established or retained by the business at the time of PDC funding. Because "jobs created" and "jobs retained" are not actual counts of jobs at each business, we could not conclude that the number of jobs reported as created by PDC-funded businesses had been realized. Additionally, we found that the Economic Development Department's reporting of funds leveraged from its Economic Development loans and enterprize zone participation is based on the investment that is projected by the business recipient. Additionally, updates to investment records for business loans were not supported by source documents; consequently it was unclear to us why updates occurred.

The report goes on to conclude that the PDC badly needs to improve its weak performance measurement and spotty data collection. We agree. PDC's total spending for fiscal 2006 is estimated at $248 million. Portland's population is about 554,000. Thus, the PDC spent around $450 this year for every man, woman, and child in the city. I don't know how others feel, but the Bogdanski household would like to know whether our $1800 a year is being spent wisely, or whether it's just being poured into condo developer pockets and other rat holes.

Comments (7)

Jack you know your blog better than us who surf it...in the past has any key staff from PDC ever responded via online posts regarding these or the many other points you've made?

I think it is helpful to think of taxpayers as investors in a publicly held corporation. An investor has an expectation that there will be a profit resulting from their investment. Similarly a taxpayer has an expectation that their tax dollars will be spent for purposes that are transparent, and that those spending the dollars are held accountable for the use of public funds. In the corporate world executives go to prison when they deliberately lie to their investors, and they get sued constantly in shareholder derivative lawsuits for diseminating innacurate information when a market fluctuation causes investor losses, even if they did so with no intent to influence the market. In this case it is apparent that the PDC schmucks are deliberately diseminating misleading data to justify the expenditure of millions of dollars of public funds. If PDC officials were held to the same standard as the private sector there would be serious jail time here.

has any key staff from PDC ever responded via online posts regarding these or the many other points you've made?

Never responded, online or offline. But they have their own little private "pdc.city" web page, which refers numerous bureaucrat readers here every weekday -- presumably including PDC staffers.

I wish some enterprising reporter for the local MSM would ask some of the same questions I have asked, but "enterprising" and "local MSM" often seem a contradiction in terms.

Jack: excellent post and following comments. Has PDC ever responded to past and present posts?

I believe PDC has responded. They still insist that financing costs are not part of the tram accounting, nor of the whole North Macadam URA accounting. When Larry Brown of PDC and other senior staff members continue this methology then we will never have a means of evaluating the "performance results" of any PDC endeavor.

They also have answered the question by not including all the budget elements of an Urban Renewal area (no transportation dollars in the NM UR budget for example).

How can "actual" performance results be determined when several important auditing criteria are not included-and they are not inadvertently left out?

I'm hoping Nigel Jacquis or Ryan Frank dig deeper and editorialize what the evidence is presenting about PDC. The politicians need a push dealing with PDC.

One thing that looked like a rat hole for a while (no fault of the PDC's) was Airport Way, even though the data you quoted previously shows quite a bit of land value increase. There is now a *lot* of construction going on at the I-205/Airport Way interchange (maybe the pads for Ikea and others) and it's clear that the formerly empty area is going to be hopping soon. I assume that the development of Cascade Station will proceed fairly well after that.

Jud: the Mission Statement of Cascade Urban Renewal District stated that the district was to be "transit oriented" and no "big box stores"; and it was to be an instrumental part for the expenditure for light rail through the district and out to the airport.

That is the criteria that was used, thus PDC's Cascade is a failure.

That is why we have "planning", "goals", "mission statements", etc. You have to review the intentions and then perform audits to determine their success.

Jud: but then using your logic-that Cascade is a success-then Urban Renewal for Cascade was not necessary; free enterprize would have worked much better and sooner, because that is what PDC finally has let happen by forgetting all their District requirements and zoning.

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