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Tuesday, April 17, 2007

Enjoy that bond rating while you can

The City of Portland is burning money like a drunken sailor these days. A half billion here, a half billion there, the vast majority of it for condo developer toys. And all this is going down while the city's police and fire retirement system ticks away like a time bomb that everybody knows about but is just pushing around under the table with their feet.

The day of reckoning is coming, though. Wait until they have to start showing retirement liabilities on their books the way normal businesses do. Now there's some music they don't want to face down at City Hall. GASB 45, boys.

Comments (12)


Interesting reading.

The party's almost over Sam.

Sure you want to be mayor?

Someone's knockin' at the door
Somebody's ringin' the bell
Do me a favour
Open the door and...


...with apologies to McCartney and the Pythons

(well, they're both English)

Is it possible that the city is issuing debt like crazy in anticipation of being cut off by this rule?

I don't think the City provides free health care to its retirees, either PERS or FPDR. Those employees can *choose* to self-pay the premiums for continuation coverage.

In Oregon, local agencies are required *by statute* to provide to pre-Medicare retirees (on a self-pay basis) the same plan options offered to active employees, and for rating purposes must be aggregated with the active employees.

The rub is that the pre-Medicare retiree cohort is *generally* not as healthy as the actives, so even though the retirees are paying their own premium, they pay the same premium as the actives. This is in effect a subsidy that the new GASB rule is trying to identify.

I guess I should have prefaced my previous remark that the GASB rule in question applies to *NON-PENSION* benefits, as it states in the linked article.

I thought I read somewhere that there are also changes afoot over how the pension benefits are reported. I could be mistaken.

I do know that the way Portland has "accounted" for them in the past is strictly the River of Denial.

As I understand it, the PFD&R system is a "pay as you go" system. They just jack up property taxes to pay for whatever the current costs are. Technically, there is no "unfunded actuarial liability". And unlike every other tax rate on your property tax bill - this is the ONLY ONE IN OREGON that isn't capped. I think legislator Randy Leonard was instrumental in sneaking in that fix. Chime in Randy, you're the one who dreamed up this boondogle, aren't you??

You're asking Smell Bad Randy to confess to a sin...shame on you.

Frank, you're correct that FPD&R is "pay as you go." However, the changes recently passed by Portland voters will phase out this pension system as new hires are placed into OPSRP--the new tier of PERS. This is a cheaper plan for the city because OPSRP is a funded system that earns returns on investments.

The FPD&R levy is, in fact, capped. By city charter, the levy is restricted at $2.80 per $1,000 of assessed value. Expenses that exceed that limit are the responsibility of the city's general fund.


Thanks for the distraction, but Frank's point was not that the levy is unlimited, but rather that the overall amount of property taxes that get soaked up by bluecoat pensions and "disability" is in fact unlimited. It's all coming out of property taxes every year, come hell or high water, and there's no limit to the percentage of annual property taxes that the FPD&R eats up.

Expenses that exceed that limit are the responsibility of the city's general fund.

Indeed. And the average taxpayer could give a rat's you-know-what about which "pot" the money comes from.

I do appreciate John's clarification. I now am truly puzzled as to why COP is so eager to spend the "surpulus" revenue they have. They should be socking it away to pay future pension costs that are otherwise liable to severely eat into the budgets for services. In the future we will have lots of well cared-for police and fire retirees, and none actually out there responding to emergencies.

Frank, don't be "puzzled". In government you always spend the surplus and not apply it to items that are obligations by contract, like pension costs. When an obligation runs dry you just raise taxes, even without a vote. It's the major way government in actuality raises taxes without voter consent.

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