Portland vs. Seattle city debt: It's not even close
During our recent series on the long-term debt of the City of Portland, some commenters wrote in to tell me I should express my opinion on the optimum level of municipal debt per resident. I didn't take that bait, but I surmised that $7,842.47 per resident, which is where the city stands at last reckoning, was too high. Some asked for a comparison with other cities. I replied that I wasn't sure how relevant that would be. Remember what your grandma used to tell you about what not to do if your friend jumps off a bridge.
Relevance questions aside, the prospect of a comparison did pique my curiosity. And so I put in a call to folks at the City of Seattle, who were nice enough to steer me to all the documents one needs to get a picture of the municipal debt situation up there. They issued a huge wad of refinancing and construction bonds back in April, and the "official statement" (bond sales document) for that borrowing provides some excellent data. Then there's the massive "comprehensive annual financial report" for 2006. Between the two documents, you get a decent look at Seattle's finances.
They're in way better shape than we are in Portland.
First and foremost, their employee pensions are actually pretty well funded. They show an unfunded pension liability of $225.8 million, which is a far cry from Portland's $1.8 billion (with a "b") unfunded police and fire pension liability. There's an additional twist here, however: Seattle has an old police and fire pension system, changed back in the early '70s, that's still paying benefits to police and firefighters from the good old days. The city does not label the liabilities of that system as "unfunded," but based on what the financing documents say, it appears that in essence they are. (The firefighters' fund gets a share of the state tax on fire insurance premiums, and the city has started a small sinking fund for some of the liabilities, but it's not clear how much of the benefits really come from city taxpayers on an ongoing basis -- probably most of them.) If you treat the actuarial liability of those pension programs as completely unfunded, Seattle's pension debt goes up to $499.6 million.
As for long-term bonds and other long-term liabilities, Seattle comes in at $3.48 billion -- higher than Portland's $2.61 billion, but there's a big asterisk there. Seattle has public power -- the city owns and operates the power delivery system up that way. And if you subtract out long-term debt for the power system, which you'd have to do in order to make an apples-to-apples comparison to Portland (where we residents also pay off the private power companies' debts, as well as the city's), you get a long-term debt total for Seattle of $2,078,530,528 (not including pensions). Pensions and other long-term indebtedness together come to $2,578,130,528.
I guess I hadn't thought about it in a while, but Seattle doesn't have many more people within its city limits than Portland does. Its most recent population estimate is 578,700, compared to Portland's 562,690. When you divide the Seattle long-term debt by the population, you come to a debt of $4,455.04 per resident. That's nowhere near what the debt per capita comes to down here. If you don't count the Seattle power bonds (and again, you shouldn't), Portland residents are saddled with much more in per capita city liabilities than Seattle residents are -- something like 76 percent more.
Just to placate the naysayers out there, I've also run the Seattle numbers with the power company debt included. Emerald City residents are still better off than Rose City dwellers, even in that apples-to-oranges comparison. Their total pension and long-term debt comes to $3,987,345,528, compared to Portland's total, which is about $425 million higher. In other words, even if the entire Seattle power system suddenly stopped generating money and all its assets became worthless, the residents up there would still be left holding a smaller bag than Portland residents are now. Seattle's long-term debt per resident, counting the power system's bonds, is $6,890.18.
As I've said, I'm not all that keen on the comparative approach to managing one's finances. Just because my next door neighbor has run up $60,000 on credit cards shouldn't make me comfortable with the fact that I've run up only $40,000. But if you think you're going to feel better about the City of Portland's obscene debt load by looking to a place like Seattle, forget it.