Portland dusting off the plastic for another binge
The City of Portland hasn't staged a bond issue in a while. The whole rigamarole in which the bureaucrats publish a formal offering document and go out and borrow millions from some bank or other robber baron outfit -- the last one of those that I've seen was way back in July. That was when the city borrowed about $27.8 million to help the inadequate cash flow in its cancerous police and fire retirement system.
Four whole months without running to Wall Street for another eight-figure fix? My goodness! The city's long-term indebtedness appears to be stalled at a mere $2.9 billion!
But don't you worry, debt fans. On closer inspection, it becomes clear that the city's borrowing machinery is still in good working order, and we'll be cracking the coveted $3 billion level in no time.
There are several reasons for this prediction. First, although I'm not the world's greatest expert in this area, I think that the lawsuit over the city's abuses of the "urban renewal" processes was a big part of the temporary debt slowdown. And that lawsuit has now been bought off. Indeed, the big homeless hotel and spa down by the Greyhound station, which the lawsuit so famously stalled, is going to have its groundbreaking tomorrow. This is confirmation that a big obstacle to further reckless borrowing has been removed.
Second, don't think that the city can't slither out and borrow tens of millions just because it hasn't gone through the formal bond process. As we've highlighted on this blog in the past, the city has several sizeable letters of credit outstanding, and when it needs dough without a lot of hoopla and public process, it just draws on them. No muss, no fuss, no City Council discussion, no public vetting of what the money's being borrowed for. Eventually, the city pays off the line of credit with permanent bonds, but by that time the money's been spent, and as a practical matter, there's no way to say no to the bonds. So much for public input.
And since the first of the year, the city has been tapping those hidden lines of credit with great gusto. According to figures we received earlier this week from Eric Johansen, the city's debt manager, the outstanding balances on the lines of credit increased by nearly $21 million between January 1 and November 1. The breakdown of where it went is here; the biggest line items are $10.1 million for the city's "enterprise business solution" computer system (from all appearances, a classic bureaucratic money pit), and another $5.3 million for whatever is going on with "urban renewal" out in Lents.
Third, there are going to be some additional bonds sold between now and year-end. According to Johansen, "[t]he City expects to sell about $19 million in limited tax revenue bonds in December for the Public Safety System Revitalization Project and the Enterprise Business Solution Project (financial system)." Cha-ching. Not to mention the permanent financing for the homeless tower; that's going to involve another $36 million mortgage. I presume that those bonds get sold next spring; in the meantime, we tap another line of credit, I guess.
Finally, there's plenty of new debt on the horizon for 2010 and beyond. The city recently announced that it's looking for a new consultant who will certify the "feasibility" of new "urban renewal" borrowing. This consultant will apparently be hired to swear on a stack of IOUs that building more junk apartments will sufficiently jack up the tax base that big property tax dollars can be corralled in the future to pay off money that's being borrowed now and handed to Fireman Randy's real estate pals.
Anyway, in the document requesting bids for that consulting gig, here's what the city said about the looming "urban renewal" credit card spree:
Is everybody o.k. with upping the ante like this? At our house, when we start running low on cash for basics, we go easy on the toys for a while. Not in Portland. No, sir. In this town, when in doubt, you put it on plastic -- it's like getting stuff for free.
No wonder the city's looking for a new CFO. A debt workout specialist would be good -- pretty soon, we're gonna need one.