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Thursday, December 3, 2009

Good news, bad news on City of Portland debt

The City of Portland is out borrowing millions again -- this time for part of a new police dispatch system and for part of the city's troubled financial computer conversion. With the new bond issue comes a new official sales document for the city's paper, and as usual, it sheds light on some aspects of the city's finances that the mainstream media doesn't report much about:

There's some good news and some bad news in this document. First, the good news: The city's slacked off on borrowing money in the last half of 2009. The overall long-term bond load is actually down slightly from what it was six months ago. But in addition to this month's new IOUs, Portland's planning some humdinger borrowings in 2010, including $75 million for the water system in January; a monstrous new $430 million mortgage on the sewer system in February; and more "urban renewal" hock in SoWhat and Lents sometime during the year. But at least over the past several months, the crazy borrowers at City Hall appear to have taken a breather.

Now the bad news: In addition to the roughly $2.3 billion unfunded pension liability for police and firefighters, now the city has opened up a fairly hefty unfunded retirement liability for the rest of its workforce. That other segment of its workers, covered by the state PERS system, was enjoying a surplus of funding for a while there, but since the investment returns of PERS tanked along with everyone else's starting in 2008, now there's an unfunded liability of $259.2 million on the city's books as of December 31, 2008:

We've made adjustments in our City of Portland debt-o-meter (in our left sidebar) to reflect these new realities. For our estimate of long-term bonds and interim financing, we've set a new baseline of $2,874,288,790 as of November 1, 2009, growing at an annual rate of 4.7% (the rate the city's bond balance has grown over the last couple of years). For unfunded pension and retiree healthcare liabilities, we've set a new baseline of $2,687,987,638 as of December 31, 2008, growing at an annual rate of 6.5%, which is the last apples-to-apples annual growth rate we have been able to divine from the city's pension pronouncements.

With those new figures plugged in, the long-term city debt per resident is now pushing $9,825. With another $505 million of bonds showing up over the next quarter, that figure is going be well over $10,000 by the time the Easter bunny comes to call. Go by streetcar!

Comments (7)

What's the over/under on that debt/person hitting 5 digits?

I'll say 1 Feb '10.

But look how all of the debt service on current liabilities fades to nothing at around 2030 AD!

Oh, wait, the mayor has another 13 years [estimated] to run around with our credit card with his pants unzipped.

If I'm reading those footnotes in Table 4 correctly, the $259+ million unfunded liability was as of 12/31/08. At that point, the value of pension investments was way down.

After a shaky start, this has generally been a good year for these types of investments. It will be interesting to see how much of that unfunded liability disappears when the new valuation is determined as of 12/31/09. The PERS Variable Earnings Crediting Rate as of the end of October was 28.88%, and Tier 2 was at almost 13%. The market had a good November, so those numbers should be even higher as of the end of last month. That would seem to indicate that at least a good chunk of the FY 2008 losses have been recovered.

Let's hope. According to the document, the required contributions into PERS are going to ramp up considerably beginning in 2011. Between that and the police and fire pension benefits that have to be paid, there'll be at lot less money available for essential services.

That's why they have to engineer Portland for ever higher densities.

We'll need a massive influx of new taxpayers to cover all this this debt (much of which was generated by paying for high density urban planning projects).

Lather, rinse, repeat.

How long before the pyramid scheme collapses?

I cannot wait until the OM for the stadium bonds comes out...

The massive influx of new residents enticed here by regional boosters is typically young and just out of college with no jobs, or immigrants with special needs for subsidized housing and education for their larger than average families, but no jobs.
The Portland-Metro planning model is a pyramid scheme built on the willingness (or coercion) of taxpayers to continue shelling out to cover the costs of accomodating new residents. The new arrivals don't sufficiently pay for the social and other infrastructure upgrades, while using just as much or more of it than the original residents.

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