Just how broke is Tri-Met?
Members of Portland's apoplectic transit-hater crowd find their heads spinning this week with the release of the troubled transit agency's latest audited financial statements. These documents confirm what people have been suspecting for months: that Tri-Met's finances have not been well managed, and the whole operation is careening toward disaster.
The most eye-popping revelation is that Tri-Met's unfunded liability for retiree health care benefits is now $816.5 million. That's up from $632.2 million a year ago. And hey, people, that's just to pay the retired employees' medical bills! It doesn't include the liability to pay them their pensions, which adds another $267.3 million in unfunded liabilities to the tally. Cha-ching! You math majors out there can see that the total unfunded pension and retiree health care liability is now approaching $1.1 billion.
And even that mega-number may be low. The actuaries who come up with these figures make all sorts of assumptions in predicting what the future will hold, including how much Tri-Met will earn on investments that it socks away to pay future benefits to these folks, and how much medical care is going to cost going forward. Some of the assumptions made in the current financials seem a bit, shall we say, optimistic. Such as:
Significant actuarial assumptions used in the valuation include a rate of return on the investment of present and future assets of 7.0 percent, an annual cost of living increase of 4.0 percent and annual salary increases of 5.0 percent....If you finding yourself thinking that you're going to make 7% or 8% on your investments, or that health care rates are going to "trend down," over the next decade, call Amanda Fritz for emergency psychiatric evaluation.
Significant actuarial assumptions used in the valuation include a rate of return on the investment of present and future assets of 8.0 percent, a benefits in payment status annual increase of 3.0 percent, and a 3.0 percent annual rate to determine the normal retirement benefit for active employees....
Significant actuarial assumptions used in the valuation include a discount rate of 4.5%, and health care cost rates trending down from 10% in 2010 to 5% in 2020 for the major medical component, which is representative of the entire plan....
Another item that jumps out of these financials is that Tri-Met is apparently playing the same "interim financing" shell game that Portland uses when it goes out to borrow huge sums of money for "urban renewal" shenanigans. It authorizes "interim" financing of projects early on, before the public has any firm handle on what the project entails. While the jumbo "interim" loans are outstanding -- up to five years these days -- Tri-Met spends all the money. By the time it informs the public that it's going out for the permanent, long-term mortgage, the money's all been spent, the "interim" loan is due any day now, and it's way too late to say no to the long-term bonds.
We also see that Tri-Met is the tenant under several leases of office space out there, paying rent of about $1 million a year. This being Portland, one can only imagine how those properties are selected, and how the rents are set. Past or present proximity to Neil Goldschmidt is no doubt an important factor in that analysis.
In some ways, the timing of the bad money news works well for Tri-Met, which is currently begging voters for a property tax increase, supposedly to fund its current operations. On the other hand, the ugly balance sheet also reflects poorly on the agency's management, which has made some screamingly bad choices with the doomed WES commuter train to Wilsonville and a streetcar to nowhere on Portland's east side, and now proposes to double down with a mystery train to a place called Milwaukie.
Regardless of whether the voters are dumb enough to give the transit district its property tax, Tri-Met appears to have hit a financial iceberg. And its captain,
Ted Fred Hansen, left an hour ago on a speed boat. The rest of you, go by streetcar!