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Wednesday, March 30, 2011

Portland auditor: City spending water, sewer bill money illegally

Here's a most interesting development out of Portland City Hall: Auditor LaVonne Griffin-Valade has issued a report that concludes that the city's water and sewer bureaus have been breaking state law and the city charter in the way they have been spending water and sewer revenue on items that have little or nothing to do with provision of water and sewer services. In addition, she says, these unrelated expenditures may well cause the city to be in breach of various covenants that the city has made in its agreements relating to its various loans from bondholders.

These ideas are not new. Critics of the city's skyrocketing water and sewer bills have been saying the same things for years. But to have it in black and white, straight from the auditor, is a real story.

Quite a few spending items are called out in the report, but the two worst offenders are the water bureau's "green house" project and its takeover of what is now Rose Festival headquarters. Not only are these projects "not directly related" to water service (and that's putting it mildly), the money spent on them was neither in the water bureau budget request or in the budget passed by the City Council.

Griffin-Valade does her usual best to bend over backward for the commissioners. She refuses to admit that the very nature of these expenditures makes them illegal, but dwells instead on whether budget procedures were properly followed. And she leaves out at least one glaring item: the reported practice of having water bureau employees enforcing the city's sign laws and requirements regarding sale of diesel fuels. These are not "policy choices"; these turn water bills into illegal taxes, and could put the city in default on its bonds. Apparently, however, it would take a judge to say so.

The document, which seems like a blueprint for a lawsuit over existing practices, is here. It's worth downloading for use in the upcoming city elections. The responses included from the two city commissioners in charge are particularly illustrative. Legend Dan Saltzman over at sewer basically says, "You've got a point; we can do better." Fireman Randy's response is a little different: "You're wrong; anything is related to water services if I say it is, and I don't need no stinkin' budget." That's exactly the attitude that she's talking about.

Comments (41)

It's a honeypot and I still want to know how much Randy pungled up for SW Moody from ratepayers money.

The bad thing is, they still haven't paid anything for EPA stuff yet and they are raising rates.

When I first saw that the city was borrowing $80 million for water this week, I assumed it was for EPA. I assumed wrong.

They're going to need a new auditor.

The worst part is, if you ask people if Water Bureau money should be used for the Rose Festival building, they say No. But they don't realize that it already has. Voters are woefully uninformed. (But then, I would be too if I didn't check out Jack's blog daily.)

Prediction: Randy laughs in the auditor's face and no one ever brings a lawsuit.

I'm very glad the city never got its hands on PGE. Just an idea: Has anyone ever considered the possibility of privatizing the water bureau? I know that where I grew up, the water utility was private. Selling the water bureau would give the city a lot of money to pay down its debt and get it out of the hands of wayward politicians.

Has anyone ever considered the possibility of privatizing the water bureau?

How about if Randy wants to raise rates, he goes to the PUC just like PGE, NNWGas, PP&L, etc?

RIght now, Randy gets a bug and decides to raise rates, no one stops him. This is not a very safe approach. In addition, PURB has written opinions for two years telling Randy to NOT raise rates and that PWB is wasting money - All of which end up in the garbage can.

Right now, PWB is Randy's slush fund and the EPA is just a cover story to raise rates.

Has anyone ever considered the possibility of privatizing Randy Leonard?

"Leonard defended the project, disputes the audit's findings, "We didn't spend $1.5 million," would have been spent anyway"

Classic lazy and indifferent Leonard. He's the poster child for the politician who never grasped the concepts of fiduciary responsibility or due diligence.

His adolescent narcissism places Randy above such concerns.

Instead of looking at the cost and applying real due diligence.

He may have told them "to look for ways to be more efficient, or to "squeeze in going down" but in typical lazy Randy fashion he could care less what anything costs so he didn't track or follow up.

"Water Bureau employees spent - equivalent to about three full-time employees working on the project for one year."

Randy Leonard's cavalier approach to agency, staff and cost runs throughout the city. It's sickening.

I haven't put a lot of thought into privatization, but it's something that should be investigated. The water bureau is a valuable asset that could be used to pay down Portland's enormous debt. Check out this link to see a list of the privately owned water companies in the US: http://www.nawc.org/about/about-members.html

I'm not saying this is necessarily the best answer, but it should be examined in Portland.

The Auditor is not a lawyer and is prohibited from practicing law on behalf of another. If she thinks that there is a breach or potential breach of some law I would assume that she has consulted with the staff of the Office of City Attorney. I believe that if she wants to assert the hint of illegality that she include in her report the opinion of an attorney to back her up, which could alternatively include an outside counsel. Let the lawyer who shares her view, or is willing to back her up in court, step forward and put their name in the record. Let's lock them into such a view! No weaselly legal advice should be allowed, or later denied.

I want the full text of the legal advice given to the City Attorney, in the form of an Opinion and included to the report itself. It is not exempt from a public records request, is it?

oops: "legal advice given to the City [Auditor]"

Steve -

Re SW Moody

Thats a question I've been wondering, too.

One thing to note is that there is a legitimate reason to spend some water bureau $$$ on SW Moody.

Think about it. If the street level is raised 14 or 18 feet or whatever, -- and I'm not arguing if that is a good idea or a bad idea, just observing -- then the access tunnels / manholes whatever also have to be extended vertically at least that far upward.
So there are parts of the Moody costs which should be paid by the Water Bureau.

How much money, and for what reasons, is a whole different question, and the Water Bureau is being kind of opaque about voluntarily stepping forward with that kind of information.

If they have to repipe the water mains under Moody to a higher level if the street is raised, thats seeious construction costs. Not really sure they need to do that, though, as both gravity and pressure should make those mains work better the deeper they are.

What do I know. I'm not an engineer, I only impersonate one on this blog. .

PDX nag -

The city traditionally takes the position that advice from the city attorney to a bureau or the auditor is privileged under the attornry client privilege and exempt from disclosure under the Public Records Act.

I don't like that policy, but I see a lot of good reasons for it. The attorney client privilege is kind of important IMHO.

Here's a corollary to cityhall's gamemanship. It spends water and sewer bureau monies on unrelated items which might otherwise be paid for out of general fund monies. This way it manages to produce a general fund surplus usually around 2 to 5 million dollars at the end of each fiscal year. And you know what general surplus monies are used for? That's right, political candy fund. Commissioners get to ask for money for gifting to causes which advance their chances of getting re-elected. It's like Christmas time for the incumbent commissioners and mayors. For instance, new children scholarship monies, nothing sells like children especially if they have perceived disadvantage.

I asked Commissioner Fritz why general surplus monies couldn't be returned to water and sewer departments to help put a dent in sharply escalating water and sewer bills. Her response was we (cityhall) can't do this as it would be illegal. She also says she saved water and sewer customers some $500 million by advocating for a lower cost treatment plant than otherwise. So, she must not be feeling our pain to borrow a Clinton term.

As for Commissioner Leonard, he has the audacity to say water and sewer rates weren't high enough to begin with. All I know is the Big Pipe Project better work because we've all paid dearly for it.

I hope, as pdxnag and others have suggested, that legal action is taken. That seems to be the only solution around this town for change. You'd think there would be a few under-employed attorneys around that could prevail or at least prod the City Attorney as well as City Auditor to take action. Since those two now know of the malfeasance, and if they don't take action, then they should be taken to court too.

Privitazation of the bureau is the last thing to do, just ask Indianapolis. With Leonard and Adams finished as politicians, they are using this final year to make this their party time. Adams' indiscretions have incapacitated him to the point where Leonard has free reign. The misfeasance/malfeasance we are seeing in the water bureau has been documented and accurately chronicled in this forum by Jack and many others. Now the water bureau is finally being recognized for the dysfunctional entity it is under Leonard and Shaff. The City and water bureau have been complicit to scientific fraud for many years, with time (and public health) showing we do not need these EPA projects at all.

"there is a legitimate reason to spend some water bureau $$$ on SW Moody."

There are also neon roses, green houses and Rose Festival pavilions.

WHy would you assume any of these people to spend money wisely?

Having been in attendance at the city council where the Admiral presented his proclamation to turn over the old McCall's site to the Rose Festival; it struck me then how little time was spent thinking about the whole process and how little informed the public chooses to be. No one is really protecting the citizens from this destructing group we currently have in the council.

The comments that day by Randy showed that the water bureau has excess employees that need to fill in the day by painting, cleaning and other activities outside of their job descriptions.
Amanda questioned this use of labor but obviously never followed up.

Perhaps it is time to examine once again the city manager form of government and leave the accountablility to those who are better managers than a mental health hurse, a fireman, an attorney, a trust fund engineer, and a drop out.

Why is this not on any mainstream media?

Insider - you reject out of hand any notion of privatization and then go on to discuss what a mess the current water bureau is. I don't know what the story is in Indianapolis, but even if their story is bad, that doesn't mean privatization of the PWB is necessarily the wrong way to go. As you seem to recognize, the status quo is terrible. It's time to think outside the box to come up with ways to fix this organization. The cost increases that PWB is proposing for the coming years are going to hurt so many Portlanders who are already living on the edge. It adds insult to injury to think that we in Portland experience so much rain yet we have to pay so much for water!

Didn't all of this start under former-auditor Gary Blackmer's watch? Hope he isn't working in a place where he can rubberstamp more financial malfeasance.


Stuart- clearly you have no experience with privitized water utilities. I do first hand, and there is consumer remorse each and every time. Just because our local bureau is now melting down under incompetence doesn't mean it can't be fixed. It belongs to the people who pay the bills, not some managed contract entity with no public accountability once the papers are signed. I do and will always reject privitized water. There is much more to the issue than thinking out of the box you have no experience with, and know nothing about.

Wow, insider, that's quite the put down. I guess we should just take your word for it. You're the authority.

Now you get it.

Randy really needs to retire and move to Camas to enjoy his two pensions and go fishing with his PFB buddies. His belligerence and obstinacy towards citizens and other city bureaus and staff seem to have gotten worse since what appears to have been a mid-life crisis. He expresses no sympathy for residents and businesses for whom rising utility rates are crippling, doesn't seem to care that some will chose to move elsewhere (further eroding the tax and employment bases), and sees nothing wrong with spending utility revenues on whatever project or crusade he sees fit. He rejects or ignores reports from citizen and ratepayer advocates such as the City Auditor and the PURB daring to exercise their oversight functions and question if non-mission-critical spending of PWB revenues -- however small -- is out of line.

He's lost the politician's touch, or is too jaded and doesn't care anymore. I mean, how hard is it to simply say a few words (as Saltzman did) to mollify the Auditor and voters and make a couple of vague promises to look into the matter? For this and many other reasons, I will not vote for him should he choose to run for his seat again.

I wonder if auditor winds up looking for a new job soon.

And what recourse is there if the city blazenly defies state laws? I mean, doesn't the state have to intervene? The AG seems happy to turn a blind eye to anything going on in Portland. I still there needs to be a federal investigation.

I'm betting nothing happens... or Portland pulls strings to get the law changed to suit its needs.

Has anyone ever considered the possibility of privatizing the water bureau?

Honestly, I don't think that'd be a good idea - it'd cause water rates to go even higher (the various unfunded mandates wouldn't go away, the city would have to start paying for its own usage as a line item rather than within the rates, and the private entity would want their profits - PLUS, the entire water distribution system would be subject to property taxes. (Almost always, the largest property tax payer, or one of the largest, in a particular county is a utility of some type.)

Instead, maybe the Water Bureau should be split off into its own distinct government agency, completely removed from the City of Portland, with its own elected board of directors who are directly accountable to the citizens rather than Portland's model, where the elected Commissioner is only elected by a small portion of the city, but whose bureau represents the entire city (and in essence is unelected, and whose own real oversight is in the city-wide election for the mayor who has the power to reassign the bureau.)

Public Utility Districts are nothing new, and when they work well, they work incredibly well. (Of course, there are also examples of PUDs whose Boards are so politically inbred that they are nothing less than disasters.)

Stuart:I haven't put a lot of thought into privatization, but it's something that should be investigated...

Please do research before you promote privatization.


Privateers may be creeping around your town hall. Your town is sitting on a gold mine: your water supply. Corporate executives know this and may be trying to weasel control of YOUR water from your city or town.

Corporations may try to exploit your struggling city. Because of the economic crisis, cities and towns across the nation are going broke, and large corporations are offering large sums of cash in exchange for control of our valuable drinking water and wastewater systems.

You might not know it‚ happening in your own community. Your mayor or city council may be cutting a deal behind your back. They could be trying to sell off control of your water without even telling you. We’ve seen it happen far too often.

Your water bill could skyrocket. If you let them privatize your water utility, you could end up paying as much as 80 percent more for water service.

You would have to pay for corporate expenses, incompetence and inefficiency. It‚ not surprising that you would pay more for private water. Despite their claims, corporations are not more efficient at providing water and sewer service, and they face several extra expenses. Private financing is more expensive, and corporate profits, dividends and income taxes can add 20 to 30 percent to operation and maintenance costs. The charges add up, and you would be stuck paying for them.

Sewage could flood your home. From Richmond, Calif., to Gary, Ind., to Fairbanks, Alaska, many communities have suffered at the hands of water corporations. Sewage has spilled into households and businesses, waterways are polluted and water quality has suffered.

Privatization has failed. There are better solutions to our country‚ water woes. In the short term – here’s what you can do to protect your water system:.......
(full report on link)

WATER RIGHTS belong to the people and should never be given to corporations. International water corporations naturally would angle to have our gold mine, our Bull Run Water System.

People all over the globe are fighting for their water rights that foolishly were signed away or were taken away via devious means.

Stockton, CA for example, fought for six long years to get their rights back.

Why go down the road of giving the say of our water away in the first place?

Privatization - Big Mistake. I understand that the first few years, things seem managed and then, big problems. In some areas, brown water comes out of the faucets, other areas, not enough water pressure in fire hydrants necessary to fight fires.

Some of us have been very concerned that Leonard with his PWB were running our water system into the ground, spending like mad and that in turn would lead people into considering privatization. Just maybe Leonard and whoever is behind all this would like the idea, that way they can turn over their "debt and mismanagement problems" to someone else.

Corporate profits and dividends might be the incentive here as well to move us in this direction. There seems to be an agenda here decided by whom?

It has almost been like an out of control "agenda" to then lead us to go down that road of privatization. If that is the case, we have been royally sold out.

Well said clinamen. You've summarized the privatization issue clearly and with a firm understanding of the subject.

Insider - (I assume your moniker means you're familar with PWB), why can't we force Randy to go to the PUC for rate increases?

For all I know a 50% increase in 2 years may be justified - then again it's Randy. It makes me uncomfortable having one guy who makes rules by fiat with no checks.

Geez, clinamen, I did not "promote" privatization. I simply said that it's something that should be considered. I haven't made my mind up, unlike you and Insider, but you and Insider don't help your positions when you take such snarky tones.

Stuart, I didn't find clinamen "sparky" at all. Just part of the discussion. He didn't put one person down.


Between clinamen and insider, I can tell you they have forgotten more about water than you will ever know...

What clinamen said (about privatization).

Make the water bureau a non profit corporation. That should reduce the tax burden.

"Make the water bureau a non profit"

Why do you think Randy is blowing so much PWB money so fast?

Watch what happens when the heat gets turned up too high for Randy. He'll throw David Schaff under the bus and appoint his next BFF to head the water bureau.

Steve I was trying to suggest that it be taken out of city government and instead of a profit corporation, make it a non profit corporation. Most likely no city official will have anything to do with it at the point except to claim the officers are a bunch of greedy bastards.

Watch what happens when the heat gets turned up too high for Randy.

He runs to the O to respond. They give him a column.

Randy still sounds like a parrot...giving the same old song and dance.

Such as saying we will be threatened by fines if we do not comply with EPA.

Take a look at this:

“There is significant reluctance within the E.P.A. and Justice Department to bring actions against municipalities, because there’s a view that they are often cash-strapped, and fines would ultimately be paid by local taxpayers,” said David Uhlmann, who headed the environmental crimes division at the Justice Department until 2007.

More song and dance by Randy, such as how they tried here.
Unfortunately for Randy, it is becoming clearer to the public how he tried now that the O reported that NY got a reprieve until 2028 and are asking for another to 2034.

We need to STOP today on projects moving forward. Randy needs to contact NY and learn from them, since he doesn't have what it takes to protect our Bull Run Water System and Reservoirs.

More song and dance from Randy; may tear the rest of his column apart later.

You all got the picture by now.

I didn't spend years learning about this issue and let him continue parroting without responding.

...and we don't need your plan of "stinkin" drinking water either Randy! What you have to say about dismantling our treasure, the Bull Run Water System and Reservoirs?
Good local boy, you are?

The water bureau is the private slush fund of city hall. Nice to see the auditor actually doing her job, although a bit tame.

Privatization of public utilities is always a really bad idea. Private means profit. And profit without competition means a monopoly.

Comcast anyone?

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