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This page contains a single entry from the blog posted on May 24, 2011 4:54 AM. The previous post in this blog was Forget Bangalore, try Beaverton. The next post in this blog is Portland's new scarlet letter. Many more can be found on the main index page or by looking through the archives.

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Tuesday, May 24, 2011

Tweaking the City of Portland debt clock

We've just updated some of the base figures on our meter of the long-term debt of the City of Portland, in the left sidebar on this blog. The city's total outstanding long-term bonds and interim financing have come down a little in the past couple of months, although the trend over the past year is still an increase of around 7%. Our current roundup of all of the city's bonds and interim financing shows an outstanding balance earlier this month of $3,276,852,000 -- nearly $3.3 billion -- and we're using a conservative growth rate of 5% a year on the meter to watch that continue to climb.

As for the city's pension and retiree healthcare liabilities, those are hard to call with reasonable certainty, because the city dares to publish those figures only about once every two years, and when it does it likes to change its assumptions, making precise predictions impossible. Our clock, which currently shows the total unfunded retiree liability at more than $3.12 billion, is based on a 6.5% annual growth rate. Actual mileage may vary, but it would come as quite a shock if the hard numbers came in at $3 billion or less as of today. The $3.12 billion is our honest best guess.

All our current ciphering puts the city's long-term debt per resident at just over $10,833 at this writing. For a household of four, that's $43,332.

While we were examining the city's debt levels, we thought we'd take a closer look at the city's oft-repeated boast that it has a triple-A credit rating. Only two types of bonds that the city has outstanding get that rating: its general obligation bonds, and the bonds that have a first lien on the water system. (The water bonds used to be rated lower, but we just noticed that they got a boost when Moody's changed their bond rating system a while back.)

Now, our count of the balance on the general obligation bonds is around $85 million, and we've got the first lien water bonds at $324 million. The city's interim lines of credit aren't rated, but if you give them the benefit of the doubt, they add another $123 million of top ratings. And so all told, at most, only $532 million of the city's debt is triple-A rated. The rest of the debt -- $2.75 billion -- is rated lower. Another way to put it is that only about 16% of the city's debt carries the top rating; about 84% does not.

If the city had only $1 of AAA-rated debt, would you call that its overall "credit rating"? Probably not. Is 16% of its debt enough to justify that label? Think about it.

Comments (5)

And we call Paul Allen dysfunctional??

I would be happy with assumed returns on investments (PERS-related investments) in the range of 3.25 to 4 percent, consistent with the 10 and 20 year treasury notes. This would mean that for a worker to get some expected payout tomorrow they must have a much larger chunk deducted from their paycheck today and entrusted to the wizards from the corruptable (I say corrupt) Oregon Investment Council.

If the worker wants out from such a preposterous compelled entrustment of their private savings then, of course, let them opt out -- or let them demand in court to be set free.

Having the government control the allocation of investment resources, even if only that of public employees (who were individually compelled to participate), has poisoned the entire framework of our government.

What are the odds that we can in the near term fix this financial nightmare without the state or city being declared officially bankrupt in a court?

Is 16% enough? NO!
But even when the city is officially bankrupt the folks in charge will spin it as something positive saying something on the order of, "oh goody, we get a do over, so now all those junk bonds are more! valuable than they were before."

So the debt went down slightly. You know what this means! Cost savings!!! Let's go shopping!

About a month back, I saw the sewer bureau had new issue Muni's with a term of 30 years, and the interest rate yield was in excess of 5% per year. I think I saw an AA rating on the issue. This interest rate would seem to imply a very modest amount of material financial risk for Portland relative to the average risk in other parts of the country. One improvement in the financial management of Portland government is the city auditor. This auditor is less than the blatant rubber stamp of the last auditor, and the current auditor actually called out city hall for piggy banking off of the water bureau (Geez, and wouldn't you know it, this would be Commissar Leonard's Bureau).

Another useful metric not mentioned here is how city debt and obligations compare to city revenue (per year inflows). I think the city's revenue is about equal to its debt (excluding unfunded obligations), which should mean the city is about at the low end of a healthy financial position (like range).

I am not sure the financial picture won't continue to ebb lower as the Mayoral candidates look like big public project spenders. If I have to choose between Adams and Hale, I am probably either not voting for Mayor or voting for Adams (yuck).


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In Vino Veritas

Quinta das Amoras, Vinho Tinto 2009
Mauro Molino, Barbera d'Alba 2009
Garda Chiaretto Rose
Columbia Crest, Two Vines Vineyard 10 White
Chateau Ste. Michelle, Pinot Gris, Columbia Valley 2009
L'Hortus, Rose de Saignee 2010
Maculan, Pino & Toi 2008
McKinley Springs, Bombing Range Red 2008
Trader Joe's Pinot Gris 2009
Montes Alpha, Cabernet 2007
Gran Sasso, Sangiovese, Terre di Chieti 2009
Garda, Classico Chiaretto Rose
Beaulieu, Cabernet, Rutherford 1999
Picos del Montgo, Tempranillo 2008
Chateau de Montmirail, Vacqueyras 2008
La Granja 360, Syrah 2009
Montgras, Carmenere Reserva 2009
Lange, Pinot Gris 2009
Columbia Crest, Horse Heaven Hills Cabernet 2008
Kirkland, Pinot Grigio 2010
Trader Joe's Coastal Syrah 2009
Columbia Crest, Horse Heaven Hills Merlot 2008
Trader Joe's Coastal Chardonnay 2009
Vieux Papes Red
Domaine de l'Aujardiere, Chardonnay 2009
Santa Rita, Cabernet, Medalla Real 2007
Penfold's, Koonunga Hill Shiraz Cabernet 2008
Guild, Red, Lot #02 2008
Dievole, Dievolino Sangiovese 2008
Laforet, Burgogne Chardonnay 2009
Columbia Winery, Merlot 2007
Bonterra, Cabernet 2008
Elk Cove, Pinot Gris 2009
Maquis Lien 2006
Scott Paul, Pinot Noir, Le Paulee 2007
Cameron, Chardonnay
B.R. Cohn, Cabernet, Silver Label 2006
Graffigna, Cabernet 2005
Palo Alto, Reserve Red 2008
Menguante, Garnacha 2008
Lange, Pinot Gris 2009
Felsina Berardenga, Vin Santo 1997
Anne Amie, Pinot Gris 2009
McKinley Springs, Bombing Ramge Red 2007
Vieux Papes Red
Dionysius Chardonnay 2009
Haden Fig, Pinot Noir 2009
Vega Montan, Mencia 2008
Chateau la Vernede, Coteaux du Languedoc 2007
Mount Defiance, Hellfire (White) 2008
Root: 1, Cabernet 2008
Columbia Crest, Two Vines Pinot Grigio 2009
Columbia Crest, Two Vines, Vineyard 10 White, 2008
Columbia Crest, Two Vines, Vineyard 10 Rose, 2007
Abacela, Grenache Rose 2009
Avia Cabernet 2004
Lemelson Pinot Noir, Thea's Selection 2007
Chateau de la Roulerie, Rose d'Anjou 2009
Casal Garcia, Vinho Verde Rose
La Ferme Julien, Rose 2008
Cana's Feast, Bricco Red, 2006
Hogue, Genesis Merlot, 2008
Owen Roe, Sharecropper's Cabernet, 2008
Kim Crawford, Unoaked Chardonnay 2008
J. Scott, Pinot Noir 2008
Edmunds St. John, White, Heart of Gold 2008
Columbia Crest, Walter Clore Private Reserve 2006
Stevenot, Cabernet, Sierra Foothills, "Stanford" 2000
Portuga, Vinho Rose 2009
Taylor Fladgate, First Estate Reserve Porto
Franciscan, Cabernet, Napa 2006
Chaparral de Vega Sindoa, Garnacha 2008
Quinta da Aveleda, Vinho Verde 2008
St. Francis, Chardonnay Sonoma 2008
E. Guigal, Cotes du Rhone Blanc, 2007
Edmunds St. John, Bone-Jolly, Gamay Noir 2008
St. Innocent, Pinot Noir 2006
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Chateau Ste. Michelle, Merlot, Indian Wells 2007
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Edmunds St. John, Bone-Jolly, Gamay Rosé 2009
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The Occasional Book

Jack London - The House of Pride, and Other Tales of Hawaii
Jack Walker - The Extraordinary Rendition of Vincent Dellamaria
Colum McCann - Let the Great World Spin
Niccolò Machiavelli - The Prince
Harper Lee - To Kill a Mockingbird
Emma McLaughlin & Nicola Kraus - The Nanny Diaries
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Sharon Creech - Walk Two Moons
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Mark Herrmann - The Curmudgeon's Guide to Practicing Law
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Phil Stanford - The Peyton-Allan Files
Jesse Katz - The Opposite Field
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J.K. Rowling - Harry Potter and the Sorcerer's Stone
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Donald Miller - A Million Miles in a Thousand Years
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Penda Diakité - I Lost My Tooth in Africa
Grace Lin - The Year of the Rat
Oscar Hijuelos - Mr. Ives' Christmas
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David Sedaris - Me Talk Pretty One Day
Karen Armstrong - The Spiral Staircase
Charles Larson - The Portland Murders
Adrian Wojnarowski - The Miracle of St. Anthony
William H. Colby - Long Goodbye
Steven D. Stark - Meet the Beatles
Phil Stanford - Portland Confidential
Rick Moody - Garden State
Jonathan Schwartz - All in Good Time
David Sedaris - Dress Your Family in Corduroy and Denim
Anthony Holden - Big Deal
Robert J. Spitzer - The Spirit of Leadership
James McManus - Positively Fifth Street
Jeff Noon - Vurt

Road Work

Miles run year to date: 54
At this date last year: 50
Total run in 2011: 113
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In 2009: 67
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In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269


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