City replacing "urban renewal" lines of credit with $44.9MM bonds
The City of Portland is going to Wall Street with its hat in its hand again this week. This time it's borrowing around $44.9 million for various "urban renewal" monkey business in the so-called "Interstate Corridor" district. The sales document for the new IOUs is here.
The new bond issue is rated A2 by Moody's, which is about five rungs down from the triple-A rating that the city likes to tell you that it has. Some of the loan will be outstanding for 20 years. Most of it will not bear federally tax-exempt interest, which means that the interest rates should be pretty high.
The latest financing illustrates two hinky aspects of "urban renewal" as practiced in Portland. The first is the "urban renewal" zone itself. One look at the map, and it's obvious that the "district" boundaries are not cohesive. It's a gerrymandered collection of unrelated pockets of real estate flung over a wide swath of north and northeast Portland. Many of the lines make little sense, and one end of the district has little to do with the other. In that regard, as we noted a couple of weeks ago, the district is about to get much worse, not better.
The other troubling aspect of this week's borrowing activity is that the money in question has already been spent. The funds that are borrowed now will be used to pay off lines of credit that the city took out as long as five years ago. The lines of credit are negotiated in secret, and when they're set up, no detailed record is made of what the proceeds are going to be used for. And later, when the permanent financing takes place, there's no precise accounting for how the borrowed money was spent, either. The city simply reports how much money it's burned in the district over the past several years, without segregating how much of the spending was borrowed and how much of it wasn't.
In this case, the city says it's spent $95 million on "urban renewal" in the district over the past 10 years -- including about $42 million on the Interstate MAX line, and another $12 million on shadowy "indirect" costs like staff overhead. But no one ever gets to see precisely how much was borrowed for precisely what. The sloppiness of the whole thing is breathtaking.
And as we've been preaching for a long time now, it doesn't take too much reflection to realize that the public's right to challenge these borrowings at the ballot box has been completely stripped away by the city's tactics. If you try to challenge this week's bonds, you're threatening the city with default on the credit lines; if you tried to challenge the credit lines when they were created, you couldn't make a case because nobody but the bureaucrats knew what the money was going to be used for.
Alas, there's more, much more, of this to come. As part of convincing today's prospective bond buyers that property taxes in the Interstate district are going to go up, the city shows off its grand plans for even more borrowing and spending in the district in the future. Here's a list of some of the projects on the drawing boards -- about $72 million more, if our math is right. All of that will no doubt be borrowed.
Last week the city auditor pointed out that Portland's borrowing way too much money, and spending too much of it on "urban renewal." And what has it done for our economy and our tax base? Not a whole heck of a lot. It's a dangerous game, and it really ought to be given a lengthy timeout, if not a permanent interment. But don't even try telling that to the bobbleheads on the City Council. They know better.