While City of Portland's debt rises, its tax levy falls
Over the past couple of weeks, we've been examining the City of Portland's long-term debt -- not a pretty picture at $4.4 billion and climbing steeply. But hey, as long as there's enough tax revenue to pay off that huge pile of IOU's over time, who cares, right?
That's where one more piece of the puzzle needs to be revealed. The city's tax levy actually declined last year below what it was the year before. According to the city's own bond sales document, recently released (the "preliminary official statement," or POS, for last week's bond issue), here are the tax collections over the last 10 years:
Look at the last two lines in the "Total Levy" column. From 2005-06 to 2006-07, the city's tax levy decreased. It was $363,683,000 in 2005-06, and slightly less, $363,073,000, the next year. That's negative growth in the tax levy, people -- not a good sign when, as noted here yesterday, Portland's long-term debt is growing at a rate well north of 6 percent a year.
How can tax levies be going down, when property values increased during that last year? According to the POS, assessed values in town went up, from $35.2 billion to $38.6 billion, and yet the tax levy declined. The best guess I can muster is "Measure 5," which causes non-school tax levies to be "compressed" when they exceed a flat rate of $10 per $1,000 of real market value. Perhaps other taxing authorities that get a piece of Portland's real property owners picked up a bigger share of the constitutionally limited property taxes, leaving the City of Portland with less tax levy to collect.
I'm not the world's greatest Measure 5 expert, and maybe I've got that screwed up. But something decreased the City of Portland tax levy last year, and whatever it may be, the crucial point here is that the levy is not growing at anywhere near the rate of the burgeoning municipal debt. If anything, the levy appears to be drifting in the opposite direction, at least in the short term.
Taking a somewhat longer view, tax levies over the past seven years grew at a compound rate of 5.01 percent a year. Meanwhile, the city's long-term debt increased at a compound rate of 6.66 percent a year. We're borrowing and spending faster than we're making money. Our standard of living is decreasing while we continue to pay for past years' excesses.
And the spending orgy's just beginning, with Sam the Tram and Citizen Smith about to take power. Streetcars everywhere! It's hard to see how Portland is going to fake its way out of the deep hole it's digging. How the city can pay off all its debts, preserve what livability it has left, and build shiny new condo marketing toys, all while its tax levy declines, is a mystery to me. Maybe that's why it's hard for me to put the POS down and get back to other important topics -- like illegal sidewalk newsracks.
| Posted at 3:44 AM | Permalink |
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Comments (12)
Another downward force on the levy could be declining investment in industrial plant and equipment. These properties go on the tax rolls with a taxable assessed value = real market value. Equipment depreciates over time, and that causes a drop in assessed value. This is usually offset by investment in new equipment. However, if industrial taxpayers slow down or stop altogether their investments, it would cause a drop in the levy for that class of taxpayers. Is that what's going on? I don't know, just a hunch.
Posted by Frank | October 10, 2007 6:48 AM
I suspect the real explanation may be contained in the City's general fund forecast, available here:
http://www.portlandonline.com/omf/index.cfm?c=26788&
I don't have time to sift through it at the moment.
Posted by Frank | October 10, 2007 6:57 AM
Jack,
To answer the fellow who keeps asking why debt is bad. If you look at page 93 of the City Budget overview.
http://www.portlandonline.com/shared/cfm/image.cfm?id=163126
You can see how the city is doing things that led to all these folks losing their homes in the sub-prime market.
Some examples from Table 15 for your favorites.
Upside down loan paying $4.85 million interest with no principal buy down on the loan in SoWhat
Convention Center $1.8 principal vs $5.4 in interest, so that loan payment is not covering the mortgage, not to mention the asset is depreciating.
Pension bonds $4.76million principal vs $18.65 million interest so we are not paying off this bond either it is growing.
This is how the subprime mortgage market works, it is building things when the cashflow does not allow for a payback, so it keeps rolling over deeper in debt.
My answer to your fellow on how much debt is enough if Seattle has the same debt per capita, would be what my parents always told me, If Johnny jumped off the edge of a cliff does that mean you are going to as well. We have to decide if we are lemmings.
As I calculated in the previous string. The municipal debt per capita has exploded since the 60's relative to median income, or the taxpayers ability to pay it back. That is probably why this "upside down" loan is so popular here in Portland.
Posted by John Capradoe | October 10, 2007 7:35 AM
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1184124311262450.xml&coll=7
http://www.bizjournals.com/portland/stories/2007/07/09/daily21.html?f=et
An example of what Frank was talking about.
Posted by John Capradoe | October 10, 2007 8:03 AM
A quote from the article.
In Canby, American Steel expects to pay about $16 for every $1,000 of assessed property value, about 25 percent less than the company pays on its $20 million in assets in Portland.
Folks can take it from there as to what the trend is.
Posted by John Capradoe | October 10, 2007 8:06 AM
For the math impaired that is $400,000 in revenue.
Posted by John Capradoe | October 10, 2007 8:09 AM
Jack,
Not sure if this could be the difference in the last two figures but my property tax bill went down in 06 from 05. Reason being was a levy that expired. Was about $400 dollars in savings for us.
Posted by MIke | October 10, 2007 9:22 AM
If Adams' transportation "maintenance" fee passes, what are the odds the city capitalizes the new revenue in the form of new debt issuance? Also, the city not too long ago reformed the business tax. So, I don't know if this will impact future total tax levy revenue or not. Also, freightliner is not doing so well in its Portland location. Then too the city and its Port authority are said to be eyeing taking over vacant superfund sites. Finally, I guess if you are a downtown resident you probably like the spending going on in building up and extending the downtown mall. But for me, living in a surrounding neighborhood, it doesn't do much for me except make me think about moving to the suburbs or exurbia when I retire in a few years.
Posted by Bob Clark | October 10, 2007 9:23 AM
Any chance the decrease could be an accounting year issue? The % collected is down also and maybe they generated this report prior to getting all the final numbers.
I'd kind of be more interested in what happened in 2003-2004 to give them a 15% bump.
Posted by Steve | October 10, 2007 9:29 AM
I think that the debt for the Big Pipe is being serviced through rate increases, not property taxes. Your tax bill might go down, but your sewer bill will be close to $100/month (that's per month, not quarter as with the current bill) by the time the project is done sometime around 2011.
Posted by Jim | October 10, 2007 9:31 AM
Is there still time for me to sell my house and move out of Portland?
Posted by Don | October 10, 2007 12:37 PM
I thought the levy that expired was a schools levy.
Posted by Jack Bog | October 10, 2007 2:41 PM