Portland staring at major hit to its balance sheet
The City of Portland is about to be forced to put its unfunded pension liabilities -- currently in the $3 billion range -- onto its balance sheet. The Government Accounting Standards Board is in the final stages of making that a requirement beginning in 2013.
In theory, it shouldn't make much difference, because the city's financial statements already discuss those nasty liabilities, back in the notes following the main numbers. But now the figures will have to be included as liabilities in the front part, putting the city's net worth way lower. And apparently the bond markets aren't going to like that:
“It really doesn’t affect anything. It doesn’t change the way people do business, but it will if all of a sudden you show a deficit and you can’t borrow money at a good rate because you are no longer a AAA rating,” said Bob Lemon, a liaison between the Portland Fire Bureau and the Fire and Police Disability and Retirement Fund....“It’s bad, it’s bad because all of a sudden the city has to account for 2.5 billion, and they have to put it on their balance sheet. They don’t have that money. It just affects their bond rating,” said Lemon.
It appears that the days in which Portland can boast a triple-A credit rating -- already a highly misleading claim -- may be numbered.
| Posted at 8:41 AM | Permalink |
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Comments (10)
Last week's JPACT meeting was a group of long faced people, lashing out at their opponents and in nervous discussions on how to save their agenda.
Have a listen http://www.oregonmetro.gov/index.cfm/go/by.web/id=31963
It's almost as if they forgot they were being recorded. Adams, Burkholder, Collette & Lininger were especially disparaging.
Despite their starting the MLR bridge, Milwaukie Light Rail is a major concern.
Worries over the fed share being reduced, overall funding crisis, shifting priorities, and the local match at risk
have TriMet et al sweating bullets.
Causing Clackamas County to default on the inter-governmental agreement to hand over $25 million for Milwaukie Light Rail will be a severe blow to the weak and near panicked "stakeholders."
The Clackamas County Urban Renewal Initiative Petition is nearing it's Aug. 6th deadline for the November ballot.
The push to make certain the vote is on the Nov. ballot could use some help.
Chief Petitioners, John Williams (former mayor of Oregon City) & John Van Huizen (Clackamas County deputy ret.)
Volunteer contacts:
Thelma Haggenmiller Thelma.haggenmiller@msn.com
503/659-5590 (Leave message if you should get my Voice Mail)
Sue Hewson sueh92@live.com Cell: 503-703-1979
Tom & Linda Eskridge 971-404-9158 (Tom) tde@molalla.net
503-349-1551 (Linda) db@molalla.net
Donate:
The Professional Firefighters of Clackamas County, IAFF Local 1159, supports this petition and has contributed some funding to help make sure the signature gathering is successful.
Your donation will help.
Please print this and send with check, today!
http://voteonurbanrenewal.com/wp-content/uploads/2010/12/clackUR.half_page_donor_form.pdf
Thank You
Posted by Petition | July 20, 2011 9:35 AM
Do any readers know if this applies to post-employment health care benefits as well as pensions (can't think why there would be different treatment, but it wouldn't be the first time the accounting profession had me scratching my head)?
Posted by Newleaf | July 20, 2011 10:30 AM
Yes it applies to all unfunded fringe benefits.
Including TriMet's entirely unfunded $1 billion in "Other Post Employment Benefits" = full health care for retirees & spouses.
Posted by Ben | July 20, 2011 10:58 AM
For over a decade the light of day has done nothing but encourage plants.
Posted by LL | July 20, 2011 11:22 AM
What? You mean I can't hide my unfunded expenses when I go get a loan?
Damn! What's become of this world, when you have to tell the truth and put your cards on the table?
Posted by Ralph Woods | July 20, 2011 11:25 AM
Thanks Ben.
Posted by Newleaf | July 20, 2011 2:05 PM
Newleaf
No, this accounting change only applies to pensions. Other Post Employment Benefits have separate accounting rules.
Check out my article on OPEB if you have more interest. http://oregoncapitolnews.com/blog/2011/04/06/retiree-health-care-liabilities-top-3-billion-in-oregon/
Thanks,
Jacob Szeto
Posted by Jacob Szeto | July 20, 2011 3:15 PM
Oh, well then TriMet has around $400 million in unfunded pension liability that it will apply to?
Posted by Ben | July 20, 2011 3:33 PM
There's a pony in there somewhere.
Posted by David E Gilmore | July 20, 2011 3:44 PM
Ben,
Almost, I reported only the union pension plan which has unfunded liabilities of $236 million. There is an additional management pension plan with unfunded liabilities of $31 million. So all together TriMet has unfunded pension liabilities of about $267 million.
The tricky part is the new discount rate. If the proposed accounting changes are adopted TriMet will likely have to apply a much lower discount rate to a portion of its liabilities. This will result in larger liabilities and subsequently larger unfunded liabilities.
TriMet's OPEB unfunded liability is about $816 million, the largest by almost any measure in the state of Oregon according to my study. Literally off the charts.
http://oregoncapitolnews.com/blog/2011/04/06/retiree-health-care-liabilities-top-3-billion-in-oregon/
-Jacob Szeto
Posted by Jacob Szeto | July 20, 2011 4:01 PM