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.
| Posted at 10:41 AM | Permalink |
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Comments (20)
FEED THE BEAST! At any cost, money no object of course.
Posted by portland native | August 2, 2011 11:37 AM
Makes me happy (all over again) that I've moved out of Portland (and Multnomah County). I'm not FAR outside of Portland, but just far enough.
Posted by Mark Jones | August 2, 2011 11:55 AM
SamRand have 18 more months to feed Wall Street more bond money. They can do a lot of damage in that period of time. Thanks for updating this financial fiasco Jack.
Posted by Old Shep | August 2, 2011 12:05 PM
Gamblers headed to the loan sharks.
"Planners" and politicians would never acknowledge that "urban renewal" or the transit projects around here are bets, though.
Posted by dg | August 2, 2011 12:07 PM
Meanwhile, out in Lents, we Coventry to wonder where all the money I going or has gone... Any news on that, jack? seems like a lot of nothing out here in terms of investment in spite of the "great URA!" .. Ugh.
Posted by Mizzdizz | August 2, 2011 12:23 PM
If we're going to have urban renewal -- a debatable premise, I know -- it should be spread out equally among the different quadrants of the city, coordinated by the neighborhood coalitions. The definition of "blight" also needs to be tightened up from "whatever the Mayor and Council or the PDC want it to mean" to some objective measure such as percentage of the surrounding population living in poverty.
For far too long most of the UR funds have been concentrated downtown and in the closer-in neighborhoods to benefit favored developers and the ahem, anatomy-enhancing, ahem, projects of our politicians. Coordinating through the coalitions would give actual residents a bigger say in how the money is spent. People in SW and the Numbers could get sidewalks. Cully and Woodstock could get paved streets. Northwest could get, I don't know, gilded bike racks.
Posted by Eric | August 2, 2011 12:34 PM
How do you spell P-O-N-Z-I???
Posted by veiledorchid | August 2, 2011 12:48 PM
Altough I don't always agree with everything I read on this site, postings like this are why I am regular reader. You probably won't ever read about this in the Oregonian (at least not with this level of detail). Thanks Bojack!
Posted by m | August 2, 2011 1:18 PM
None of the mainstream media covers the city's debt problems. We're lucky the media said anything even when the city auditor reported on them.
Posted by Jack Bog | August 2, 2011 1:40 PM
"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."
I'm pretty sure that is the total spending of the borrowed money on the UR district and NOT the total spending plus the UR diverted property taxes to pay the debt servicing.
So when the city says "it's spent $95 million on "urban renewal" in the district in the past 10 years" they are lying.
They have likely spent another 10-15 million.
Another thing they never reveal is the amount they pay themselves, the PDC, out of the borrowed millions.
I'll wager the PDC paid itself at least $20 million during the past 10 years. All borrowed and line itemed as administration and management in the North Interstate UR district budgets.
One 5 year budget for SoWa had an entry of $18 million for the PDC.
Using borrowed money to pay themselves then diverting millions more to pay off what they borrowed making the cost of their agency far more than it should be.
But who cares at the PDC? No one. Why should they?
The city council does care.
Posted by Ben | August 2, 2011 1:48 PM
Sweet Jesus these people are mentally unstable! The city is just about ready to tip over with debt, but these junkies can't stop shooting up.
The metaphor stops here when the reality is we are the ones going to pay for the inevitable OD.
Posted by Ralph Woods | August 2, 2011 2:10 PM
We the taxpayers, have already paid...big time. Terrible roads, broken bridges, toy trains to nowhere, lousy schools, and a general degradation of the entire entire city infrastructure that continues to cost money for little or no return on the investment.
Posted by portland native | August 2, 2011 4:25 PM
Well, it can always get worse. I was reading earlier that China has decided to put the United States of America on eBay. Apparently, they're getting a little antsy about the financial issues here.
Posted by Max | August 2, 2011 5:20 PM
The city council does care. *&^%$
That was supposed to be the city council does NOT care.
Posted by Ben | August 2, 2011 6:14 PM
Ben,
Glad you made that correction, did think though that you were jesting.
It seems the worse the economic situation is, the more it is like the "last hurrah" here -
"let us get while we can" or
"feed at the trough while we can."
Mind boggling it still is even after all this time when we know what they do, but yet to continue on now is stunning!!Our country just went through this "debt trauma episode" and the local ones are carrying on with more and more debt?? I find it, couldn't come up with the word, so for now will write - "scary", this insanity around us, I guess writing helps and knowing that others comment here as well...am not alone.
Posted by clinamen | August 2, 2011 10:59 PM
Ralph Woods:....The metaphor stops here when the reality is we are the ones going to pay for the inevitable OD.
Is this the plan, to drive off the cliff financially, people leave by the droves, some having to take a real financial loss just to get out of here - then who swoops in to pick up the pickings?
How would you categorize elected officials and/or others making such shattering decisions?
Sell outs?
Insane?
Greedy?
As you stated earlier, Junkies?
It is getting late, so
others can add to the list.
Posted by clinamen | August 2, 2011 11:52 PM
The PDC should be abolished.... and perhaps a ballot initiative to abolish the PDC would be in order.... Maybe a ballot initiative to abolish TriMet should follow on its heels... get rid of the problem ... since we have fairly worthless elected officials we need some new strategies....
Posted by LucsAdvo | August 3, 2011 6:20 AM
Metro should be abolished as well and TriMet broken up into a bus system and whatever else the rest of their mess is.
If the bus system had it's own indpendent funding and management they could run a far more efficient system serving far more neighborhoods and people.
Of course that woulde embarass the RailVolution zealots into possible extinction.
Posted by Ben | August 3, 2011 7:09 AM
Jack, any idea whether the the infrastructure and related line items in the OS include capitalized interest on the lines of credit that were outstanding or was interest on the lines actually paid. If capitalized and deferred until now, there's a pretty sizable chunk of change that reduces the amount actually spent on urban renewal.
Posted by steve | August 3, 2011 5:12 PM
My boss's residence has frozen over. Ben actually made a post that I can agree with. I need to find a shot of something strong to overcome my shock.
Posted by LucsAdvo | August 3, 2011 6:37 PM