Portland quietly borrows $15 million against gas tax
Here's a wild one: According to this impeccable source, yesterday the City of Portland borrowed $15.4 million, apparently pledging many years of future gas tax receipts as collateral. The bond issuance was never reported on the city's website, and no preliminary or final official statement has ever been published anywhere -- even now, although trading in the bonds has already commenced.
According to the recent report of the city's finance office, which blasted the transportation bureau for reckless spending, the borrowed money "will primarily reimburse the Transportation Operating Fund for a series of capitally-eligible work dating back to February 2011." In other words, it's money that's already been spent. On what, we can only imagine -- but surely it was "green" and "sustainable."
That the city is sneaking around taking out eight-figure loans without publicly disclosing the deal in advance is a major red flag that things are amiss in the money department -- especially where transportation projects are concerned.
To our knowledge, the city has never before hocked future gas tax money to pay for current toy projects. It's another innovation of the lame duck Sam Rand Twins, apparently. Heaven only knows where the city will end up financially by the time the current administration leaves City Hall. But certainly it won't be a good place.
UPDATE, 10:08 a.m.: As a reader points out, apparently this innovation was first employed under Mayor Vera Katz, when Sam Adams was running her office.
| Posted at 7:48 AM | Permalink |
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Comments (20)
I guess the eastern suburbs will have to wait a while longer for those long promised sidewalks.
There is sure some financial funny business going on.
Posted by Portland Native | November 9, 2011 7:57 AM
They probably just needed the money to cover the severance packages for Ellis Mccoy and Lavinia Gordon.
Posted by Cass | November 9, 2011 8:23 AM
Curious ... that seems to be just about the same amount as PBOT's budget shortfall ...
Posted by Garage Wine | November 9, 2011 8:37 AM
What am I missing here? I thought gas tax revenue was at the state level, not the city's to offer up?
Posted by Mr. Grumpy | November 9, 2011 8:46 AM
One interesting thing about the bond issue is that for the maturities around 2018 and 2019, the city is paying an above-market interest rate -- 5% or so -- so that it can sell the bonds at a premium to face value. The issue for one year sold at an 18% premium to face value -- about $180,000 on the $1 million (roughly) face -- because the interest rate was higher. Basically the city is borrowing that extra $180,000 in exchange for paying an extra $30,000/year in interest for 7 or 8 years: cash in today traded off against higher interest payments tomorrow.
Posted by Isaac Laquedem | November 9, 2011 8:46 AM
Go by Credit Card!!!
Posted by Mister Tee | November 9, 2011 8:52 AM
Can we send the Sam Rand twins to the same prison as Bernie Madoff? Seems to me like this is the same sort of Ponzi scheme.
Posted by portland native | November 9, 2011 8:54 AM
They've sold bonds with a similar name at least three times previously. From the same MSRB website:
PORTLAND ORE GAS TAX REV REF-SER A 03/17/2005 2005 to 2016
PORTLAND ORE GAS TAX REV SER A 06/01/1998 1999 to 2018
PORTLAND ORE GAS TAX REV SER A 09/01/1996 1997 to 2016
Posted by Mister Tee | November 9, 2011 8:58 AM
Soon CoP will be selling bonds to pay off bonds that are paying off previously issued bonds.
Oh, that's what they are already doing.
Posted by Lee | November 9, 2011 9:09 AM
According to the Oregon Bond Manual, state law requires that a preliminary official statement (POS) be issued 10 days before any bonds are sold. So, if the city has, in fact, sold bonds in this case, that's not just a major red flag, that's illegal.
Posted by Peter Apanel | November 9, 2011 9:23 AM
The City now does the same as it's poor: go to the Cash/Payday Loan store. And the vast majority of the citizens don't realize what's happening and how they will pay later. They'll pay out of the money they make operating a food cart all winter.
Posted by Don | November 9, 2011 9:27 AM
Portland needs an intervention. To end the cycle of financial abuse and addictions.
Posted by Mojo | November 9, 2011 9:51 AM
at least three times previously
One of those you list was a refinance of one of the other two. But you're right, it looks as though this is a Vera invention, pre-Randy but with Samster running her office.
Posted by Jack Bog | November 9, 2011 10:06 AM
And people question why "highways don't pay for themselves" and how badly subsidized highways are. It's because too many people take from the gas tax revenue (and then they claim gas taxes aren't dedicated to roads so it's OK to use gas tax funds for streetcars, light rail and the like). 20% of the federal gas tax goes straight into the "Mass Transit Account". Fortunately ODOT is restricted by Constitutional Amendment, but when ODOT dishes out the money to cities and counties, the cities/counties appear not to be bound to the same law and can do what they want.
Posted by Erik H. | November 9, 2011 10:23 AM
According to our own Federal Budget Office posted in the Wall St. Journal several months ago, 100% of our highways are funded by gas taxes-both fed and state.
But many local critics claim otherwise that we subsidize roads. Remember in 2009/10 over $189 Million in STIP Oregon gas tax money was siphoned off for bike/ped trails, mass transit education programs and such. In reality gas taxes are subsiding the other.
Posted by Lee | November 9, 2011 10:30 AM
The biggest crooks wear suits.
By the time the general populace wakes up and realizes they let this crap go down, it's going to be way too late.
Greece here we come!
Posted by Ralph Woods | November 9, 2011 10:55 AM
Damnit people don't you know there are bicycle lanes and light rail lines to build !
Get with the 19th century and stop whining !
Posted by tankfixer | November 9, 2011 11:07 AM
UPDATE, 10:08 a.m.: As a reader points out, apparently this innovation was first employed under Mayor Vera Katz, when Sam Adams was running her office.
No surprise there!!
Wonder what else falls under innovation first employed under Katz/Adams?
Posted by clinamen | November 9, 2011 11:38 AM
Fascinating - They're selling revenue sources one by one. So they blow it now and in the future when we don't have enough money for roads or police, then Sam/Randy Jr (or whoever is mayor) can throw their hands up and blame our ancestors.
Posted by Steve | November 9, 2011 12:49 PM
"blame our ancestors". Sounds like someone I know in the White House, or most other politicians.
Posted by lw | November 9, 2011 12:55 PM