Portland water system mortgage payment hits $37 million a year
Portland sold its latest round of water bonds the other day. The city borrowed around $80 million for various construction pork projects vaguely having something to do with the water system. The interest rate on the 25-year portion of the borrowing was 3.5%. For a tax-exempt rate, that's not exactly cheap. By our amateur calculations, the overall interest rate on the bonds, which call for roughly level annual payments over 25 years, was about 2.78%.
The "underwriter's discount" -- the profit made by the underwriter -- was about $420,000, and the costs of issuance (which no doubt includes a fee to bond lawyer Harvey Rogers's law firm) was another $65,000 or so.
With this new borrowing, the city's water bonds and other water-related debt will require an annual mortgage payment of $37 million, roughly double what it was five years ago. The total gross revenue of the water bureau is currently about $142 million a year. Looking ahead, with all the additional IOUs the bureau plans to sign in the near future, four years from now the mortgage payment will be something like $71 million, but the annual gross revenue is supposed to be around $217 million. That 50% increase in income will be coming from us Portlanders, but only if we use water, of course. Of the $75 million increase we'll pay, about $34 million a year will go to the banks for money that will have already been spent.
The tale of the tape is here.
As best we can tell, the people who bought the bonds were not officially informed of the Carollo Engineers water supply deal, nor were they told in writing about last weekend's "boil water" scare on the city's west side.
| Posted at 11:45 AM | Permalink |
|
Comments (7)
I guess you could say we are "underwater" in more ways then one...
Posted by Tim | July 27, 2012 12:04 PM
Another easy thing to do - Just keep rolling the bonds over at a minimal monthly increase. Sam/Rand can keep digging the hole since they don't have to fill it.
Now you know why the first taste is free.
Posted by Steve | July 27, 2012 1:57 PM
Density, density, density = ratepayers, ratepayers, ratepayers!
That's why your charming older neighborhood is doomed, it's been hocked by scoundrels of the worst kind.
Posted by Mr. Grumpy | July 27, 2012 2:20 PM
Chump change. Unfortunately, we're the chumps.
Posted by Max | July 27, 2012 2:37 PM
Mr. Grumpy,
Exactly. That is why city allows two houses to be built in the backyard of one existing house. This has nothing to do with the livability of a neighborhood.
Posted by clinamen | July 27, 2012 2:58 PM
These fools will continue to debt swamp us until we lose our good drinking water and in the process lose our water rights to either regional water control or complete privatization. There is money to be made here, never mind about our good drinking water being seriously degraded, never mind about the rates skyrockting! Our elected officials for the most part have betrayed our community. If there is one who is brave enough to say otherwise and stand up to say they will do everything they can to prevent the wrecking of our Bull Run Water System, then speak up!!
It is time to start a Hall of Shame and Hall of Fame List here.
Senator Merkly, where are you?? It does look like you wanted this elephant in the room off your back, so you sent it to the state? This is a federal issue. Talk to NY Senator Schumer, join with NY on this instead of laying down on our water. Your lack of engagement is extremely disappointing. If you can't do better than this, you shouldn't be reelected. Not much faith in Wyden or Blumenauer. Et tu, Merkly?
Posted by clinamen | July 27, 2012 3:06 PM
So, the lawyers and the dealers take fees, then they sell bonds to grandma for her old age? Can we get some of the private talk about this, the way somebody found it on Enron? What about usage rates? Are they continuing to over-estimate them? Is the auditor the only grown-up at City Hall? That has got to be tough duty.
Posted by JadeQueen | July 27, 2012 4:40 PM