Another quiet little City of Portland credit card
One of the most interesting finds in our ongoing exploration of the City of Portland's massive debt load has been the lines of credit under which the city has quietly borrowed huge sums of money for use by the Portland Development Commission. We spotlighted the $277 million line of credit from Bank of America for urban renewal projects here; we blogged about using an additional line of credit for PDC computers here. And the SoWhat District streetcar line of credit, which couldn't be paid off on time and had to be "renegotiated" back in June, caught our attention here.
But it seems that the PDC isn't the only city agency that wanders out quietly borrowing money on "temporary" lines of credit. The city's transportation bureau, known as PDOT, is also in on the act -- and those hotsy-totsy solar-powered parking meter robots out on the central city streets are behind the latest line of credit borrowing.
The PDOT angle came to our attention in connection with the recent audit report on the solar parking meters. In the midst of discussing how these gadgets are now out of warranty and will probably need serious maintenance attention in the future, the report noted that the city is planning to sell the meters to a private company and then lease them back. The private owner will take care of the maintenance, and the city will pay them for doing so as part of the lease.
We know something about sale-leasebacks, and usually they're pretty much the equivalent of slapping a mortgage on whatever goods or property are being sold and leased back. In this case, the "owner-lessor" will pay the city a chunk of dough up front, and the city will pay it back, along with a nice rate of return on the investment, over a period of years. Call it a sale-leaseback of the meters, but depending on its terms, it's likely going to wind up just another equity loan against city infrastructure -- of which there have been far too many.
But that's not what most caught our eye in the report. That honor went to this passage, in which PDOT Director Sue Keil discussed the way the city has been financing "upgrades" to the parking meters. She wrote:
Never having heard about the PDOT line of credit before, we wrote to the city's debt manager, Eric Johansen, and asked about the deal. He responded:
The City has a tax-exempt line of credit through Key Bank that funds a variety of transportation projects, including the parking meter upgrades. The non-revolving line of credit is in the amount of $13.5 million. To date, about $9.1 million has been borrowed and subsequently paid off. An additional $2.6 million has been borrowed and is currently outstanding. Finally, $1.8 million has not been drawn on the line.It shouldn't be surprising that a city that's drunk on debt has eight-figure or nine-figure credit cards floating around in its various bureaus. The only thing that's surprising about the situation is the fact that the populace either hasn't thought, or doesn't care, about the implications of all this borrowing for the city's future. Oh well.PDOT drew a little over $5.7 million on the line between June 1, 2005 and June 29, 2006 to reimburse itself for previously incurred expenditures relating to the parking meter upgrades. These line of credit draws were paid off in their entirety by July 3, 2008.
As the line of credit was a direct placement with Key Bank, there was no official statement or other disclosure document prepared for the transaction.
The interest rate on the line of credit is variable. Currently, we have selected a rate option of Prime minus 15 basis points, multiplied by 65%. Based on today's Prime Rate of 5.00%, the rate on the line of credit rate is 3.15% ((5.00% - 0.15%)*65%).
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Comments (9)
By "upgrade" I assume they mean the 25% increase in hourly rates and the 10% increase in revenue hours per day.
Posted by Allan L. | August 8, 2008 10:30 AM
And once again, no one will say NO! or STOP!. There will be no outrage. In the meantime, Silly Hall will continue with their "feel good" stunts, as Phil Stanford put it yesterday....renaming streets....taxing grocery bags....menu health policing....Randy's potties....and the even more outrageous expenditures in toy trains, car-free bridges etc/ad infinitum.
Yet we can't get to or from the SOWA boondoggle, we can't replace a bridge about to fall down, we can't fill pot holes.
No one gives a damn. Portland voters continue to elect incompetent, accountable-to-no-one idiots. The apathy is thicker than Beijing smog.
Anybody out there care?
Posted by veiledorchid | August 8, 2008 11:54 AM
Did you ask Eric how many OTHER lines of credit the City has that are not revealed in the City's POS flow?
This is starting to look like BushCo. There is always more under the next rock. Does anybody have the authority to challenge them for a complete disclosure of all debt? That is, no weasel exceptions, no fine print, ALL of it.
Posted by dyspeptic | August 8, 2008 1:55 PM
At least the other Erik (Sten) realizes the perils of debt, he sold his fancy SW house.
Man, these guys are getting to be junkies looking for a fix. Just wait until all of Sam's buddies start asking for payback for their pet projects for supporting him. I can hardly wait until he weasels on the Sizer/Leonard match.
Posted by Steve | August 8, 2008 5:24 PM
Not to worry as Key Bank may tank before the City and the Fed will cover that loss with more funny money.
http://finance.yahoo.com/q/bc?s=KEY&t=1y&l=on&z=m&q=l&c=
Then everybody lives happily on forever more.
Posted by Abe | August 8, 2008 9:18 PM
I hope these funds aren't used to pay any sort of operating expense. That's how NYC almost went bankrupt--although with faulty bond proceeds, not lines of credit. Still, if Portland's spending a nickel of them for operations, we've gotten onto the slippery slope.
Posted by Don | August 9, 2008 8:52 AM
I finally figured it out. The reason our local media doesn't even cover one tenth of this debt/borrowing issue that Jack logically researches, is that the reporters can't even understand it. They need the NY Times or AP to write it for them. What they need is NY Times to write a headline like:
"Portland Politicians Borrow (Take) Money Like Drunken Sailors"
Then maybe citizens will take notice and read the first paragraph.
Posted by Jerry | August 9, 2008 9:46 AM
"I hope these funds aren't used to pay any sort of operating expense".
The PDC uses borrowed money to pay most if not all of their operating expenses.
They use borrowed TIF AND lines of credit funds to do so.
And they are in a crunch to fill gapping holes created by inadequate TIF revenue and massive cost overruns on essentially all of their projects.
The press simply won't report what goes on.
In the recent, routine 5 year budget cylce for SoWa the PDC takes $18 million from borrowed, Urban Renewal-TIF funds for "administration and management" of the North Macadam Urban Renewal District,,, or "South Waterfront".
Posted by Hal | August 9, 2008 10:17 AM
A very serious question for you, Jack. I know perfectly well that you can't tell exactly how many of these little time bombs are waiting in Portland's portfolio. I'm not expecting you to know, and I wouldn't be surprised if any estimate of their number was hopelessly optimistic. However, based on the knowledge you already have and your knowledge of how Portland's city government is running, roughly how much extra debt above the current $5 billion-plus should you be putting onto your debt meter?
Posted by Texas Triffid Ranch | August 13, 2008 2:44 PM