Is Portland the next Detroit?

PORTLAND, Ore. (KOIN) — In the once-vibrant city of Detroit, 47% of the streetlights don’t work. Nearly 80,000 buildings are abandoned. In 1950, the population was nearly 2 million. In the most recent census, there are 700,000 people.

The Motor City’s unfunded liabilities exceed $18 billion. And its retirement system is underfunded by $3.5 billion.

After Detroit filed for bankruptcy in July, Mayor Dave Bing said other cities will follow.

“Detroit is the biggest and the first, but we’re definitely not the last,” he said.

Could Portland be the next Detroit as some pundits have suggested?

“That’s a cause for concern,” said David Draine, a senior researcher for the Pew Charitable Trusts. He said Portland “capped the well but now they need to clean up the mess” of the police-fire-disability-retirement pension system.

Draine points out Portland has already taken one step in the right direction. In 2006 voters decided to stop allowing new police and firefighters from enrolling in the pay-as-you-go with property taxes pension plan.  Newly hired police and firefighters are now enrolled in a better-funded state-run plan.

Portland economist Joseph Cortright told KOIN 6 News, “By some metrics, Portland doesn’t perform really well.”

Signs have pointed to possible problems all year. In April, Moody’s began studying Portland for a possible downgrade in credit rating. In May, the city auditor criticized Mayor Charlie Hales’ decision to eliminate the city’s chief financial officer. In June, a city audit showed that while the city’s financial health is stable, the overall financial position continues to decline.

“I  don’t know that I can address what might happen down the line,” said Dana Haynes, the spokesperson for Mayor Hales. “Right now it isn’t a problem and right now we’re still being able to meet all of our mandates and the city is financially sound.”

But Pew researcher Draine said the massive amounts of money the city needs to fund pensions, specifically those for police and firefighters, will cripple the city.

“It’s going to be a financial burden that is going to weigh down on the city of Portland,” he told KOIN 6 News in a Skype interview.

In January, his Pew study put Portland as one of the nine worst large cities in the country at funding pensions. Portland is also just below Chicago with only 50% of what is needed to cover those pension obligations.

When Haynes was asked if the city is merely kicking the problem can down the road, he said, “No. Right now we’re dealing with it the appropriate way.”

City staff argue the pensions are funded because a portion of property taxes are set aside every year to make payments on the debt.

“At the same time,” researcher Draine said, “right now taxpayers in Portland are being asked to pay for service delivered years, in some cases even decades, ago because these benefits weren’t paid when they were given.”

KOIN 6 News found a city audit released in June that showed for every dollar of property tax collected in 2012, 24 cents is funneled into the fire and police disability and retirement fund. Only 46 cents goes into the general fund.

“Every dollar you spend on retirement benefits is a dollar you don’t have to spend on some other public service,” economist Cortright said. He works for Impresa Economics and consults for cities across the country.

“I wouldn’t say (Portland is) in trouble,” he said. “I would say it’s something we have to pay attention to. It’s a challenge but it doesn’t have the immediacy or the gravity of Detroit.”

“Portland is doing pretty well, all things considered,” Haynes said. “Could we be doing better? Absolutely. Is there any comparison whatsoever between a Portland and a Detroit? None whatsoever.”

Cortright said Portland has “a fairly vibrant, growing economy,” bus some changes must be made.

“Managing benefits going forward, not promising more than you can deliver and looking for ways to grow the economy and raise revenue over time” are the keys, Cortright said. “Detroit is a good reminder to everyone that this is something you can’t put off forever, and if you do, the negative consequences could be great.”

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