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Audit hits city use of utility fees for projects

Water, sewer funds sometimes 'drift' away from core mission
by: L.E. BASKOW City auditor LaVonne Griffin-Valade recommends in a recent audit that the City Council provide better oversight to ensure that water and sewer ratepayers only pay for water and sewer services.

A new city audit confirms what some Portland water and sewer ratepayers have been noticing and complaining about for some time now: The Portland City Council spends ratepayer money in ways that are not always transparent or directly linked to city utility services.

Among them: $20 million in 'green street' facilities along bike boulevards; at least six staff positions for river planning; $500,000 in community college scholarships; a new $1.5 million building for the Portland Rose Festival Foundation; and a $700,000 energy-efficient demonstration house for the Water Bureau.

According to the audit, none of those projects was directly linked to water and sewer service, nor did any of them follow the city's complete financial planning and budget process.

'Each of the projects … may have a public benefit,' City Auditor LaVonne Griffin-Valade writes in her 28-page report.

'However, there was no formal process clarifying how these projects are related to the operation of water or sewer services, nor whether those benefits should be funded with water or sewer ratepayer money.'

The audit continues: 'Adding spending items to bureau budgets late in the budget process, or not including the items in the financial planning and budget process, goes around the formal mechanism allowing review by bureau budget advisory and review committees, and the public.

'Not including these stakeholders undermines the public's input on spending prioritization of ratepayer money.'

Moreover, the auditor states that such spending 'may lead bondholders to question whether the bureaus are drifting from their core mission of providing utility services, and whether they are operating the utilities in a sound, economic and efficient manner.'

City Commissioner Randy Leonard, who oversees the Water Bureau, responded to the audit and defended certain projects.

Leonard explains that the Water Bureau's renovation of the historic Visitor's Center in Tom McCall Waterfront Park overhauled a 'severely neglected, unusable public facility' after the city transferred ownership to the Water Bureau in 2009.

City leaders 'were very clear' that the labor for the renovation project would be performed by Water Bureau employees, while the Rose Festival Association would cover additional expenses, Leonard says.

'Water Bureau employee labor costs should be characterized as opportunity costs because the cost of those employees would have been borne by the ratepayers regardless of whether the Visitor's Center renovation occurred or not,' he says.

Commissioner Dan Saltzman, who oversees the Bureau of Environmental Services, responds to the audit by calling it 'helpful,' and agreeing with the recommendation to break out the utility license fees on customers' bills for greater transparency.

The audit also recommends that the City Council provide better oversight to ensure that water and sewer ratepayers only pay for water and sewer services. Further, it suggests that the Bureau of Environmental Services and the Water Bureau provide a status report with detailed steps to address the issue within a year.

To see the full audit, go to the website www.portlandonline .com/auditor.