The city of Portland’s financial health is stable but declined the past two years, according to an audit released Wednesday by City Auditor LaVonne Griffin-Valade.

Portland’s short-term financial health is fine, city auditors reported, but the city’s long-term financial prospects are “more problematic.”

The city continues to enjoy solid credit ratings and a diverse revenue stream, and, admirably does its budgeting using five-year projections, auditors noted.

“The city’s overall financial position, however, continues to decline,” auditors found, in tracking trends since a similar audit was issued two years ago.

The city has a growing debt burden and “unmet infrastructure maintenance needs,” particularly for its road system, auditors concluded.

Lately, the city has borrowed to meet its spending requirements.

“In eight of the last 10 years, city expenses have been more than revenues,” auditors found.

Click here to read the city audit.

Total city debts increased 26 percent from 2003 to 2012. A good share of the increased debt is to cover past urban renewal spending. Urban renewal debt grew a whopping 66 percent from 2003 to 2012, from $347 million to $577 million. Last year, 25 percent of all property taxes collected by the city went for urban renewal, up from 19 percent in 2003.

Though property taxes are a major funding source for the city’s discretionary general fund, only 46 percent of property taxes last year went to the general fund last year, compared to 54 percent in 2003.

The other big cost center for property taxes is police and fire disability and retirement fund payments, which is where nearly a quarter of all property tax dollars go. The city has a $2.9 billion debt to pay for future police and fire pension and disability services. Until 2007, when the city put police and fire staff on the Public Employees Retirement System, Portland paid for that system entirely on a pay-as-you-go basis, rather than saving up for future expenses in advance.

Auditors say the city’s tab to cover those police and fire pension costs will likely continue to rise for the next 20 to 25 years.

Another major driver for the city’s increasing debt load is the Big Pipe sewer project, which greatly reduced combined sewerage overflows into the Willamette River and Columbia River Slough.

While rising water utility rates tend to generate the biggest complaints, sewer charges have risen faster in the past decade.

Water revenue to the city rose 23 percent from 2003 to 2012, while sewer and stormwater revenues went up 30 percent.

The total number of city employees, compared to the population, has been stable over the last decade, auditors found.

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