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Audit: City finances good, but problems persist

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Portland's overall financial health is in good condition, but growing maintenance and pension needs could pose financial problems in the future.

Those are among the findings of an audit on the city's financial condition that was released Monday by the City Auditor's Office. Its findings are similar to previous audits on the city's financial condition in recent years.

"Portland’s financial health is currently stable, but increasing liabilities, unmet infrastructure maintenance needs, and growing debt weaken the City’s ability to provide existing levels of service on an ongoing basis," reads the audit.

The audit can be read at bit.ly/1djehlG.

The audit found several favorable things about the city's short-term financial condition. Among other things, its revenue base is diverse, city revenues and revenues per resident are increasing, and the city has favorable liquidity and a good credit rating.

But the audit also waned the city's long-term financial position is more problematic. Among other things, it found that city expenses exceeded incoming revenues in eight of the last 10 years. The audit also said the city’s net position continues to decline due to unfunded liabilities and deferred maintenance.

The audit found that total property tax revenue grew 14 percent over the past 10 years, from $397 million in 2005 to $454 million in 2014. But the audit also found obligations and debt payments have increased. In 2005, 48 cents of every property tax dollar went to the General Fund, which the City Council has the most discretion spending. Today the amount is 44 cents. In contest, payments to the Fire & Police Disability Fund increased from 25 to 26 cents, urban renewal debt increased from 19 to 26 cents. Local levies and other debt dropped from eight to four cents.

The audit also found the condition of the city's assets varied greatly by bureau. The Bureau of Environmental Services reported the highest percentage of its assets in good condition (70 percent), while the Portland Bureau of Transportation reported the lowest percent (33 percent).

PBOT also has the highest annual maintenance funding gap ($181 million), while BES is the lowest ($12 million). The total annual maintenance funding gap is $304 million, the audit says.

In a June 5 response letter, the Office of Management and Finance suggests the audit makes the city's financial condition look worse than it actually is. The letter written by Chief Administrative Officer Fred Miller and Chief Financial Officer Ken Rust said the audit ignored some of the office's early comments.

"Our primary concern is that the report lead to a better understanding of relevant issues by the Council and the public. We note that you, too, want it to be 'read and understood by a wide audience.' Attention to our comments could help meet that objective," reads the letter.