Portland’s Runaway Debt Train

Tri-Met’s more recent notoriety also reveals some serious concerns about financial management . Auditors recently finished their annual report, and it indicates that that Tri-Met has run up some rather large bills that it may be hard-pressed to pay.

Unfunded Pension Liabilities: Unfunded liabilities on Tri-met’s employee pension funds have grown to more than $260 million. This deficit has developed because Tri-Met can not meet its obligation to pay into the pension funds on a current basis. Indeed, at the rate Tri-Met paid the pension funds for fiscal year 2010 (ended June 30), they would be more than eight years delinquent. Overall, the pension funds are nearly 50 percent under funded.

Other Post-Employee Benefits: "Other Post-Employee Benefits" (OPEB), made up principally of retiree health care, pose a much bigger problem. As of the end of the fiscal year, the unfunded liability for these benefits was $817 million, up $185 million in just one year. Underfunding is an even greater problem. The retiree benefits are 100 percent under funded. Tri-Met has simply put no money aside for these benefits. Tri-Met has achieved world class status in underfunding its OPEB. The Los Angeles MTA, which carries nearly five times as much travel volume as Tri-Met had unfunded OPEB liabilities of only $730 million (still a huge figure) in 2009, which is the last data available.

When challenged on the huge unfunded liability and its growth, Tri-Met General Manager Neil McFarlane responded to KATU-TV: "That’s adding apples, oranges and grapefruits together to get a completely unreasonable number." One wonders what kind of complications the chief executive office of a publicly traded Fortune 500 company would face for similarly dismissing inconvenient data in its annual report (whether from the Securities and Exchange Commission, the board of directors or the stockholders).

Employees Ahead of Customers: Tri-Met implemented a fare increase in September and reduced bus service by 5.8 percent and light rail service by 3.5 percent. In the last 10 years, thebasic bus fare has risen 71 percent, well above the 27 percent inflation rate (Figure 2). The fare increases and service cuts are imposing substantial hardship on many Tri-Met riders, who have limited incomes and no access to cars. The above inflationary fare increases represent a financial management failure of fundamental proportions.

Yet while it was raising fares, Tri-Met also increased union employee compensation by three percent and covered increases of 7.5 percent to 22.5 percent on two employee health care programs. Tri-Met has admitted that these increases were not legal obligations (could this be a gift of public funds?). The cost of the non-obligatory wage increase was more than double the amount Tri-Met expects to raise from the September fare increase. Some discontinued service could have been financed with the rest of the wage increase money and the non-obligatory health care premium increases.

More at… http://www.newgeography.com/content/001826-portlands-runaway-debt-train

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