Faced with more than $45 billion in infrastructure needs in the coming decades, a hand-picked group of community leaders is recommending an overhaul of the way the Portland region pays for projects.
The group is saying that the piecemeal way the region's cities, counties, special districts, school boards and colleges pay to build things simply won't continue to work. Some of their proposals include calls for new taxes.
And, they say, communities need to make it easier for developers and business owners to set up shop, by removing the red tape that comes before a ribbon cutting.
Thus go the recommendations of the Community Investment Initiative's Leadership Council, which has been meeting for more than a year as part of a Metro-funded effort to look at the region's funding future. The council is adamant that the region's economy will stall without better infrastructure, free-flowing transportation corridors and solid school buildings.
The curtain comes off the initiative's recommendations on Thursday, as some of the group's leaders were scheduled to present their plan to the Metro Council.
Their ideas weren't created in a vacuum – the discussion about paying for infrastructure has been ongoing at every level of government. And the notion of having a regional infrastructure fund – developed in tandem with the public and private sectors – riffs off of a state-level proposal that in turn is based on Partnerships BC, which has been building bridges, hospitals and schools in British Columbia for a decade.
Return on investment
The infrastructure bank concept sounds new-fangled, but is based on some simple economics.
Governments sell bonds to pay for projects. If a city of 10,000 people in Washington County wants to sell $15 million in bonds to pave a road, it's going to attract a certain level of investor who is expecting a small return based on the risks associated with that bonding (for example, the city could go insolvent while the bonds are outstanding).
That means two things: There's less competition for the bonds, and interest rates are going to be higher – the taxpayers have to pay the bond buyer more over time.
Last month, though, Metro sold $140 million in bonds. It received a $25 million bonus from the bond buyer because the bonds were considered lucrative, and it got a good interest rate. The taxpayers will pay $197 million back to the bond buyer – amounting to $32 million in interest after the bonus is figured in.
Back to that small theoretical Washington County city. What if the bond sale for its road project could be bundled with a sewer line in Gresham, a new school in Damascus and a bridge replacement in Oregon City?
With the size of the bond sale growing, more investors become interested; with the region, instead of individual cities, backing the bonds, they become less risky for investors.
In the end, the same projects get built across the region, they cost the same to build but taxpayers pay less because of lower interest rates.
Timeline for transportation
The initiative's strategic plan says the group should choose a set of projects that would improve freight mobility, improve safety, make it easier for people to get to work and reduce congestion and emissions. It says the group should work to find more funding for highway maintenance.
"A series of strategic investments, capitalized through increases in traditional transportation funding mechanisms including the gas tax and vehicle registration fees, is needed to support key projects that bring a major economic return to the community," says a copy of the report provided to Metro News.
It also calls for a voluntary pilot program to spark the controversial vehicle miles traveled tax, which would replace the gas tax as the main way to pay for transportation. Privacy rights advocates have long argued the program is intrusive because it tracks how much drivers move about, but government officials have said the dramatic increase in gas mileage in vehicles – including some that use no gas at all – means the gas tax is no longer sustainable as a funding source for roads.
"Between 2005 and 2010, fuel tax revenue declined from $415 million to $404 million a year, as material and construction costs increased with inflation," the report said.
Colleges and communities
Leadership Council members were clearly concerned about the state of higher education in Oregon, and in the Portland region. The report says Oregon is fourth-to-last in the country in state spending on higher education, and says a stronger Portland State University is one of the keys to improving the region's economy.
The report says Portland State should look into creating a regional taxing authority, with the possibility of asking the region's voters to pay for improved higher education in the region.
On a more local scale, the initiative uses fairly opaque language in describing its community development goal: "Foster conditions that support development ready communities."
Isn't every community development ready?
Not so much, the Leadership Council said. It's hard to bring on new development when small parcels, often with different owners, dominate in areas targeted for new development. Brownfields and wetlands make it hard to develop industrial sites. Byzantine regulations and codes make it hard for even persistent developers to turn dirt.
The group says it wants to spend the 18 months developing a pilot program, where one community would be targeted for an overhaul of its pre-development practices, so investors could jump in with relative ease.
How did we get here?
Metro has been funding the initiative since its inception, when former chief operating officer Michael Jordan pushed for a public-private group to rethink the Portland region's infrastructure investments.
Jordan, now the chief operating officer for Oregon state government, convened a select group of steering committee members to choose the Leadership Council. The council, along with Metro staff, has been meeting for more than a year to come up with the recommendations.
Metro has spent more than $815,000 on the effort.