Multnomah County approves $4 million interfund loan for Elk Rock pump station replacement

The Multnomah County Board of Commissioners at its regular meeting approved a $4 million interfund loan from the county's risk management fund to the Dunthorpe Riverdale Service District to fund construction of the Elk Rock Pump Station replacement.

County Chief Financial Officer Eric Cariano told the board the interfund loan would be authorized by resolution and that a separate budget modification would be required to appropriate the funds. "The request on this particular agenda item is to authorize through resolution an interfund loan from Multnomah County to the district ... in the amount of $4,000,000," Cariano said.

The loan supports a larger capital project shared with the City of Portland to replace a pump station Cariano and Department of Community Services staff said is about 54 years old and no longer meets service levels. "The pump station's 54 [years] old, and it's not meeting the service levels," said Chet Hagen, program manager in the Department of Community Services. Hagen said the station lacks sufficient on-site storage capacity to prevent sewage overflows and that the district and city both use the facility.

Why it matters: County staff said the total estimated project cost is $11.2 million, of which the Dunthorpe Riverdale Service District's share is $8.8 million. Staff said construction has started and is expected to be completed in fiscal year 2027, with a possible slip into fiscal year 2028. Approving the interfund loan and the budget modification allows the county to transfer cash now so construction can proceed.

Loan terms and budget effects: Cariano said the county may make the loan under ORS provisions for interfund loans and its own financial policies. For capital interfund loans the county applies a term not to exceed 10 years and an interest rate tied to the Local Government Investment Pool (LGIP). Cariano said the LGIP rate at the time of the presentation was 4.6 percent and estimated that, if repaid over 10 years at that rate, the district would pay a little over $1 million in interest. "If the loan were to be paid off over a 10 year term based on the 4.6% rate, the district would pay about a little bit over a million dollars in interest over that 10 year term," Cariano said.

Cariano described accounting steps the budget modification would make: increase the risk fund appropriation by $4 million to record internal loan remittances, reduce risk fund contingency by $3.5 million, and record estimated first-year loan proceeds and payments. The county estimated the combined principal-and-interest payment for the first year at about $509,000.

District financing capacity and alternatives: Hagen said the district funds operations and capital primarily through a property tax assessment currently set at $240 per month per connection. He said the district has about 17 miles of sewer line and operates four pump stations. The county's analysis concluded the district has the revenue base to repay a 10-year loan, and County staff told commissioners a private-market loan would likely carry higher interest and issuance costs. "It would most likely be above 5.5% if we did that," Cariano said of a private-market loan, adding that private borrowing would also incur debt issuance costs.

Public comments and concerns: Two speakers raised concerns during the public-comment periods tied to the item. One commenter, who identified themself as Lightning, urged a lower interest rate and asked that the loan be interest-free: "I don't think we should pay 4.6%. And I think it should be an interest free loan," the commenter said. A second commenter pressed for environmental studies and questioned siting near waterways, calling for reports and, if studies were not completed, to "shut down" the project. In response, Hagen said the City of Portland followed applicable land-use rules for the unincorporated area and that the design aims to reduce discharges to the Willamette River. "The pump station ... is above the hundred year flood plain as well. So, all that was taken into consideration during the design of the pump station," Hagen said.

Board discussion and votes: Commissioners asked about the geographic makeup of the district, repayment capacity, community outreach about construction impacts and environmental safeguards, and the county's authority to place funds in the investment used to calculate interest. Commissioners who spoke expressed support for the loan as a lower-cost option for district ratepayers compared with private borrowing. The board unanimously approved the resolution authorizing the interfund loan and, in a separate vote, unanimously approved budget modification DCM-001-26 to effect the appropriation and accounting changes. The roll-call votes were recorded as: Commissioner Moyer ' yes; Commissioner Singleton ' yes; Commissioner Brent Edwards ' yes; Commissioner Jones Dixon ' yes; Chair Peterson ' yes. Both actions were adopted.

What happens next: If executed, county staff said they will set up a 10-year debt schedule at loan execution and budget the annual principal-and-interest payments in subsequent budgets. County staff also said the district plans to pay the loan earlier if possible but sought the 10-year window for flexibility. The county noted a related, subsequent agenda item authorized the appropriation increase needed to move the cash.

Sources: Remarks by Eric Cariano, Multnomah County chief financial officer; Chet Hagen, program manager, Department of Community Services; public comments recorded in the meeting transcript; board roll-call votes recorded on the record.