Finance committee reviews bond, repayment and timing options to pay for $200 million Sidewalk Improvement and Paving program

At a Portland City Council Finance Committee meeting, city finance staff presented options for borrowing to fund the Sidewalk Improvement and Paving (SIP) program, the effort authorized by council resolution 37705 that identifies up to $200,000,000 in investment over multiple years. The presentation laid out questions the committee must decide before authorizing bonds: repayment source, maturity, initial bond sizing and the method of sale.

The city’s deputy chief administrative officer for budget, finance and chief financial officer, Jonas Bieri, who filled in for the city’s debt manager, walked the committee through legal and market constraints for municipal borrowing and emphasized the central role of the city’s debt management policy in structuring any issuance. "That is the end of my presentation. I think I probably took more than 10 minutes. Apologies," Bieri said after the briefing and opened the floor to questions.

Why this matters: borrowing now would let the city accelerate construction of sidewalks and paving projects in neighborhoods that have lacked investment, but it would also commit future revenue streams for 20 years or more and reduce capacity for other capital or operating needs. The committee asked staff for detailed, verifiable numbers about near‑term debt capacity and the timing of debt that will come off the books.

Key points from the briefing

- Scope and authorization: Council previously approved resolution 37705, framing SIP at up to $200 million to be invested over multiple years. Staff said it is unlikely the city would issue the whole amount in a single tranche; instead the first bond will be sized to a reasonable spend‑down and project pipeline.

- Timeline and spend down: Federal tax‑exempt bond rules require a reasonable spend‑down of proceeds; staff said a typical window for a new program of this size is about 18–24 months and that the initial issue should match what the city expects to spend in that window.

- Term and useful life: Staff said the default assumption for planning is a 20‑year maturity; useful life of asset types matters for tax‑exempt eligibility (PBOT staff provided example useful lives: asphalt streets about 20 years, concrete about 30 years).

- Repayment source and security: The two main approaches discussed were (1) non‑self‑supporting borrowing secured by the general fund (the strongest security and usually the lowest cost) and (2) self‑supporting borrowing where the general fund is the legal security but payments are expected from dedicated transportation revenues, notably the General Transportation Revenues (GTR) fund. Bieri explained the city’s debt policy limit for non‑self‑supporting general‑fund obligations is 7% of unrestricted general‑fund revenue and that current projections put the city near about 6.5% (he estimated only around $3,000,000 of additional capacity in fiscal 27/28 under current assumptions).

- Coverage, reserves and volatility: Bieri described the importance of coverage ratios and reserve policy for investor confidence and long‑term affordability; he said coverage or reserves may be embedded in documents for utility debt and are often managed internally for general‑fund borrowings.

- Market approach and timing: Staff reviewed two sale methods: competitive sale (shorter, roughly a three‑month process and typically lowest cost) and negotiated sale (longer, five to six months or more, gives more ability to include local, MWESB or BIPOC underwriters). Staff said the ordinance could authorize either pathway.

- Other financing tools: The presentation mentioned reimbursement declarations (to let the city begin some work before bonds are sold), interim or bridge borrowing (lines of credit) and possible future new revenue streams as alternative sources. Staff cautioned that bridge financing without a firm future revenue introduces risk and would require contingency plans.

What staff said about capacity and timing

- Bieri provided a working forecast: the current projection of non‑self‑supporting debt at around 6.5% leaves roughly $3 million of additional capacity in fiscal 27/28 under the set of placeholders staff used. He also noted that pension bond debt service scheduled to end around fiscal 29/30 would free up a more meaningful amount (staff cited roughly $17,000,000 per year coming off the books when that long‑running pension obligation bond matures).

- Bieri flagged other existing authorizations and pipelines that affect capacity, including remaining Build Portland bond authority (staff estimated roughly $30 million of remaining capacity on that authorization) and a set of projects already in the forecast that consume general‑fund debt capacity.

PBOT operational context and trade‑offs

- Millicent Williams, PBOT director, and Jeremy Patton (PBOT staff) described trade‑offs if the city expects to use GTR payments to make SIP debt service: recent council direction expanding transportation network company (TNC) fee scope would add an estimated $5,000,000 to GTR collections, of which staff estimated about $4,000,000 would be available after prior commitments. Williams warned that shifting GTR from maintenance to bonded SIP work would reallocate maintenance dollars to later years, potentially reducing near‑term maintenance service.

- Jody Yates, PBOT maintenance operations group director, summarized current maintenance priorities: "Currently and for about the past 15 years, we've only been maintaining pavement maintaining streets of citywide significance." She noted local neighborhood streets generally do not receive regular pavement maintenance and that SIP money could expand maintenance coverage beyond the major corridors.

Committee questions and next steps

- Council members pressed staff for more precise five‑year forecasts showing when specific debt rolls off and how much capacity each change creates. Bieri and staff agreed to provide more detailed schedules of projected debt service reductions and the implications for the 7% policy limit.

- Committee members asked staff to explore phasing SIP into components that might be financed differently (for example, sidewalks with a different revenue match than wholesale paving) and to return with a recommended strategy for an initial bond sizing and preferred sale method.

- No ordinance or borrowing authorization was voted on at this meeting; staff said the next step would be to return with a borrowing ordinance once the committee gives direction on repayment source and initial sizing.

Ending note

Committee members agreed to continue the discussion in subsequent meetings and requested the finance team provide a detailed schedule of (a) debt service reductions coming off the books through fiscal 29/30 and (b) updated capacity calculations under alternative repayment scenarios so the committee can choose a financing path and authorize a borrowing ordinance for council consideration.