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Trust Lands Should Be Auctioned to High Bidder to Benefit Schools

In his recent guest column in The Oregonian, Director of the Oregon Department of State Lands Jim Paul summarizes the history of the Elliott State Forest. He correctly notes that the Common School Trust lands within the Elliott must be managed as an endowment asset for public schools.

Since the Elliott is now a net liability instead of an asset due to environmental litigation, the State Land Board has appropriately concluded that the Trust Lands should be sold.

Unfortunately, the sale will not take place through competitive bidding, because this is not an auction. On July 27, the Land Board will announce the results of an appraisal and set the sale price as the appraised price. If you dare to offer even one dollar more, your bid will be set aside by state lawyers as “nonresponsive.”

The three Land Board members – the Governor, the Secretary of State, and the Treasurer – do not want prospective purchasers to compete on price. They want them to compete on four non-financial variables, which will greatly complicate the sale process.

All offers must include at least the following set of “public benefits”: (1) at least 50 percent of the timberland must remain open for public recreational use even after it is transferred to new owners; (2) 120-foot no-cut buffers on each side of fish-bearing streams must be left permanently untouched; (3) at least 25% of the older stands of trees must be left standing; and (4) at least 40 full-time jobs annually must be provided over the first ten years of ownership.

If there are multiple offers at the same mandated price, the tie will be broken by the strongest package of these public benefits. But that turns the process into a beauty contest. There is no objective way to compare an offer with 130-foot buffers with another offer that has only 120-foot buffers but proposes to employ 50 people each year rather than 40.

Public school students, parents, and employees deserve to receive fair market value for surrendering this asset. An “appraisal” is not the same as market value.

Evidence of this is everywhere. For example, almost everyone selling a home in Portland right now knows that the final sale price is likely to be higher than the listed price, because the Portland market is red-hot.

When the State of Indiana decided to lease the operations of the state turnpike to a private vendor in 2006, the “experts” estimated that it might be worth $2 billion. In fact, the winning bid from a Spanish-Australian consortium was $3.8 billion.

In 1984 the Portland Trail Blazers famously appraised the value of Michael Jordan to be lower than that of Sam Bowie. Subsequent events proved that the Trail Blazers had made one of the worst talent “appraisals” in pro sports history.

And just last month, a Chinese investor paid $3.4 million for one lunch with investor Warren Buffet (the purchaser gets to bring seven of his closest friends). How many of us, if asked on the street, would have appraised a single lunch with anyone as being worth $3.4 million?

But that’s the point of competitive bidding. Only the market knows the value of an asset. If even one person in the world is willing to pay millions for a single lunch, then that is exactly what the lunch is worth. If we don’t allow a market to set the price of Elliott State Forest timberland, we’ll never know its true value.

There is a simple fix to this problem. The Land Board should require that all offers for the Elliott Trust Lands include the mandated four public benefits, and then select the highest responsible bid.

School beneficiaries such as local school boards, employee associations, and parent booster groups should prepare now to sue the Land Board for breach of fiduciary trust if the Board continues with its absurd plan to give away Common School Trust Lands without competitive bidding. The appraised value announced on July 27 should be the starting point for competitive offers, not the end point.


A version of this article originally appeared in The Oregonian on July 14, 2016.

“Beyond Traffic” Has a Different Meaning in Portland

Portland is one of seven cities still in the running for a $50 million grant as part of the “Beyond Traffic” challenge sponsored by the federal Department of Transportation.

While the idea of solving traffic congestion sounds great, that is not an actual goal of Portland planners. In fact, local officials are trying to make traffic worse, by downsizing roads and lowering traffic speeds. As part of this campaign, a northbound travel lane on Naito Parkway was recently removed, and later this year two lanes on Foster Road will be eliminated.

Portland planners think we drive too much, so they want $50 million in federal funds to develop new data collection systems to encourage people to travel by bus, train, or bike. Since most people prefer a car, this will be a big waste of public money.

The transportation challenge for Portland is the need for an expanded highway system. Experimenting with technologies such as electronic tolling as a way of paying for that expansion might have been a useful grant application. But Portland planners don’t want to grow the system; they’d rather keep it small and congested, then use fancy technology to entice a few people onto a slow bus.

This is not a plan that will move us “beyond traffic.”

Updated as of 6/22: According to The Oregonian, the U.S. Department of Transportation has selected Columbus, Ohio as the winner of the federal “Smart City-Beyond Traffic” competition.

With this distraction out of the way, perhaps city planners can turn their attention to something more useful, such as finding ways to actually reduce traffic congestion in Portland.

Portland Schools Schedule Book-Burning Party

The Portland Public School board recently voted to prohibit textbooks or classroom materials questioning the mainstream thinking about climate change.

The decision has sparked an outpouring of commentary, with many writers supportive of the School Board.

However, the wording of the Board resolution should greatly concern parents of Portland public school students. Resolution No. 5272 is two pages long, but the most chilling part is the final sentence:

“[Portland Public Schools] will abandon the use of any adopted text material that is found to express doubt about the severity of the climate crisis or its root in human activities.”

The primary purpose of education is to teach students how to be critical thinkers. Now that the School Board has declared that expressions of doubt about complex scientific topics will be banned, what is the point of going to school?

Regardless of the subject we should encourage students to be skeptical. The more questioning, the better. They will be poorly prepared for adult living if they spend their childhood years being spoon-fed in schools where skepticism is prohibited.

Public education already faces a growing challenge from private schools, online learning, and home-based education. If Resolution 5272 is upheld, Portland Public Schools will give parents one more reason to leave.

If Gambling Is a Problem, Who Is Responsible?

Governor Kate Brown opposes a plan by the Coquille Indian Tribe to build a casino in Medford.

In her public statement, the Governor said she opposes the addition of any more casinos because “even a single additional casino is likely to lead to significant efforts to expand gaming across Oregon to the detriment of the public welfare.”

Her concern for the public welfare is touching, but if one simply “follows the money” associated with the state’s own gambling franchise—the Oregon Lottery—it’s clear that the Governor has little regard for the health of Oregon citizens.

The Oregon Lottery is a state-run monopoly using a network of 3,939 retailers to offer players a wide choice of games, including Scratch-its, Keno, Powerball, Win for Life, Mega Millions, Lucky Lines, and Pick 4.

In addition, the Lottery has approximately 11,925 Video Lottery terminals deployed throughout the state. These terminals accounted for 71.5% of total sales in 2015 and are highly addictive. According to the Oregon Health Authority, roughly 90% of problem gambling in Oregon is associated with Lottery video machines.

In 2015, Oregon earned $1.2 billion from the state Lottery. In January, Powerball mania resulted in record sales of $36 million in one week. An Oregon Lottery spokesman said, “Any time sales go up, that’s a good thing for our beneficiaries.”

Who are these beneficiaries? By law, 57% of net Lottery revenues support public education. Activities loosely defined as “economic development” get 27%. State parks and salmon enhancement programs split 15% of revenues.

Those activities account for 99% of all Lottery funds. The last 1% gets allocated for problem gambling. The state estimates that 81,800 adults and 4,000 adolescents have a gambling addiction.

If Governor Brown were so interested in the “public welfare,” she would be advocating for an increase in the percent of Lottery funds dedicated to the 86,000 problem gamblers. This would at least give her some moral high ground to stand on before criticizing a casino proposed by the Coquille Tribe.

But despite total control of the legislative process by the Democratic Party, the Governor has not made this a priority.

Oregon’s misuse of tobacco tax money is even more egregious. Oregon was one of 44 states that sued the tobacco industry in the mid-1990s regarding the health care costs associated with smoking. As a result of a Master Settlement Agreement (MSA) with the four largest tobacco manufacturers, each state was to receive payments every year from 1998 through 2025.

According to the plaintiffs, MSA money was supposed to be used for tobacco prevention activities and health care subsidies necessary to treat smoking illnesses, but that was not a formal part of the agreement. Thus, each state was free to use the funds in whatever way its state legislature approved.

In Oregon, total MSA funds received since 1998 equal $1.26 billion—yet only 0.8% of the money has been used for tobacco prevention activities.

The Governor’s hypocrisy associated with the use of tobacco and gambling profits is embarrassing. She should clean up her own house before she starts lecturing any of the Tribes about their casino expansion plans.


This article originally appeared in The Coos Bay World on May 24, 2016.

Google’s War on the Poor

Google announced recently that it would no longer run ads for payday loans, the short-term loans that typically have high annual interest rates due to the poor credit of customers.

Google’s decision is significant because many states (including Oregon) have effectively regulated payday lenders out of existence, so much of the business has moved online. If Google cuts off ads, potential customers will have a more difficult time getting loans.

Google undoubtedly considers this decision part of its “corporate social responsibility.” What they overlook is the adverse impact it will have on low-income individuals. A week ago, payday loan customers had few legal options for short-term borrowing. Now they have even fewer.

When the Oregon legislature outlawed much of the payday lending industry in 2007, the most striking aspect of the public debate was the total absence of payday loan customers. Borrowers themselves weren’t the ones complaining about high interest rates; it was the upper-income Progressives, who didn’t need payday loans.

Google has been one of the most successful companies in American history. The company should stick to its core business and stop trying to protect payday loan customers by censoring ads. Borrowers don’t need that kind of help.

Why is the State Land Board selling the Elliott State Forest without competitive bidding?

In August 2015 the Oregon Land Board (Governor Kate Brown, Secretary of State Jeanne Atkins, and Treasurer Ted Wheeler) voted to sell roughly 82,450 acres of “Common School Trust Lands” within the Elliott State Forest because the state was losing money on those lands. Under Oregon law, School Trust Lands are supposed to make money for schools.

Given the ongoing losses, the Board reached the correct decision. Unfortunately, the sale protocol adopted by the Board is bizarre. The Board will establish a price for the land based on appraisals, and that will be the only price accepted. If you dare to offer $1 more, your offer will be declared “non-responsive.”

How can this make sense when Trust Lands serve an as an endowment for public schools? Trustees of any endowment have a fiduciary obligation to make decisions in the best interest of beneficiaries. The 82,450 acres of timberland being sold in the Elliott may be worth anywhere from $300 million to more than $400 million, but no one knows the exact value. Setting a non-negotiable price through appraisals means that potentially vast amounts of money could be left on the table.

Anyone who has been to a charity fundraising auction knows that the estimated value of something frequently turns out to be wrong—by a lot. That’s why we have competitive bidding.

The same is true in business transactions. Just last month, for example, Alaska Airlines bought Virgin Airlines for $2.6 billion, or $57/share—a price that was 80% higher than what the shares had been trading for prior to the sale.

Instead of bidding on price, the Land Board plans to pick a winning offer based on which prospective purchaser has the best package of “public benefits.” The minimum level of benefits has been defined by the Board as the following: (1) at least 50 percent of the purchased timberland must remain open for public recreational use; (2) no-cut buffers of 120 feet on each side of fish-bearing streams must be left permanently untouched; (3) at least 25% of the older stands of trees must be left intact; and (4) at least 40 full-time jobs annually must be provided over the first 10 years of new ownership.

These benefits may have merit, but using them as the way to choose the best offer will turn the sale protocol into a beauty contest. There is no objective way to compare an offer including 130-foot buffers with another offer that has only 120-foot buffers but proposes to employ 50 people each year rather than 40.

This protocol is going to create a nightmarish decision process for the three Land Board members, while violating their fiduciary obligations to schools.

There is an easy solution to this problem: Simply make the four public benefits a minimum requirement, and then pick the highest-price offer meeting those requirements. Maybe we’ll find out that the Elliott is worth a lot more than it’s been appraised for.

Anyone who works at a public school, serves on a school board, or has a child enrolled at a public school should be outraged at this giveaway.


This article originally appeared in the Salem Statesman Journal on April 30, 2016.

Get Ready for High-Cost Electricity

In the recently concluded session of the Oregon legislature, the big environmental “win” was Senate Bill 1547, a bill that was hatched in secret by two large utilities and a group of environmental activists. The bill promises to rid the Oregon electricity grid of coal-fired power and to double the required levels of “renewable energy” from 25 percent to 50 percent by 2040.

When the legislature was debating SB 1547, members were calmly assured by proponents that the cost of these requirements would be minimal. They were reminded that the existing standard of 25 percent (by 2025) had always included an “off-ramp” if the cost of compliance reached 4 percent of utility revenue—and the costs had never come close to 4 percent.

Indeed, compliance costs for PGE in 2014 were only 0.24 percent of revenue (or $4.2 million in dollar terms). Obviously, ratepayers had nothing to worry about.

This storyline was especially soothing when it was repeated by Sen. Lee Beyer, former member and chair of the Oregon Public Utilities Commission. In his grandfatherly way, he told his colleagues that everything was under control.

The problem with this narrative was that it’s highly misleading. What the advocates didn’t say was that the reason the cost of compliance so far has been low is that utilities only needed to get 10 percent of their power from designated renewable energy sources through 2014. However, from 2015 to 2019, the requirement jumps to 15 percent, and rises steadily after 2020.

No one actually knows how much it will cost to get 50 percent of the power from “green energy” sources by 2040, but it’s going to be expensive.

We get a hint of this in the PGE forecast for 2017-2021. For those five years, PGE predicts that compliance costs will total $335 million, or 3.46 percent of revenue. Those costs will have to be paid for by ratepayers, and they will get nothing in return.

Under SB 1547, the highest costs are back-loaded. Advocates know that when the program blows up a decade from now, it will be someone else’s problem. Many of the legislators who voted for it will be sitting poolside collecting their PERS checks.

Senate Bill 1547 is a fraud. Virtually every claim made by proponents is false. Instead of increasing our “energy security” by making the Oregon grid “coal-free,” it will dramatically increase the risk of power failure by force-feeding huge amounts of intermittent sources like wind and solar into the grid. In engineering terms, the electrical distribution system requires stability; SB 1547 mandates volatility.

System costs have to rise because consumers will be paying twice for the same power—once for the subsidized wind farms and again for the adult power sources used to back up the wind farms that sit idle most of the time.

The advocates also claim that SB 1547 will get coal out of the system by 2030; but Oregon’s only coal-fired power plant will be shut down in 2020 anyway. The notion that this bill will affect coal used in other states is laughable.

In his floor speech, Rep. Cliff Bentz summarized his criticism of SB 1547 by saying it was “long on symbolism, short on results, and really expensive for ratepayers.” Nonetheless, a majority of legislators voted for it, and the governor signed it.

Ratepayers deserved so much better. In 2017, repealing SB 1547 should be at the top of the legislative “to-do” list.

Who Profits from Gambling?

Governor Kate Brown opposes a plan by the Coquille Indian Tribe to build a casino in Medford.

In her public statement, the Governor said, “even a single additional casino is likely to lead to significant efforts to expand gaming across Oregon to the detriment of the public welfare.”

What she actually means is she’s opposed to more gambling if it’s not run by state government.

During the current two-year budget cycle, Oregon expects to earn $1.2 billion from the state Lottery. In January, Powerball mania resulted in record sales of $36 million in one week. A Lottery spokesman said, “Any time sales go up, that’s a good thing for our beneficiaries.”

The hypocrisy of Oregon politicians about gambling and other so-called “sinful” activities is tiresome. We are constantly lectured to avoid smoking, drinking, and gambling because those activities are bad for us; but as soon as legislators get a cut of the action, it’s full steam ahead.

Now that recreational marijuana is legal and taxed, politicians are suddenly enjoying a new profit stream. Can marijuana advertising be far behind?

As soon as our governor starts reining in the state Lottery, I might take her concerns about tribal casinos seriously. Until then, she should stop pretending to be a voice of morality.

Earning Their Keep: Do Elected Officials in the Portland Region Show up for Meetings?

By Nick Pangares and John A. Charles, Jr.

Most elected officials who serve on school boards or city councils do not get paid for service. However, for at least five governing jurisdictions in the Portland metro region, councilors do receive compensation. Those jurisdictions are: the Commissions for Multnomah, Clackamas, and Washington Counties; the Portland City Council; and the Metro Council.

This research examined the attendance records for all regularly scheduled meetings for the five jurisdictions during 2014 and 2015. In some cases, there were also “board briefings” or “work sessions” to attend.

In general, most elected officials attended a high percentage of meetings, either by being present or by participating via telephone. Group participation rates usually exceeded 85%, on average.

Washington County Commissioner Greg Malinowski had the best attendance record of all elected officials over the two-year period – 100% for both years. Multnomah County Commissioner Judy Shiprack had the worst two-year record – 70% for board briefings, and 80% for board meetings. She is termed-out and not running for re-election.

Summaries of the attendance records for all elected officials are below. The numbers indicate the percent of meetings where the officials participated.

 

Clackamas County Commission

Regular Commission Meetings

 

Ludlow Savas Schrader Smith Bernard
2014 98% 100% 82% 89% 89%
2015 98% 95% 93% 93% 89%

 

 

Multnomah County Commission

Regular Commission Meetings

 

Madrigal Kafoury McKeel Wendt Baily Smith Shiprack
2014 100% 98% 88% 98% 86% 90% 83%
2015 n/a 92% 97% n/a 89% 95% 77%

 

 

Multnomah County Commission

Regular Briefings

 

  Madrigal Kafoury McKeel Wendt Baily Smith Shiprack
               
2014 100% 93% 83% 97% 94% 90% 70%
2015 n/a 100% 100% n/a 65% 90% 70%

 

 

Washington County Commission

Regular Commission Meetings

 

  Duyck Malinowski Schouten Rogers Terry
           
2014 94% 100% 87% 87% 94%
2015 91% 100% 91% 88% 85%

 

 

Portland City Council

Regular Meetings

 

  Hales Fish Fritz Novick Saltzman
           
2014 92% 83% 92% 94% 85%
2015 97% 92% 97% 92% 85%

 

 

Metro Council

Regular Meetings

 

  Hughes Chase Craddick Harrington Stacey Collette Dirksen
               
2014 84% 97% 95% 97% 97% 97% 89%
2015 93% 98% 95% 98% 100% 98% 93%

 

 

Metro Council

Regular Work Sessions

 

  Hughes Chase Craddick Harrington Stacey Collette Dirksen
               
2014 85% 94% 96% 96% 96% 96% 94%
2015 89% 93% 93% 95% 98% 91% 91%

 

While taxpayers probably expect officials to show up, does attendance really matter? That depends. Strictly speaking, yes. Each body must have a quorum of members present to conduct business. If too many officials skip meetings, decisions can’t be made. So even if individual commissioners are ineffective, a minimum number of them are needed at any given meeting.

Moreover, at most public meetings where agenda items will be voted on, public testimony will be taken. Constituents have a right to expect that when they take the trouble to show up with prepared testimony, elected officials will be there to listen.

However, attendance has little to do with influence or effectiveness. Public meetings are a form of street theatre; all the key decisions have been made ahead of time behind closed doors. So an elected official with a spotty attendance record could easily be the most important member of the body – it’s just that the heavy lifting is being done out of sight.

For example, Portland City Commissioner Dan Saltzman had the lowest two-year record of attendance among all City Commissioners, but few observers would consider him ineffective. To the contrary, he may be the most influential member of the Council, especially with a Mayor who is not running for re-election.

Metro Presiding Officer Tom Hughes also had the worst attendance record among his peers. Yet any Council member hoping to advance new policy would hardly consider Councilor Hughes unimportant.

There are also extenuating circumstances. What we see may not reflect the whole story. According to Commissioner Malinowski:

“The issue of absences turns out to be apples and oranges most of the time. This is partially because 4 out of the 5 commissioners are part time, and most of the time the reason Commissioners miss meeting is because of prior obligations regarding outside County business. If you compare absences with the schedule of each commissioner, this is usually the case. However, meeting attendance and communication is critical, particularly when technical questions about County business need to be answered.”

When asked if there should be a required minimum participation rate for meetings, Commissioner Malinowski responded:

“Overall the honor system of attendance is working, and I don’t see a need for a minimum attendance rate requirement. Many times what happens is the Commission will cancel meetings if two or more Commissioners are going to be absent. This usually happens on Tuesday evening meetings.”

The value of attendance is ultimately determined by voters. Those who are satisfied with the performance of their representative may overlook a mediocre participation rate.

However, voters should remember two things. First, for the five jurisdictions featured in this report, elected officials get paid to show up. They are not volunteers.

Second, attendance does matter. If everyone takes a night off, no business gets transacted. And running a government entity is a business.

About the authors: Nick Pangares is a research associate at Cascade Policy Institute. John A. Charles, Jr. is President and CEO of Cascade Policy Institute and also serves on the board of a rural water district in Clackamas County. Volunteer Bob Ludlum assisted with data gathering for this report.

TriMet’s Edifice Complex

Recently TriMet announced that after two years of planning for an expensive new “bus rapid transit” line from Gresham to Portland, the new service would actually take 8-11 minutes longer than current buses.

Over in Southwest Portland, TriMet is planning a $2 billion light rail line to Bridgeport Village near Tualatin, a suburban shopping mall.

Agency planners are fascinated with shiny new objects, but most riders don’t benefit. For example, between 2000 and 2015, TriMet opened five new rail lines, but the total vehicle-miles of daily transit service actually dropped by 5%.

It’s time to admit that TriMet’s basic business model is becoming obsolete. The agency is a sluggish monopoly that takes years to bring new service to market, while customers live in a smartphone world where they have millions of choices and same-day delivery.

In particular, the coming era of driverless vehicles will create entirely new businesses that will free riders from the tyranny of fixed-route transit service. Legacy systems such as TriMet will be stuck with a vast network of aging infrastructure that will be too expensive to maintain.

We don’t need another light rail line to Bridgeport, or a bus rapid transit line to Gresham. What we need is new vision of mobility in Portland.

(revised 4/6/16)

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