Could Clackamas County Reduce Its $37 Million Debt Service?

Third in a series about issues identified by Clackamas County Democrats at their recent platform issue meeting.

The prior article in this series described how the Bank of North Dakota works. This article will provide information as to whether or not a similar bank concept could save money for Clackamas County, our special districts, education system, and cities.

Clackamas County government, not including all the special districts and cities, has a long term debt of more than $248 million. It will have to pay more than $37 million in debt service. In terms of bonds issued with the full faith and credit (FFCO) of the county government, the county pays about $29 million in interest annually. Adding revenue bond interest of $4.3 million results in some $37 million in interest every year.

The interest payments are a double-edged sword: While they repay bondholders for helping pay for certain county services or projects, which is good, they also go to bond institutions and profit-making banks which may originate the bonds.

Ironically, this puts the banks in the position to apply these interest payments to lobby for tax cuts which help banks but harm states like Oregon. How? By removing state and local tax deductions. That means the county is paying for banks to lobby against the county’s best interests, which means the best interests of the people.

County interest payments for FFCO debts range from a low of 2 percent to a high of 6.5 percent. For revenue bonds the interest ranges from 2.5 percent to 5 percent. If the county could cut its interest rate by just one percent, it would realize a savings of about $2.5 million per year.
The county also pays fees to originate bonds and annual fees to the originating institutions and to out-of-county law firms specializing in bonds. If these fees could be reduced, then another source of savings to Clackamas taxpayers is available.

As a local municipal example, the city of Milwaukie has at least $400,000 in debt service payments each year. That does not include new library bonds yet to be issued. By changing this system, which tends to benefit the banks at the people’s’ expense, our cities and special districts could save tens of millions of dollar every year. This is money that could be made available to apply to other projects benefiting our citizens here in Clackamas County.
With the state and the federal governments more and more turning a deaf ear to local government’s plea for financial help repairing and improving infrastructure, “finding” more money for local projects is increasingly imperative.

Savings in the form of additional revenues could also be accrued with higher interest rates on county bank deposits. Borrowing from a Bank of Clackamas County, even if initially limited just to governments and special districts, could also provide additional revenues for worthwhile projects.

But wait! If a public bank is such a great deal, why haven’t we developed one already? The answer is political. Wall Street makes millions from Clackamas County borrowing. They have convinced voters that banking is so complex and complicated that only bankers know how to make it work. Although after the LIBOR scandal and the 2008 bank crash, more voters than ever realize that bankers in today’s world aren’t the friendly, helpful neighborhood bankers of yesterday. Today’s bankers foreclose as soon as possible and then don’t report the foreclosure for months in order to make their portfolios look good. Wall Street, which impacts us daily, has no loyalty to any small customers or any community.

As the video below shows, creating the first public bank was a political challenge. The result of that political courage was and is a benefit being enjoyed by all North Dakota residents today.
What is clear is that a Clackamas County Public Bank, if all it did was to manage and pool public funds, could reduce interest payments, increase revenues for local governments, and help Clackamas County obtain a degree of financial independence that would create benefits for generations to come.


If the public bank could do more, such as invest in local agriculture and small businesses, where the vast majority of new jobs are created, Clackamas County could become not just the technical leader in laminated timbers, for example, but the leader in production of lam beams generating family wage level jobs here at home.

Too, our carbon footprint could be greatly reduced as local small business growth reduces our need to import products from around the world. These don’t have to be big projects to make a huge difference. They just need to send clear signals to the market that Clackamas County is ready to invest in innovation, making life here better rather than merely line the pockets of Wall Street Fat Cats earning multi-million dollar bonuses paid by your money.