Tuesday, September 29, 2009

Bank of the Cascades Cease and Desist Order

Obtained a copy, ran OCR on it so you can search it, download here: CACB C&D pdf

It's rather entertaining reading, as it makes clear that the state and federal regulators are rather appalled at the state of the banks management:
1. The Bank shall have and retain qualified management.
(a) Each member of management shall have qualifications and experience commensurate with his or her duties at the Bank.

Read it, it is damning.

Now the part that is going to make it tough for CACB to survive starts with this:
5 (a) Within 30 days from the effective date of this ORDER, the Bank shall eliminate from its books, by charge-off or collection, all assets classified "Loss" and one-half of the assets classified "Doubtful" in the ROE that have not been previously collected or charged off. Elimination of these assets through proceeds of other loans made by the Bank to existing classified borrowers is not considered collection for the purpose of this paragraph.

(b) Within 120 days from the effective date of this ORDER, the Bank shall have reduced the assets classified "Substandard" and "Doubtful" in the ROE, which have not been previously charged off, to not more than 75 percent of capital.
"Not more than 75% of capital?

What percentage of capital are these bad loans now? The latest 10-Q filing states that as of June 30th CACB had $1.7 trillion in loans outstanding, of which $204 million was classified as non-performing. They had a $63 million loan loss reserve to try to cover this.

Oh, and the C&D also prohibits any further lending to anyone who has had a loan classified as "Loss" and requires any further lending to anyone with prior loans classified as "Substandard" or "Doubtful" to be approved by Board or entire loan committee. And then only if all past due interest has been collected in cash.

That kind of puts a damper on getting the party started.

The C&D is dated August 26th, just over 30 days ago. These next few weeks are going to be telling for CACB, Bend's flagship.

Monday, April 20, 2009

Local Economy Continues To Crater--UE Up To 17%

Quick post of the harsh numbers that just came out:

Bend MSA
Unemployment, unadjusted, March, 2009: 17%
Unemployment, unadjusted, March, 2008: 7.8%

Deschutes County:
Notices of Default, year to date through April 17th, 2009: 1037

Notices of Default, year to date through April 17th, 2008: 395

Notices of Default, all of 2007: 590

More later.

Wednesday, April 1, 2009

Response From Visit Bend

From Doug LaPlaca, CEO of Visit Bend:

Hi Bruce. Thank you for your thorough blog posting on Visit Bend’s proposed funding policy for the promotion of tourism. The posting was very well written and I had a couple of additional notes to help with your understanding of the issue.

First, your comment that the City has no responsibility to make up shortfalls in the tourism fund is absolutely correct. The shortfalls encountered in the Tourism Fund over the past two years were “made up”/reimbursed by the following year’s tourism fund, and thereby reducing the amount of money allocated to the promotion of tourism the following year. I certainly would not support allocating more than 30% of TRT collections to the promotion of tourism. The proposed funding proposal will eliminate shortfalls in the tourism fund altogether because the City will no longer be carrying the risk of fluctuations within the tourism fund. That will now be the onus of Visit Bend.

Second, your comment that event operators in Bend will now have to go “glad-handing” to Visit Bend to receive event funding is also correct, and I would like to convince you that this would be a good improvement. As a resident of Bend, I’m sure you are aware of the high number of special events in our community. Funding all of these events with tourism fund dollars would not create the maximum return on the reinvestment of the 30% for the community. The purpose of the tourism fund is not ambiguous. We need to reinvest those dollars into the promotion of tourism in a way that it will have the most beneficial return-on-investment for our community and economy. This is where Visit Bend comes in. We have over 60 years of combined experience in economic development through tourism. We hold our responsibility to the community of Bend in the highest regard and devote 100% of our energies to doing our jobs better than anyone else in the industry. We are residents of Bend, we love our City and our mission is to bring money to the businesses of Bend by bringing tourists to the City. Every decision we make is based on this mission.

Third, the debt repayment for the previous welcome center (now the ODOT building) is behind us. The final payment was made this past December so those payments will no longer be deducted from the tourism fund.

I hope this helps your understanding of the issue and I would be delighted to talk to you further about it. This kind of dialogue is very healthy and there remains a tremendous amount of misinformation in the community regarding tourism promotion. If you are interested in tourism, I would also be happy to share our Strategic Plan with you that we will be presenting to the City on April 14. We have several very exciting and impactful programs in place that will have a very positive impact on our economy.

Note: from followup email
One final clarification regarding your posting; in the proposed funding policy, Visit Bend would still pay the City's audit and overhead expenses associated with the tourism fund. This amount is approximately $25,000 per year (same as years past).

The basic premise of our proposal is 1) to eliminate "shortfalls" in the tourism fund altogether, thereby eliminating the tourism fund's dependence on short term loans from the General Fund. That's what has been happening and, as a citizen of Bend, I want this to end. 2) to entrust and empower Visit Bend with the full 30% of the tourism fund to maximize the impact of tourism promotion for Bend's economy. Visit Bend is the contracted specialist in this arena and we want to be held accountable. If the community does not think we are not excelling in our mission, I would certainly step down.

Again, I invite further discussion on this issue. I believe in this proposal and believe it is in the best interest of our community.
End of followup

Thanks again for engaging in the issue!

All the best,


Doug La Placa
Visit Bend


My response:

On most points I agree. Just wanted to clarify everything. It makes sense to fund Visit Bend with actual revenues after they are collected, although the cash flow and budgeting issues may be harder to overcome.

Who will fund motel audits? That was a separate item in the 08/09 budget memo from Sonia. Not much but a random audit of some is necessary.

I agree that giving one accountable organization the job and letting them do it is a good idea.

Sunday, March 29, 2009

Visit Bend Wants "All" Its Money

A couple of months ago the Bulletin published the article "Visit Bend seeks new funding structure" detailing a proposal from the local tourism council Visit Bend to ask the City to change their funding formula. Currently 30% of the 9% room tax is earmarked for tourism promotion. About 5% goes towards related items, such as paying the debt service on the former visitor info center on the north side and to help promote major events like BendFilm, while 25% goes to Visit Bend.

Currently, the annual budget sets the level of overall tourism promotion funding at 30% of expected room tax revenues, and Visit Bend receives its share, in twelve equal monthly payments. The proposal is to simply pay Visit Bend the full 30% on a monthly basis, from actual revenues. The city will have to fund the old visitor center debt service and any other tourism promotion it wishes to do from some other source, like the general fund.

City staff and Visit Bend are promoting this proposal as a way to reduce financial risk if revenues do not reach the anticipated level, like is happening this fiscal year. The reasoning goes that in down times the general fund must make up the difference between expected and actual revenues, an amount that is anticipated to be up to $150,000.

As stated in the Bulletin:
“The percentage of funding from the city would go up, but overall, the amount of transient room-tax collections will likely go down,” La Placa said. “The end result should be pretty stable funding over time.”

For the fiscal year 2007-08, the city collected about $3.4 million in room taxes. Its funding for Visit Bend was $852,000, or about 25 percent of the room-tax collections, according to La Placa. If the city had allocated 30 percent, funding would have exceeded $1 million, giving the visitor bureau more money to attract visitors, he said.

If room-tax collections dropped 15 percent last fiscal year, using the new formula, the city still would have received $870,000 in funding, he said.

This simply doesn't make much sense-I think the writer meant that Visit Bend would still have received $870,000 in funding if revenues dropped 15%. There are a few other quotes from this article that ring some bells, like:
Under the new system, the onus of managing funding during slower room-tax collection periods would fall on Visit Bend, taking the pressure off the city if room-tax collections were less than anticipated, La Placa said.

“This would take the financial risk off the city and also satisfy the tourism and business community that the city is reinvesting 30 percent of the (transient room tax) collections back into the promotion of tourism — as stipulated by city code and state law,” La Placa said...

The new method of determining Visit Bend’s budget would give Visit Bend greater reason to promote tourism because higher room-tax collections would mean more funding, Bend City Manager Eric King said at Tuesday’s meeting.

Does Visit Bend need greater incentive to simply do their job? If so, perhaps we should find someone else to do the job. And I'm not clear on how providing a higher percentage of the actual revenues to Visit Bend takes any pressure off the City.

The council is taking up this issue in the April 1st Work Session. The proposal from Visit Bend states:
Consistent with Oregon House Bill 2267 and Bend City Code 7.012, the City of Bend currently allocates 30% of transient room tax (TRT) collections to the Tourism Fund to be used for the promotion of tourism as defined in Oregon House Bill 2934. The majority of these funds are transferred to the Bend Visitor & Convention Bureau (d.b.a., Visit Bend) through a pre-fixed budget that is established by the City prior to the beginning of each fiscal year and paid to Visit Bend in 12 equal monthly installments.

Since the budget is pre-fixed, the City carries the financial risk created by fluctuations in TRT collections throughout the year. Meaning, if the established budget for Visit Bend is greater than 30% of actual TRT collections over the ensuing year, the City absorbs the difference creating an unnecessary financial burden for the city.

Additionally, the current funding system does not allocate the full 30% of TRT collections to Visit Bend, but rather withholds a percentage of the Tourism Fund for internal City projects and expenses that the tourism industry and business community have argued do not fit the State’s definition of tourism promotion as defined in HB2934.

Proposed Solution
To resolve the negative impacts created by the current funding system, Visit Bend on behalf of the Bend tourism industry, is proposing that the current pre-fixed budget system is replaced by a percentage-based system, whereby 30% of TRT collections on a monthly basis are directed to Visit Bend for the promotion of tourism (minus the City’s pre-determined administrative and audit expenses). In this proposed system, the financial risk created by fluctuations in TRT collections is shifted from the City to Visit Bend.

In addition to removing the financial risk from the City, the tourism industry and business community receive the full 30% reinvestment into the Bend economy that they believe they are legislatively entitled to.

An additional benefit of this proposed system, is that is de-politicizes the allocation of the Tourism Fund. By allocating the full 30% to Visit Bend, the City is empowering Visit Bend to maximize the return on investment for the local economy, and holding them accountable to do so.

Additional benefits resulting from the proposed system are the following:
- The proposed system supports the legislative intent of City code 7.012 and Oregon House Bill 2267.
- The proposed system maximizes the positive economic impact of tourism in Bend, for area businesses and the City’s general fund.
- The proposed system fosters a strong and mutually beneficial relationship between the City of Bend and the Bend Business Community.

Proposed Contract Amendment
The proposed contract amendment will stipulate that City Council’s approval of Visit Bend’s business plan each year will activate a one year renewal of the contract (as it does currently), and a one year commitment to fund Visit Bend with 30% of the monthly TRT collections during the following fiscal year (minus City administrative and auditing expenses that will amount to approximately $25,000 in FY09/10).

Additional Note
In order to initiate the 2009/2010 fiscal year with a deficit-free Tourism Fund, Visit Bend will reimburse the City an amount equal to the 2008/2009 year-end deficit in the City’s Tourism Fund. This amount will be between $50,000 and $80,000 and will be paid by Visit Bend to the City at the end of the 08/09 fiscal year. If Visit Bend does not have sufficient funds to pay-off the deficit at the end of FY08/09, the City will withhold one-twelfth on the remaining deficit amount each month of FY09/10.

Note that there is no mention of where the 5% Visit Bend doesn't currently get goes, just that it goes to something that some people don't think promotes tourism. Yet, the Bulletin stated that this 5% goes to grants for ads for events like BendFilm and for debt service on a building that was used to promote tourism.

The controlling law from ORS 320.300 defines:
(7) “Tourism promotion” means any of the following activities:
(a) Advertising, publicizing or distributing information for the purpose of attracting and welcoming tourists;
(b) Conducting strategic planning and research necessary to stimulate future tourism development;
(c) Operating tourism promotion agencies; and
(d) Marketing special events and festivals designed to attract tourists.

(8) “Tourism promotion agency” includes:
(a) An incorporated nonprofit organization or governmental unit that is responsible for the tourism promotion of a destination on a year-round basis.
(b) A nonprofit entity that manages tourism-related economic development plans, programs and projects.
(c) A regional or statewide association that represents entities that rely on tourism-related business for more than 50 percent of their total income.

(9) “Tourism-related facility”:
(a) Means a conference center, convention center or visitor information center; and
(b) Means other improved real property that has a useful life of 10 or more years and has a substantial purpose of supporting tourism or accommodating tourist activities.
From the 2008 VCB Funding Memo we see that the only entity funded is Visit Bend. Grants to BendFilm, etc. were stopped in 08/09. The funds not going to Visit Bend now are used to repay the general fund for earlier shortfalls, city overhead, debt service on the Visitor Information Center, and for motel audits. These items totaled $231,000, while Visit Bend received $809,000 (not the $830,000 listed) after the council vote.

In its proposal Visit Bend wants all the tourism promotion money, a full 30% of room tax revenues instead of the 25% it currently receives, and full control of how the city promotes tourism. Event planners will have to go hat in hand to Doug LaPlaca at Visit Bend rather than approach the council for advertising funding. In return, Visit Bend pledges to pay any shortfall in the current years' revenues, but immediately backtracks by saying that if it doesn't have the cash at the end of June, it will simply agree to receive less of the monies it would be now entitled to next year. Note that it states this will make the current tourism fund deficit free, but the Issue Summary from staff states:
Based on current trends in room tax revenues, the Tourism Fund is expected to end the year with a cash shortfall of $100,000 to $130,000. This Visit Bend proposal provides for a reimbursement to the City of $50,000 to $80,000 (depending on level of reserves Visit Bend has) to cover the year-end deficit in the City’s Tourism Fund. The remaining cash shortfall will need to be covered by a loan from the General Fund and repaid with the following year’s room tax receipts.
The current overhead, debt service, and motel audit expenses would also have to be funded by another source, i.e. the general fund.

In any case, I have seen no evidence that the city must make up any shortfall. In fact according the contract with Visit Bend, more than funds actually received can NOT be spent:
2. Public sector funding will be limited to those sources set forth in Section IV. (Note: currently 30% of transient room taxes) The annual budget will be based upon a percent of tourism related taxes mutually agreed upon by February 1st of the proceeding year by CONTRACTOR and the CITY, and the annual budget will contain a reserve fund in an amount up to fifteen percent (10%) of the public funded portion of the annual budget. The reserve fund, if such is deemed to be necessary, may be used in the case of actual revenues being less than forecast revenues and in support of activities included in the approved Business Plan. CONTRACTOR may access the reserve fund upon request and approval by the CITY. In no case will expenditures exceed actual funds available for CONTRACTOR operations. Actual funds available shall consist of those funds provided in accordance with Section IV above (NOTE:"...shall be no less than 27%of the transient room tax revenues."), and any funds provided from private sector contributions. However, if CONTRACTOR assumes additional event sponsorships that are not funded by tourism related taxes, then CONTRACTOR may request additional funding from the CITY to support these additional events.
So the reality is that the the city not only does not have to make up room tax shortfalls, the contract itself specifically addresses the issue, stating that only the agreed percentage of room tax funds actually collected can be spent.

It is not up to city taxpayers to make up funding shortfalls, it is up to Visit Bend to adjust their budget.

And there is an element of Bend City Code that may render any such changes in VIsit Bend funding a moot point at this time, specifically:
7.036(1)(b) Amendment to Tourist Promotion Fund. A decrease in the percentage of the monies to the Tourist Promotion Fund, or a change in the definition of the Tourist Promotion Fund, shall require a vote of the people as provided in Section ___ of the Bend Charter.
The Code earier defines the "Tourist Fund" as:
A special fund called a Tourist Fund shall be established for the purpose of promoting tourism within the City of Bend...30% of the money shall be paid into the fund. The Tourist Fund shall be used for the promotion of tourism as defined in Section 1 of HB 2934 (Oregon Laws, 2001)(NOTE: Same as definition from ORS 320.300 quoted above), and the city is authorized to enter into contracts with the Bend Visitor & Convention Bureau, the Central Oregon Visitor’s Association or other entities deemed worthy by the City Council to carry out this purpose.

An argument could very well be made that such changes in revenue distribution constitutes a change in the definition of toursim fund, namely that the only defined use of tourism promotion funds is to finance Visit Bend. This is a significant restriction from current practice.

That is irrelavant in this case, as the current contract clearly shows that the "change" requested, to a percentage of the actual revenues, is already in force.

It just hasn't been enforced to date.

Monday, March 23, 2009

16.1% Unemployment in February

For January, we were one place in front of Flint, MI, tied for 356th out of 372 MSA's in the US:

356 Bend, OR Metropolitan Statistical Area 14.6
356 Monroe, MI Metropolitan Statistical Area 14.6
358 Flint, MI Metropolitan Statistical Area 14.8

The numbers for February just came out a few minutes ago, and we are number one in Oregon once again at 16.1% unadjusted, a stunning 1.7% increase from January. I wonder if we will actually surpass Flint and drop into the range of the Central Valley in California. It was grim and it's gotten even grimmer for anyone needing a job around Bend.

On a related note, I just talked to Trudy a little while ago, and she had a customer who works worked for Cessna come in and talk for awhile this morning. His last day was last Friday, and his comment about Cessna after this latest round of layoffs is that "...it's like a ghost town out there." Not good. He is single and doesn't have much for expenses, so he figures he is going to hang out and play for a while. Those with families to support are probably not that lucky. Every day I see more For Rent and For Sale signs. And more people like the "Single Father, Needs Rent Money, Anything Helps" guy with his two kids at the intersection of Reed Market and 3rd St. the other day.

I'm not sure what the solution is, but it's going to take a long time to get back to where we were even twelve months ago at 8.1% UE. We are now in the top 5% of unemployment in the entire United States.

That's really grim. Let's hope our Councilors don't decide to spend too much more of our precious tax dollars as things get worse. No more unanticipated $400,000 expenses to be paid out before June 30th, please.

Thursday, March 19, 2009

Councilor Clinton's Response

In full:

The contract we voted on was for $387k to redo all the standards & specs for the public works dept. I voiced my misgivings: (1) this work should be done in-house (2) it should be paid for out of the SDC fund rather than by ratepayers and (3) cost is too high. I received semi-reasonable answers from the staff so decided that on balance, the importance of the work overrode my misgivings.

I have seen numerous cases where the City has ended up paying through the nose for patching up projects that were not done right the first time. ADA compliant curb cuts and ramp work is a good example. Part of the reason was often that the standards and specs were ambiguous. In the long run, I think that getting all this on a more professional basis will save the City way more than it costs.

Facing huge cutbacks, Council approves $687K building standards update

This just flat out astounds me. An expenditure, at this time in this economic climate, that will total almost $700,000, and it's not even reported in the Bulletin. The only Councilors voting against it were Capell and Eager. I asked Clinton about his vote and will update when I receive an answer.

From the summary of yesterday's City Council meeting:
After discussion about the cost and timeliness of this action Council authorized (by vote of 5 to 2 with Councilors Capell and Eager opposed, but noting that they may support the agreement with additional information) a professional services agreement with CH2M Hill for Phase 2 of the new Construction Standards and Specifications in the amount of $387,041. These documents are the foundation for all designing, contracting and construction of public infrastructure. Legal and contracting requirements that protect the City have changed dramatically over the past 10 years. In addition, construction methods and practices continue to improve. New standards and specifications are needed to better meet the needs of the community, properly protect the City, and provide clear and consistent requirements of the development community. The cost of this will be split equally between operational budgets in the Water, Water Reclamation, Stormwater and Street Operations Divisions

Of course, there is no mention of the concomitant additional $300,000 next year.

I was up until 4:30 in the morning a few nights ago, talking with Trudy about "should we stay or should we go?". Luckily the patent licensing fees I have been receiving make moving a possibility.

And after this, it's done. Time to move on...

PS from the Bulletin reporter, Erin Golden: "I didn't write about it because unfortunately, there's only so much that can go in one meeting story. The focus of the evening was the budget discussion..."