Five things I learned from TriMet’s CFO

deHamelPhotoB W_loBeth deHamel doesn’t have to work for TriMet.

But on Thursday, while deHamel was waiting for a MAX train with her colleagues, the former Goldman Sachs executive, who has degrees from Duke and Harvard’s Kennedy School, said she took the job as TriMet’s CFO last year because she wanted to be “part of the solution.”

That’s also the sense I got from her in a 45-minute interview about TriMet’s budget Friday afternoon. She seemed sharp, earnest and as candid as a reporter can hope for on the record.

This is not to say I’m no longer scared out of my gourd about the future of public transit in Portland, given the vast and largely unaddressed financial problems she described.

DeHamel seems good at her job. She’d better be.

Here are five things I took away from the interview.

1) Yes, TriMet is worried, too.

TriMet critic John Charles, deHamel said, talks as if nobody has noticed that the agency’s 0% funded, $817 million obligation to its current and future retirees’ medical premiums, which would have sucked $75 million out of TriMet’s operations budget this year if they’d been keeping up with them. Not true, she says.

“We are more than aware of this, of all our financial problems,” she said. “Our OPEB in particular. … It’s not that we are not paying attention here. We acknowledge the issues.”

2) TriMet execs are pinning just about everything on legal victories against their union.

widowsThe Mercury wrote last week that TriMet should “look seriously at renegotiating” its union contract. Um, too late, guys. Actual negotiation has failed, and eventually it looks like it’ll fall to a federal arbitrator who’ll side either with TriMet (big benefit cuts for workers and early retirees) or the union (renew the status quo). No middle ground available here.

DeHamel and other TriMet bosses are counting on a victory to eliminate many of the retirement obligations that the agency hasn’t been saving for. About 86 percent of its retiree medical shortfall comes from pre-65 retirees, whose benefits are tied to current workers’. DeHamel said those benefits could legally be cut.

“If we’re successful in our labor negotiations, that ($75 million per year) liability number will go down a lot,” deHamel said. “I’m not saying we won’t have a problem, but the order of magnitude of the problem will be dramatically different.”

TriMet has created a “trust fund” for retiree medical benefits, she said, and it’ll start putting money into it as soon as it can.

“This is a big problem, but it’s one that was created over 30 or 40 years, and it’s not one that can be expected to be solved in the first two to three years,” deHamel said, persuasively.

3) TriMet’s bond expert isn’t worried about its credit rating.

DeHamel used to handle municipal bonds for Goldman Sachs, so she probably ought to know whether TriMet will be in trouble when it tries to borrow money for the Orange Line next year. She says there’s little risk. That’s good.

4) Yes, rail projects compete for cash with future bus/rail service.

wrath waitingTriMet will not cut service on the 15 or the Yellow Line tomorrow in order to build a MAX line to Milwaukie.

It might, however, cut service on the 15 or the Yellow Line because of the recession; then take out a loan to build a MAX line to Milwaukie; and then not have enough money to restore service because it’s too busy paying down loans.

This is because money from TriMet’s 2003 and 2009 payroll tax hikes can be used either for “new” or “improved” service, which according to deHamel the agency here defines as including rail construction as well as operation costs.

Sometimes, new rails might be the right decision. But they definitely compete with service.

5) TriMet is counting on a return to rapid growth.

Because TriMet is built on payroll tax, deHamel said, its entire future depends on trends in Portland’s workforce.

To make the numbers work on the Orange Line, TriMet is assuming that after the next few years, taxable payroll in its service area will grow by an average of 4.5 percent per year, indefinitely. DeHamel said this was based on the trend from 1995 to 2010, during which taxable payroll grew by 4.7 percent annually – faster in the 90s, slower in the 00s.

Is this a safe assumption? Expect another post about this Monday.

As I told deHamel, I’m a pessimist. But when you’re deciding whether to borrow $60 million against an uncertain future, I think a little pessimism is healthy.

DeHamel replied that she’s a “realist.” TriMet riders like you, me and her should hope she’s right.

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