Financial Condition Report 2022

Executive summary

This report reflects historical results and data. It is important to keep in mind that the impact of the COVID-19 pandemic on County operations specifically as well as the general county economy are still ongoing. The full impact is unknown and is expected to continue to be significant.

Why we did this audit

While this report does not reflect the full impact of the current COVID-19 pandemic, it does provide a useful look back at historical trends, which include the impact and recovery from the Great Recession of 2008/2009 and some of the impacts from the pandemic. This data can help inform future decision making. We believe the financial health of Multnomah County as presented in the report is the result of difficult decisions made by County Commissioners, who have responded to challenges by creating and following sound financial policies while maintaining service to the public.

Expenditures by Program in FY2021

Total Expenditures = $1,601,691,000

Social Services continue to be the largest expenditure by program.

Image of a US dollar showing percentage of total expenditures by program area

As shown in the chart above, the percentage of total expenditures to each area were:

Social services 38%
Health services 19%
Public safety & justice 19%
Other 12%
General government 7%
Library 5%

FY2021 highlights

Downtown courthouse opened
Coronavirus (COVID-19) funding of approximately $156.8 million
Business Income Tax revenues increased approximately $32 million

Visualizations

Yearly fiscal highlights

Below are a few of the significant fiscal highlights that have impacted the county since 2012.

FY2022

While FY2022 is not yet presented in this report, the impact and county response related to the COVID-19 pandemic will continue to have a significant impact on county operations.

FY2021

The new downtown courthouse opened in October 2020.
Over $156.8 million in intergovernmental revenues recognized related to the COVID-19 pandemic.
A $32 million (31%) increase in the business income tax (BIT) due to a couple of factors:
1. The Board of County Commissioners approved a tax rate increase from 1.45% to 2.0% beginning with tax year 2020.
2. The federal aid provided over the last two years to help address the impact of the pandemic increased overall incomes, boosting increased spending and aggregate demand. This resulted in some of the largest payers of the County’s BIT having stronger than expected profits coming out of the pandemic.
General Obligation bonds issued to finance capital costs to expand, modernize, rebuild, and acquire land for library facilities.

FY2020

An emergency declaration for the COVID-19 pandemic is declared in March 2020.
The Behavioral Health Managed Care Fund program transitioned to Health Share Oregon (HSO). Beginning January 1, 2020, the Health Department was no longer operating as the Multnomah Mental Health (MMH) Risk-Accepting Entity as part of HSO.

FY2019

The new Health Department headquarters opened.
The county went live with the new suite of enterprise resource planning (ERP) systems in January 2019.
Significant projects under construction include the downtown courthouse.

FY2018

The county’s new ERP system replacement project was under way in FY2018.
Wapato facility was sold in FY2018.
Significant projects under construction include the downtown courthouse and the Health Department headquarters.

FY2017

In 2016, Multnomah County and the City of Portland created the Joint Office of Homeless Services (JOHS), thereby consolidating homeless services under the county. Beginning in FY17 the county began recognizing funding related to the JOHS program.
$25 million lump sum annual payment (at the discretion of the county's CFO) to PERS starting with FY2017 per Resolution 2016-1.7.
Significant projects under construction include the downtown courthouse and the Health Department headquarters.

FY2016

At the beginning of FY2016 the Department of County Human Services (Social Services) transferred Mental Health and Addictions Services (MHAS) to the Health Department (Health Services).
The Sellwood Bridge project was completed and the new bridge opened in the spring of 2016.
The downtown courthouse construction project began the design and construction phase.

FY2015

The City of Portland contributed $20 million to the Sellwood Bridge project.

FY2014

About $75 million received for the Sellwood Bridge construction project. Two-thirds of the $75 million came from the City of Portland, about $20 million came from federal awards, and about $5 million came from direct state funding.
The county received $10 million from the Portland Development Commission as an initial payment for the construction of a new downtown Health Department headquarters.

FY2013

November 2012, voters approved the formation of a Library District with a permanent rate for property taxes. The county will continue to operate the library system under an intergovernmental agreement (IGA) with the Library District beginning in FY2014.
The county issued $128 million in Full Faith and Credit obligations in December 2012 for the Sellwood Bridge project.
Southeast Health Center opened in April 2013.

FY2012

The project to replace the Sellwood Bridge began construction in late FY2012.
The East County Courthouse and Data Center relocation project was completed in the spring of 2012.

Objectives, scope, & methodology

The objective of this report is to evaluate the financial condition of Multnomah County using the Financial Trend Monitoring System developed by the International City/County Management Association (ICMA) and the indicators suggested by the Government Accounting Standards Board (GASB).

We express all indicators in constant dollars with the option to turn off the inflation adjustment. These adjustments for inflation convert dollar amounts to the equivalent of the purchasing power of money in fiscal year ending June 30, 2021 (or calendar year ending December 31, 2021 where applicable). The adjustments are based on the CPI-W West – Size A, Consumer Price Index (fiscal year average = second half to first half), and index that measures price changes on a quarterly and annual basis.

Throughout this report, we have included the state payments to intellectual and developmental disabilities (I/DD) service providers. In FY08, the state began paying community service providers directly, where in prior years these funds passed through the county. While the county no longer receives these funds directly, they are reported in the county’s financial statements as intergovernmental revenues and social services expenditures. In FY2021, this amounted to $219.447 million paid directly to I/DD service providers.

To provide context to some of the financial and economic indicators, we have presented the Great Recession (2008/2009) and the recession that occurred at the onset of the COVID-19 pandemic (2020). Per the National Bureau of Economic Research (NBER): “Contractions (recessions) start at the peak of a business cycle and end at the trough… A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough…a month is designated as a trough when economic activity reaches a low point and begins to rise again for a sustained period.”

Per the NBER the Great Recession had a peak in December 2007 and a trough in June 2009. “In determining that a trough occurred in June 2009, [NBER] did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, [NBER] determined only that the recession ended and a recovery began in that month.”
Per the NBER the recession at the onset of the COVID-19 pandemic had a peak in February 2020 and a trough in April 2020. Similarly, the NBER determined “…that a trough occurred in April 2020, [NBER] did not conclude that the economy has returned to operating at normal capacity…The [NBER] decided that any future downturn of the economy would be a new recession and not a continuation of the recession associated with the February 2020 peak. The basis for this decision was the length and strength of the recovery to date.”

For more information

The prior reports cover FY1993 through FY2019 and are available on the County Auditor's web page. Earlier reports are available upon request.

The county's financial policy is adopted and published annually in its adopted budget. The county's financial statements and budget can be accessed at multco.us.

Additional economic information can be obtained through the State of Oregon for the State Employment Department or the Office of Economic Analysis.

For information about the county's property tax structure and limitations, see the Tax Supervising & Conservation Commission webpage and the County Assessor’s Office webpage.

For more information about economic recessions, see the National Bureau of Economic Research’s webpage.

Data reliability

The majority of the financial information in this report is from the Annual Comprehensive Financial Reports and therefore, we relied on the work of the county’s external financial auditors. We reviewed other information for reasonableness and consistency. We did not audit the accuracy of source documents or reliability of data in accounting systems.

Statement of compliance with government auditing standards

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Audit staff

Annamarie McNiel, CPA, Principal Management Auditor