Portland Gets an “F ” on Fiscal Honesty

Portland has been trying to pull fast one. 

The city claims it “operates on a tough set of financial controls” to ensure it balances its annual budget. 

It doesn’t.

According to a report recently released by a nonprofit, Truth in Accounting (TIA), in order to “balance the budget” Portland has been failing to include its true costs, pushing costs onto future taxpayers. 

“Despite receiving support from COVID relief grants and other federal programs, Portland remained in dire fiscal shape during the onset of the pandemic ,” the Report said.

TIA examined the nation’s 75 most populous cities. At the end of FY 2020, 61 of them did not have enough money to pay all their bills. 

Grades of A to F were assigned to the 61 cities to give greater context to each city’s Taxpayer Burden or Taxpayer Surplus.  TIA divides the amount of money needed to pay bills by the number of city taxpayers to come up with the Taxpayer Burden. 

The “D” and “F” grades apply to governments that have not balanced their budgets and have significant Taxpayer Burdens. No cities received A’s, 14 received B’s, 26 received C’s, 29 received D’s.

Six cities received Fs for failing grades. One of those was Portland.

“…government officials are responsible for reporting their actions and the results in ways that are truthful and comprehensible to the electorate,” the TIA Report says. “Providing accurate and timely information to citizens and the media is an essential part of government responsibility and accountability.”

One of the ways Portland makes its budgets look balanced is by shortchanging public pension and Other Postemployment Benefits (OPEB) that it provides to retired employees, according to the Report. These benefits principally involve health care benefits, but also may include life insurance, disability, legal and other services.

In other words, Portland has been using some of the money that’s been owed to cover pension and OPEB costs to keep taxes low instead and to pay for politically popular programs without real accountability.

Portland was ranked one of the poorest performing cities at the end of FY20 in terms of its taxpayer burden, the report says.   Because the city didn’t have enough money to pay its bills, it had a $5.6 billion financial hole.  To erase this shortfall, each Portland taxpayer would have had to send $24,900 to the city.  That was up substantially from $18,800 at the end of FY15.

“Portland’s overall financial condition (from FY19) worsened by $1.2 billion mostly because the city’s Fire and Police Disability and Retirement Plan had no assets and it is assumed that the plan will have to borrow money to pay benefits.,” the report says. “Overall, the city had set aside only 36 cents for every dollar of promised pension benefits and eight cents for every dollar of promised retiree health care benefits. 

“Portland has been in poor fiscal shape for years.,” the TIA report said. 

Time to stand up and fix things.

Reckless lunacy: Portland has surrendered to graffiti vandals

The scourge of graffiti in downtown Portland, OR

It should have been confronted in the beginning. Now it’s out of hand.

Graffiti was once a rarity in downtown Portland. Now, ignored or tolerated for too long, it has metastasized, spread like a cancer throughout the city.

Graffiti isn’t harmless play-acting or simply entertainment for bored youth. It isn’t simple rebellion either. It is, instead, reckless lunacy.

Unapproved graffiti on a building, train or highway wall is not just a harmless “expression of self,” as some apologists argue.  There’s no romanticism in it. It is abusing others’ property. It’s a crime that impacts the quality of life of everybody who has to confront it. At a minimum, it’s vandalism. When used to mark territory by gangs, it puts the community at risk. If allowed to stay and multiply, it serves as a billboard for disorder and social disruption.

As Whitney Hall has written, graffiti has a “wave effect” in that it leads to increases in crime, including violence, loitering, littering, and other forms of property destruction, as well as more theft of items being used to do the graffiti.

Maybe some graffiti can be seen as art, but that’s not what’s now covering Portland. It is, instead, brutality taking away our right to a clean city, our right to live in a safe unthreatening environment.

When New York City’s grand Frederick Law Olmstead-designed Central Park fell into debilitating despair in the 1970s and 1980s, the proliferation of graffiti was a prime signal of its decline.

Vandals bombarded the Belvedere Castle, a Central Park landmark, with spray painted graffiti in the 1970s.

The park’s revival was spurred, in part, by aggressive efforts to rid the park of graffiti and meticulously restore it to its former grandeur.

Portland needs to do the same.

ProPublica, a nonprofit newsroom that investigates abuses of power, recently posted an article written by Jeremy Kohler arguing that the failure of state legislatures and law enforcement to respond to the attacks of armed far-right mobs led directly to the riot at the U.S. Capitol on Jan 6. “Experts and elected officials said the lack of action by lawmakers and police created an environment that encouraged political violence,” ProPublica wrote. “Eventually, you get to the point of entitlement where you can get away with anything and there will never be any accountability,” the Idaho House minority leader, Ilana Rubel, a Democrat, said.”

It’s time to face Portland’s tolerance for graffiti for what it is, another sign of a city out of control.

The mob is not the rest of us

BROOKLYN, NEW YORK, (Photo by Erik McGregor/LightRocket via Getty Images)

When the demand went out from activists earlier this year to “Defund the police,” Portland, Oregon responded. 

In June, the City Council cut $15 million from the police budget, rewarding Commissioner Jo Ann Hardesty, a key architect of the cut, with a big win. 

But when Hardesty pushed later for deeper cuts, she failed. At an Oct. 28 City Council Zoom call meeting, Hardesty proposed slashing the Portland Police Bureau’s budget by $18 million and shifting the money to other city services. When the proposal was tabled until a Nov. 5 meeting, Hardesty did not take it well. “I see it as a cowardly move to put this vote off until after the election,” she said. “I am a bit disgusted at the lack of courage on this council.”

Commissioner Jo Ann Hardesty

Citing 156 nights of street protests as a call for action, Hardesty said, “It is shocking that my City Council colleagues don’t know why people are taking to the streets.”

Hardesty either didn’t know, or didn’t want to acknowledge, that the people “taking to the streets” in this and other protests, and generating a lot of overwrought media coverage, don’t necessarily represent the community at large. Too many other politicians and members of the public often make the same mistake.

A recent Gallup poll, conducted as part of a newly launched Gallup Center on Black Voices, found that, in fact,  a large majority—81 percent—of black Americans want the same or increased levels of police presence in their neighborhoods. Just 19 percent of black Americans said they wanted the police to spend less time in their neighborhoods. This is similar to the 67% of all U.S. adults preferring the status quo, including 71% of White Americans.

Previously reported Gallup findings show the vast majority of Blacks believe police reform is needed, such as improving police relations with the communities they serve and preventing or punishing abusive police behavior, but that’s not the “Defund the police” message seen on protester’s placards.

“The “defund the police” movement is backed by progressive activists and politicians, who in turn are funded by nonprofit social-justice organizations and money from corporations shaken down by agitator groups…which pose as community organizations, though they have little popular representation or membership,” Charles Blain, the president of Urban Reform and Urban Reform Institute, asserted in City Journal, a publication of the Manhattan Institute for Policy Research. “They champion the most adverse policies for the very citizens they claim to be fighting for.”

Linked to this is the pressure by some activists to eliminate the Transit Police that patrol TriMet’s transit system. 

Activists have aggressively criticized The Transit Police, alleging that say they focus on people of color and make members of marginalized communities fearful. In response, the Portland City Council has already voted to pull the Portland Police Bureau out of group on Dec. 31.

The problem is research presented to TriMet’s board of Directors indicates there’s actually a high level of support for the Transit Police among TriMet riders. According to a TriMet survey, a lack of transit police makes half of all riders feel unsafe. The percent is higher for Blacks (67%), non-English speakers (58%), and people of color (54%). Just 24% of those surveyed said the presence of police makes them feel unsafe.

According to the TriMet survey, 61% of riders think the greatest threat to their safety isn’t the Transit Police,  but other riders who are too aggressive, perceived to be abusing drugs, or having mental health issues.

Then there are the Parlance Police who want to ram their word usage down our throats.

One of the best examples of these people in action is activists (including much of the media) pushing the public to embrace use of the term Latinx as a gender-neutral, pan-ethnic label to describe a diverse Hispanic or Latino population.

The term has come into wide use by entertainment outlets, magazines, corporationslocal governments, and universities to describe the nation’s Hispanic population. Politicians, in particular, have hopped on the Latinx trend. Sen. Elizabeth Warren, D-Mass., for example, marked Hispanic Heritage Month by promising in English and Spanish to champion Latinx families.  

But there’s a problem. Recent work by the respected Pew Research Center found that only 23% of U.S. adults who self-identify as Hispanic or Latino have even heard of the term Latinx, and just 3% say they use it to describe themselves.

“Progressives, Hispanics are not ‘Latinx.’ Stop trying to Anglicize our Spanish language,” Giancarlo Sopo, a public relations strategist, wrote in a USA Today Opinion column. “Hispanic Americans face plenty of challenges as it is. The last thing we need are English-speaking progressives ‘wokesplaining’ how to speak Spanish.”

Progressives argue that Latinx fixes the gendered nature of Spanish,” Sopo wrote.” It is true that nouns are gendered in Spanish, but it is unclear what, if any, problem this poses to Americans. Taken to its logical conclusion, a push for gender-neutral Spanish nouns requires dismantling a language spoken by 572 million people across the world.” 

“The term (Latinx) makes me sad and angry — it represents another anglicism of my native language and a feeble attempt at gender inclusivity,”  Laura Phillips-Alvarez, a student at the University of Maryland, wrote in an Opinion column for the school’s newspaper, The Diamondback. “…America is obsessed with labeling things, and “Latinx” is just another attempt at categorizing a group of people who are so frustratingly difficult to categorize.”

And while we’re on the subject of mobs, let’s not leave out the college student activists who pressure campus administrators and intimidate the rest of the student body.

Recent events at Bryn Mawr College, a small women’s liberal arts college in Pennsylvania that charges $71,550 a year to attend, are a prime example of a student mob takeover that effectively shut down the campus and led to administration capitulation. 

After two Philadelphia police officers fatally shot Walter Wallace Jr., a Black man armed with a knife, on Oct. 25, a group of Bryn Mawr activists “embraced the dubious claim that their extremely progressive campuses were actually contaminated by a dangerous climate of racism that (quite literally) threatened the survival of black students,” the parent of one student’s parent wrote in Quillette, an online magazine. “In many cases, the ire was directed not only at administrators and non-ideologically-compliant faculty, but also at any student suspected of not supporting the strikers’ apocalyptic rhetoric, dramatic postures, and inflated demands. Anyone who sought to attend class, go to the dining hall, or even turn in schoolwork was denounced as a “scab,” and often faced acts of bullying.”

The leaders of Bryn Mawr’s student strike, which began on October 28th, said their goals were “to dismantle systemic oppression in the Bryn Mawr community,” and end the apparently crippling regime of “institutional racism, silencing, and instances of white supremacy.” Their demands, which by mid-November were a dense 24 pages long, included implementation of a “Reparations Fund” for grants to “Black and Indigenous students in the form of grants for summer programs, affinity groups, multicultural spaces, and individual expenses such as books, online courses, therapy, and any and all financial need beyond the scope of racial justice work.”

This would presumably mimic an action students at Georgetown University took in 2019 when they voted to increase their tuition(likely paid by their parents) to benefit descendants of enslaved Africans that the Jesuits who ran the school sold nearly two centuries ago to enhance its financial future.

On Nov. 16, Bryn Mawr President Kim Cassidy surrendered, sending an email to Bryn Mawr students, faculty, and staff saying, ” I am in agreement with the areas for action laid out in the November 12 demands. I have attached a response that details how specific aspects of demands will be fulfilled, including timelines and our commitments to invest the resources needed.” 

At the end of the strike, Bryn Mawr President Kim Cassidy said The Bryn Mawr Strike Collective’s actions ” have been brave and bold.”

On November 21st, Cassidy sent an email to parents saying the strike was over. The strike leaders, now named The Black Student Liberatory Coalition (BSLC), invited students and faculty to “continue to disrupt the fucking order.” 

According to the parent-written Quillette article, some professors have agreed to accept “strike work”—conversations with friends and family about racism, diary entries, time spent watching anti-racism documentaries, and so forth—in lieu of actual course work, even in math and science programs. 

Activists have every right to press their agenda, but decision makers, the general public and the media need to be more careful about assuming the activists speak for the rest of us.

 It’s like relying on Twitter to interpret the public mood. A small share of highly active Twitter users – most of whom are Democrats – produce the vast majority of tweets from U.S. adults, according to another Pew Research Center report. The most active 10% of users were responsible for 92% of tweets sent between November 2019 and September 2020 by U.S. adults with public-facing accounts. Democrats and Democratic-leaning independents accounted for 69% of these highly active Twitter users, while Republicans and GOP leaners accounted for 26%. 

Mobs are like that. They don’t speak for everybody.

These are difficult and dangerous times. Pandering to the mob makes things worse.

Is Portland losing its luster?

“A standoff between the police and protesters over a mixed-race family’s eviction in Portland, Ore., is stirring up old ghosts of segregation and redlining from the 20th century,” the New York Times declared on Friday morning, Dec. 10.  “…barricades constructed with orange traffic cones, plywood, overturned dumpsters and wooden doors blocked vehicle access to the area around the house in all directions. Protesters dressed in black sat at the barricades, some warming themselves at makeshift fires.”

Neighbors walk past the protester-erected barricades, Dec. 10, 2020 on North Mississippi Ave. in Portland.
Kristyna Wentz-Graff / OPB

By late Saturday evening, a gofundme account, Save The Kinney Family Home, had raised $308,257 from 5,900 sympathetic donors, even though the story of what was going on with the house and its residents was constantly shifting. Meanwhile, neighbors seethed as the protest spread over several blocks and fears grew of clashes between activists and Portland Police.

 A sheriff’s office news release says 81 calls for service were made in the area between September 1 and November 30, because of fights, shots fired, burglary, thefts, vandalism, noise violations and threats by armed individuals. Meanwhile, accounts of open hostility to journalists covering the turmoil increased, including physical assault.

All this turmoil came after residents of Portland’s Laurelhurst neighborhood homes had gotten sick and tired of the steady growth in homeless camping in the area in blue tarp-covered tents and RVs, the trash, the garbage, needles everywhere, feces on their property, people urinating openly in their yards.

Homeless campsite at Laurelhurst Park, Portland, OR

On Nov. 19, the City of Portland finally responded to constant complaints when workers and volunteers began sweeping the encampment, removing the campsite construction and cleaning up the surrounding area. 

News of the sweep spread locally, regionally and nationally, adding to the long list of stories appearing across the country about the problems in Portland, Oregon during the year. Protests initially sparked by the May death of George Floyd in Minneapolis turned into violent tear gas-filled clashes with police that turned fatal in late August when an antifa supporter shot and killed a counter-protester. 

Police use chemical irritants and crowd control munitions to disperse protesters during a demonstration in Portland on Sept. 5, 2020. (AP Photo/Noah Berger)

Protests, riots, vandalism, intimidation, shootings, murders, tear gas, arrests, looting, indiscriminate destruction dominated news about Portland for much of 2000. The turmoil may have been primarily in certain hotspots, but the perception has grown nationally that all of Portland, the liberal utopia, is a hot mess, a metropolis of mayhem.

You can’t help but think it has diminished Portland’s reputation and caused potential newcomers from other parts of the country to have second thoughts.  

Until recently, Portland has been among the most popular urban magnets for migrating Americans, particularly the young and educated that modern cities covet.

Migration data from the U.S. Census Bureau’s 5 year American Community Survey showed that Portland was one of the places attracting the most young adults age 25-34 during 2012-2017. Seven metropolitan areas, Houston; Denver; Dallas; Seattle; Austin; Charlotte; and Portland exhibited annual net migration gains for young adults that exceeded 7,000. The Portland Metropolitan Area’s gain was 7,203, of which an astonishing 41% were college graduates.

In 2018, based on data from the Census Bureau’s 2018 one-year American Community Survey, the Portland Metro Area dropped off the list. Instead, the top seven metro areas attracting millennials were Seattle, with a net migration of about 11,300, followed by Denver, Austin, San Antonio, Charlotte, Houston, Nashville.  Phoenix, Paradise NV and Columbus, Ohio. Portland didn’t even make the top 10.

All the negative publicity Portland has been getting lately may have pushed its desirability down even further. 

Portland’s reputation as a popular hub for millennial renters certainly appears to be slipping as other up-and-coming cities nationwide take the top spots. According to one real estate analysis, Portland ranked 13th overall among the top millennial hotspots for renters, on average, for the years 2015-2020. But in 2020 alone, the Rose City dropped to 22nd, behind such up-and-coming places as Washington, D.C., Memphis, TN and San Antonio, TX.

An increasing number of millennial renters are choosing more affordable areas, such as Austin, TX, the number 1 hotspot for millennial renters in 2020. The rapidly developing area saw both its employment offerings and its residents’ incomes swell in recent years, while still maintaining a lower cost of living than other major business centers. 

Homebuying in Portland is getting tougher for millennials, too. In October 2020, the median sale price of a Portland area home rose to $435,000 and there’s a widening gap between median home prices and median household incomes. To secure a 20% down payment for a median-priced home, millennials would need to save $87,000. And that’s just the down payment. 

Portland’s appeal probably isn’t helped by the fact that in 2020 Portland became the city with the highest personal income taxes in the United States. The news was delivered in testimony to the Oregon Legislature. The State Tax Research Institute reported that state and local income taxes in Portland total nearly 14% — a rate that’s higher than San Francisco or New York.

Even tourists are getting less enchanted with Portland. A headline in a story in The Oregonian said recently, “Tourists’ views of Portland turn sharply negative, another blow to hospitality industry.”   

Perception clearly matters. As Elaine Lindberg tweeted in response to The Oregonian story, “Every Portland-related post I put on my Facebook page seems to elicit an “I’ll never go to that dangerous city” reply. They think the whole huge city is a riot zone and that every resident is an anarchist. It’s SO frustrating and sad; I worry that our businesses can’t recover.”

Oregon evictions: the deluge is coming

In September 2020, Portland Mayor Ted Wheeler urged more measures to help rental tenants. “While we’re in the middle of this pandemic, we need to do our part to protect renters from the tidal wave of evictions that we know is coming,” he said. 

A “tidal wave” is right. There’s now documentation that renter households across Oregon are on track to owe as much as $378 million in past-due rent by January 2021. Up to 150,000 of those households could be hit with an eviction filing at that point, a substantial number of them lower-income households.

A nationwide moratorium on evictions the U.S. Centers for Disease Control and Prevention issued is set to expire on January 1, 2021. An Oregon moratorium protects any renter unable to pay rent from being evicted until at least Jan. 8, 2021.

Moody’s Analytics analysis estimates that by the end of 2020, the average back-rent owed by renters across the United States will be $5,400, accumulating to $70 billion by the end of the year. That could translate into up to 8.4 million renter households (20.1 million individual renters) experiencing an eviction filing by January 2021. 

That’s the warnings just issued by The National Council of State Housing Agencies in a report produced by the advisory firm Stout, Risius Ross LLC.

Many renters are struggling to cover their housing costs as the coronavirus outbreak, and its economic fallout, have now stretched about seven months, and as the pandemic takes a heavier financial toll on people who are at the lower end of the earnings ladder.

“Given what appears to be a slow economic recovery, it is reasonable to expect ongoing elevated unemployment, high rent burden among low-income renter households, continued accumulation of unpaid rent, and continued risk of eviction beyond January 2021,” said the report. 

The National Council of State Housing Agencies says state housing finance agencies in 33 states , including Oregon, have established emergency rental assistance programs since the virus struck. But the group says the programs will fall short of demand.

Get ready for chaos.

Confronting the homeless: after Denver, whither Portland?

It hasn’t gotten much media coverage in Oregon, but on May 7, 2019, Denver voters defeated a ballot initiative that would have allowed homeless people to camp in outdoor public spaces like parks, sidewalks and vehicles.

Fed up voters didn’t just soundly reject the initiative; they pummeled it 83% to 17%.

Portland Mayor Wheeler says he’s going to run again. If he doesn’t resolve Portland’s homelessness crisis, he’s likely to face the same level of public rancor.

portlandcampers2

Portland, OR campers.

In 2011, only 1% of those surveyed an annual poll of Portland-area voters by DHM Research that was commissioned by the Portland Business Alliance said homelessness was the biggest issue facing Portland. By 2017, the share of those polled identifying homelessness as Portland’s biggest problem had risen to 24%.

In a Jan. 2019 telephone survey of 510 likely voters in the Portland Metro Region, including an oversample of City of Portland voters, homelessness remained the top-of-mind issue, jumping to 33% overall and 47% among voters in the City of Portland alone. Nearly one in three who said the Portland City Council was ineffective pointed directly to its failure to address homelessness as the reason.

At the same time, half the people polled said they felt the Portland area was headed in the wrong direction. A majority of voters said the region’s quality of life was declining— continuing a trend from a December 2017 study. Only 7% said the quality of life in the Portland Metro Region was getting better.

“just last weekend, a homeless couple set up a tent next to my house in broad daylight…, “ wrote a commenter on OregonLive.” I find more and more used condoms and needles by my house (which I have to dispose of), while my neighborhood experiences daily burglaries and car thefts, all of which the city does nothing about. These problems have exploded just in the past few years. I pay thousands of dollars in property and other taxes per year and get nothing in return. When is enough, enough?”

“Wheeler keeps putting more and more money in to coddling them and tells police to not help residents when harassed or attacked by transients,” wrote another commenter. “Transients have more rights in this city than tax paying voting residents and thus more and more keep coming. We need a tough policy and kick them out. Portland is slowly becoming the shelter for America’s homeless by choice, mentally ill and young lazy transients.”

Even though Portland still has a reputation as an ultra-left city, it’s clear Portlanders’ tolerance and patience are slipping.

That’s clearly what happened in Denver. another liberal (some would say more of a live-and-let-live libertarian) city,

Responding to an explosion of complaints by downtown businesses, Denver began enforcing an urban camping ban to keep people from spending the night on city sidewalks, in parks and other public spaces. In 2016, the city began sweeps to enforce the ban, picking up tents, sleeping bags and other detritus.

denverhomelesssweep

Police sweep homeless camps in downtown Denver, CO in 2016

Still, surveys in 2018 showed the homeless population increasing, with more people camping instead of staying in shelters.

“Something needs to happen. It’s gotten to the point where it is hard to live down there,” River North (RiNo) resident Josh Rosenberg, told Denver’s Channel 7 in late 2018. “It’s not just one or two homeless guys sleeping on the street; there’s been times where they will set up camp and have tarps and suitcases and shopping carts and kind of make a little village out of it and they’ll be there until somebody calls the police.”

In late 2017, homeless advocates submitted enough signatures to get Initiative 300, referred to as the “Right to survive initiative, on the ballot. The initiative wouldhave effectively overturned Denver’s urban camping ban.

“Denver faces a choice: to do nothing, and let Denverites experiencing homelessness struggle to survive, to sleep at night, and to make it to their jobs, or to take action, and take the first step toward empathy, dignity and realistic solutions,” the Yes on 300 supporters said.

But opposition quickly became obvious. “The election was a referendum on quality of life,” said one online Denver Post commenter. “If you just moved here you don’t know, but those of us that have lived in Denver for 30 years have drastically seen quality of life decrease…”

An increasing number of Portlanders feel that way as well. If he’s not careful, Ted Wheeler could get pummeled, too.

_____________

You can find more about the survey and results at the Portland Business Alliance:

https://portlandalliance.com/assets/pdfs/2019-PBA-Jobs-Economy-DHMReport-January.pdf

The CEO-worker pay ratio: worse than useless

The annual release of data required by the SEC on the pay ratios of CEOs and the median worker at their company is out.

clownpay

The data show that Nike CEO Mark Parker makes a heck of a lot more than a typical Nike employee. The estimated ratio of Parker’s annual total compensation ($9,467,460) to the median annual total compensation of all Nike employees ($24,955) was 379 to 1 in fiscal year 2018.

Comcast CEO Brian Roberts did even better in 2018. His compensation package ($35.003,000)compared with Comcast’s median employee’s compensation ($82,205) resulted in a CEO pay ratio of 426 to 1.

As expected, the release of the data is spurring all sorts of overheated grievances.

“Look at all the overpaid, greedy CEOs.” “The facts are in. Inequality is destroying America. This proves it.”

There’s no question that CEO compensation has been escalating.

ceotoworkerratioi

The problem is the comparative CEO-worker data generated in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act and implemented by the SEC is seriously flawed, misleading and unreliable and its collection a colossal waste of businesses’ time and money.

Passed in 2010 during the Obama administration, the pay ratio requirement took effect in 2017. Ostensibly, the purpose was to ensure that the devastating 2008 financial crisis wouldn’t be repeated, to increase the transparency of executive compensation and to provide investors with another piece of information to consider when determining whether the compensation of their CEO is appropriate.

“This simple benchmark will help investors monitor both how a company treats its average workers and whether its executive pay is reasonable,” said Sen. Robert Menendez (D-NJ), who introduced the pay ratio provision in the Dodd-Frank Act.

But the numbers really say nothing useful about how a company treats its workers or whether the CEO’s pay is reasonable.

That’s partly because the real motive of the pay ratio advocates was to give the left a tool to propel its inequality agenda. The proponents wanted to promote envy and class warfare, to argue that the once-great America as a land of opportunity is vanishing and that more aggressive government intervention guided by liberal principles is necessary.

As SEC Commissioner Michael S. Piwowar said in a dissenting statement on the pay ratio rule when it was approved, “Today’s rulemaking implements a provision of the highly partisan Dodd-Frank Act that pandered to politically-connected special interest groups and, independent of the Act, could not stand on its own merits. “

“The bottom line is that this is one of the sillier and more pointless disclosures that I have ever seen,” David Yermack, a professor of finance at NYU’s Stern School of Business, told The Atlantic.

Nike, for example, spelled out all sorts of qualifiers in disclosing its pay ratio figures:

nikeparkerpayratiop

“The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.”

The ridiculousness of the whole exercise is illustrated by some of the sharp swings in some companies’ ratios from 2017 to 2018, as the Wall Street Journal recently reported.

Shipbuilder Huntington Ingalls  Industries Inc. and potash producer Mosaic Co.reported, for example, that the typical worker got half as much in 2018 as the year before. At Honeywell International Inc.,the data showed the typical worker’s compensation was 33 percent higher in 2018 than 2017.

The fact is, every company calculates the pay ratio differently, partly because the SEC rule gives companies wide leeway in identifying median workers.

Some year-to-year ratio fluctuations reflect acquisitions or spinoffs that revamp a company’s workforce. Others are attributable to whether the median employee has a traditional pension plan, or new ways of identifying that middle employee.

Companies don’t have to account for independent contractors if they don’t set their pay, for example, so, a company with a highly paid CEO and loads of low-paid independent contractors can massage its numbers to look better.

Companies can also manipulate the numbers by identifying their median worker in a variety of ways.

“To identify the median employee, the rule would allow companies to select a methodology based on their own facts and circumstances,” the SEC rule says. “A company could use its total employee population or a statistical sampling of that population and/or other reasonable methods. A company could apply a cost-of-living adjustment to the compensation measure used to identify the median employee.”

The pay ratio numbers also can fluctuate when there are different types of businesses. For example, at Goldman Sachs, an investment banking, securities and investment management firm where most employees are highly educated and highly paid professionals, the pay ratio figure will obviously be lower than at McDonalds where most employees are less educated and earn modest wages.

Businesses that employ a lot of part-time or seasonal workers, or that employ a lot of foreign workers in countries with comparatively lower wages, will also have high ratios.

Then there are the compliance costs borne by companies collecting and submitting the data. “The SEC total initial cost of compliance for all 3,571 registrants affected by the Section 953(b) requirements is expected to be approximately $1,315 million, “ the SEC  said in the Final Rule in 2015.

To top it all off, the disclosures required by the SEC rule do little to help investors make decisions on trades. Not only is the pay ratio calculation based on wildly different data used by different companies, but CEO-worker pay ratios are not especially reliable indicators of how a company will perform.

It’s not that reporters and editorial writers don’t know the pay ratio numbers are pretty much worthless and politically motivated. It’s just that a story that gives them a chance to rail about inequality is too much to miss.

As Stanford University Professor Joseph Grundfest said when the SEC rule was finalized in 2015, “Ultimately, the ratios that companies will disclose in their SEC filings will not be grist for meaningful debate so much as fodder for shocking headlines. Individually, factoids about executive compensation can be truly, deeply bananas, and some media outlets capitalize on that.”

Portland’s pay ratio surcharge – more lunacy

Occupy Wall Street protesters demonstrate in Portland

Protesters demonstrate in Portland.

Given the unreliability of the pay ratio numbers, Portland’s pay ratio tax is a farce, too, just another tool to raise revenue.

In December 2016, the Portland City Council voted to impose a surtax on CEO compensation that would be added to the city’s business tax on publicly traded companies whose chief executives earn more than 100 times the median pay of their employees.

The surcharge was set at an additional 10 percent in taxes if their CEO’s compensation is greater than 100 times the median pay of all their employees and 25 percent if the pay ratio is greater than 250 times the median.

The city initially figured the surtax would generate about $2.5 to $3.5 million per year.

Only Commissioner Dan Saltzman showed wisdom in voting against the proposal by then-Commissioner Steve Novick.

As noted earlier, Portland’s tax is based on unreliable data and will fail miserably in meeting Novick’s hope that it “would prod corporate America back to equitable pay scales.” The tax is surely irritating to businesses, but it’s not likely to change their compensation practices.

Moreover, even if some shamed companies reduce their CEO’s pay and spread around the cut, it won’t mean much to other employees.

For example, The Kroger, Co which owns Fred Meyer, reported its CEO W. Rodney McMullen’s pay was $11,534,860in fiscal year 2018, which Kroger said was 547 times its median worker’s pay of $21,075.

Even if Kroger reduced its CEO’s pay to $1 million, and distributed the rest equally to Kroger’s 453000 employees, they would each see an annual raise of just $25.46.

In other words, the surcharge is just another way to pad the city’s coffers.

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