Council rejects Hales’ business tax increase

The last time city businesses saw an increase in the business license tax was 1977

The Portland City Council. (L-R) Steve Novick, Amanda Fritz, Mayor Charlie Hales, Dan Saltzman, Nick Fish, Sept. 24, 2015 (KOIN)
The Portland City Council. (L-R) Steve Novick, Amanda Fritz, Mayor Charlie Hales, Dan Saltzman, Nick Fish, Sept. 24, 2015 (KOIN)

PORTLAND, Ore. (PORTLAND TRIBUNE) — The City Council has less than a week to rewrite Mayor Charlie Hales’ proposed budget for the next fiscal year after rejecting his proposed Business License Fee increase on Tuesday.

Hales included the increase in the proposed $501 million general fund budget he released last week. He said it would raise around $9 million for more public safety and homeless services. The Portland Business Alliance almost immediately came out against it, noting that city revenues are already increasing at a record rate.

Hales argued in favor of the increase when the council considered his proposed budget for the first time on May 10, saying the additional money was necessary to meet the needs of Portlanders who are not benefitting from the economic recovery.

“No one wants to raise fees for our great businesses; they’re good corporate citizens that support our community, and they’ve helped make Portland who we are. Yet, we’re a growing city facing big-city challenges,” said Hales.

But support for the increase was lacking. Commissioners Steve Novick and Dan Saltzman came out against it last week. Commissioner Nick Fish opposed it at the work session, saying governments at all levels are already requiring businesses to absorb additional costs. And even Commissioners Amanda Fritz was skeptical.

Despite failing to win support for his fee increase, Hales was not bitter and said raising additional revenue to meet mounting needs is one of the most pressing issues facing all major cities these days.

“We need to keep discussing it,” Hales said.

But that means the council now has to find another way to raise approximately $9 million for next fiscal year — or to cut that much from Hales’ proposed budget. Unlike the U.S. Congress, the council has to balance the city budget every year.

Complicating the deliberations is a potential contract rewrite with the Portland Police Association intended to resolve a number of long running issues. Although council members did not bring it up Tuesday, behind-the-scenes discussions with the police union have been underway for some time.

Issues under discussion include doing away with the rule that gives officers involved in deadly force incidents 48 hours before being interviewed by investigators, raising the salaries of senior officers to discourage them from taking jobs with higher-paying agencies or retiring early, and a number of pending work-related grievances filed by the union. There is no estimate yet on the cost of such a “universal settlement.”

And the deadline for all this is next Wednesday, when the council is scheduled to approve the budget that takes effect on July 1. The May 18 vote allows time for the approved budget to be reviewed by the Multnomah County Tax Supervising & Conservation Commission, as required by state budget laws.

To meet the deadline, the council will hold a public hearing on the proposed budget at 5:30 p.m. on Thursday, May 12. It will then likely hold another work session on Tuesday morning, where the substitute budget will be drafted.

“We’re going to have to have an alternative proposal in a very short period of time,” Fish said Tuesday.

If a majority of the council does not want to raise other taxes or fees to make up the $9 million shortfall, there are a limited number of funding source they could tap. They include a new 1 percent Construction Excise Tax authorized by the 2017 Oregon Legislature, which only requires half the tax on commercial projects to be spent on affordable housing.

If revenue increases are off the table, a number of budget items have already been discussed by some council members for potential cuts. They include $1.5 million to build a bikeway along Naito Parkway, $1.5 million left over in the Innovation Fund, $1 million remaining in the Portland Bureau of Transportation’s Out of the Mud program, the $1 million worth of Special Appropriation grants handed out by the council members, and, ironically, millions of dollars in the Portland Police Bureau that do not support rank-and-file officers.

“There are a couple of scenarios that are already under consideration,” Fish said.

The council is poised to support Hales’ costliest new appropriation, however. That is the $20 million commitment he made for more affordable housing and homeless services last year.

The promise followed the council’s declaration of housing state of emergency last October. It is in addition to the urban renewal dollars dedicated to affordable housing projects. The council increased the share from 30 to 35 percent around the same time.

Multnomah County Chair Deborah Kafoury has pledged to match Hales’ commitment with a $10 million match. The entire $30 million will go to A Home for Everyone, the collaboration between the city, county, Gresham and Home Forward, the former Portland Housing Authority.

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