Oregon's boom time still needs work
The old fault lines of the Oregon economy were laid bare again at the Kruse Way Economic Forum in Lake Oswego Wednesday. Three experts tried to assess the big issues of the state's economy.
"Does anyone remember I-5, 217, Kruse Way 15 or 20 years ago?" asked State Senator Richard Devlin (D) District 19. Devlin recalled that it was "A mess, an accident waiting to happen," with cars forced to slow down from 60 mph to 10 mph in a few hundred feet.
Things have changed and today Kruse Way boasts a smooth flow luxury sedans feeding the freeways.
This was an appropriate place to talk about economic good times and income distribution. As Christian Kaylor, workforce economist for the Oregon Employment Department, pointed out, the two wealthiest cities in Oregon are Lake Oswego and West Linn.
Not the homeless
Host Rob LeChevallier of Buckley Law P.C. talked about the state's economic growth. He mentioned the calls from companies all over the state wanting to invest in Portland, the run-up in home prices, the skills gap, PERS underfunded by $25 billion, the challenge of baby boomers retiring and the increase in traffic on the roads.
"I was at a meeting with Mayor Ted Wheeler last week and he said we've added 80,000 jobs in Portland in the last few years, and about three busloads of people — not the homeless, but people with jobs — are showing up in the Portland area every day," said LeChevallier. "And we can see the effects of that on our roads."
"Oregon is considered a high-income tax state, with a maximum rate of 10.9 percent. Costs to businesses are going up, including minimum wage increases, sick leave mandates, pay equity analysis and possibly a business gross receipts tax in 2019. While Oregon is an attractive place to live, these costs increases affect businesses that have low margins and cannot raise process due to competition, especially form online companies such as Amazon. What are we seeing for tax reform in Oregon, and what can make Oregon business more profitable in the global economy?"
State Senator Richard Devlin said the political climate in Oregon has changed a lot lately, as shown by the $13.75 and $15 per hour ballot proposals for a minimum wage hike. "The reality is the minimum wage was going to increase either by legislative action or by (ballot) initiative," he said.
Measure 97 focused all the discussion of taxes last year on one area, and that was corporate taxes. "Oregon is one of the highest income tax states in the nation, because we do not have a general consumption tax, a sales tax."
He said gross receipts only do no economic damage when they are low and broad. "Businesses would pay more if we had a sales tax, because businesses pay sales tax."
"There are two characteristics of tax reform. One, people like to use OPM — other people's money. And they like the words tax reform until you put anything on paper. I think Oregon is long overdue for a broad discussion of tax of tax policies, even if ultimately we have the same taxes."
Boom and bust plus population influx
Duncan Wyse, President of the Oregon Business Council, a CEO-heavy business lobbying group, gave a brief history of the Oregon economy since the 1960s, with a boom and recession every decade. He has noticed that when things are going well nobody cares about economic growth. "The long-term picture is, we are on the west coast, it's a nice place to live, we have been growing at 50,000 people a year forever, and we are probably going to continue to grow. The question for business is are we going to grow in a way that raises incomes, reduces poverty, allows us to make infrastructure that makes this a great place to live, or are we going to do it in an unplanned way?"
Wyse made the case for careful spending.
"I would argue we want to grow, and have great public services, but we have to work together, we can't have tribes fighting each other. How we manage the budget over the next 10 years is crucial, because right now we have a structural deficit, thanks to PERS increases, some of the Medicaid increases coming." He said the tax structure in Oregon is flawed and volatile because it depends on income tax.
He added that the revolution in robotics and artificial intelligence is imminent, and that the best time to do economic development is good times, when people are investing, not during bad times.
Christian Kaylor, workforce economist, said population growth is mostly around Portland — 80 percent in the three Portland counties. Multnomah County, with 23 percent of the state's population, has 51 percent of the growth in workforce-age people.
"That's 90,000 new people in Multnomah County in the last 10 years. And the majority of counties around the state are shrinking," said Kaylor. Douglas County has fewer jobs than it did 10 years ago.
Whose Bay? Our Bay
The Portland area is very different from the rest of the state, it is far more prosperous. And that makes coming up with one economic development strategy for the whole state very difficult. One that includes Roseburg and Portland, the Coast and Bend.
"In Klamath Falls and Coos Bay, they have workforce shortage issues as well, but part of that is because the young people have left the community, and the population growth is disproportionately senior citizens who aren't workforce, they've retired. We need to make more places attractive to younger people with degrees."
He added, "What you need is an economic plan for each county when they are experiencing such radically different things."
Kaylor pointed to the skills gap, and companies' reluctance to pay to train workers, in this time of low unemployment. "If you want to hire your best strategy is to steal someone from another company." He said competition was putting pressure on wages. However… "The absolute last thing they want to do is offer more money. They offer vacation time and benefits before wages, but we're finally seeing some wage pressure in the last few months."
Transportation gridlock was raised as a serious issue, since it impacts freight and the quality of life of commuters.
Senator Devlin said that transportation packages rarely pass in the legislature, but that he was pleased with the one that did earlier this year. He also said the gas tax doesn't solve all problems. "Most municipalities have gone to tolls because the gas tax is not adequate to raise money needed."
Going back to Kruse Way he said that without the interchange, "Everything would be a parking lot. But if we waited 15 years traffic would be worse."
It's not true that Portland has the worst traffic in the U.S. "My relatives lived in Southern California, they were reading books on the freeway, it took an hour and 45 minutes to get thirty miles."
said Wyse, President of the Oregon Business Council. "I think we're going to have a revolution in transportation in the next 20 years. The gas tax can go away. We were the first state to get on the gas tax, we should be the first state to get off it. It's not a good way to fund, for obvious reasons: fuel mileage is getting better and so are electric vehicles. What we know from European countries is when you pay per mile to use the roads, you use the roads way more efficiently."
Wyse also predicted that self-driving vehicles are very close to being common. "They are more efficient and more nimble. I hope this region is smart about this and thinks ahead. As with school, the way to be successful is not simply to do what we did in the past."
Christian Kaylor, workforce economist, mentioned that Singapore charges people more to drive at certain times a day. "We have to do it. I'd like to see people putting jobs near where the people are, and putting housing near the jobs. That's easy to say. What makes it difficult is, in Clackamas County, there are zoning issues." When asked if they will live near a zone for commercial real estate and jobs, their inner NIMBY comes out. "The majority of the Clackamas workforce work outside the county," he added.
Kaylor recalled living in an $600 apartment in Northwest Portland 15 years ago and driving to Beaverton without having to tap the brakes, while the inbound lane was packed. "Now it's changed and people want to live near their jobs."
Talking of education, Wyse said, "We starve education in recessions. 2000 was a disaster, a lot of folks were not educated, we had a decline in education attainment, and in the economy we're talking about today, people aren't prepared to work in it. It's not just the average funding level it's the cycle of funding. We are way too unstable as a revenue system."
Devlin said that a starting middle school teacher makes $42,000 gross, but has $500 a month to repay in student loans. After $1,000 rent that leaves them $1,200 a month to live on. "It's hard to attract workers like that." He sees people moving to Forest Grove, Troutdale and Canby to find affordable homes.
Kaylor countered that although people often say "'No one can afford $4,000 a month rent,' there is a rapidly growing professional class who can, and that is crowding out people such as teachers, whose median income is $55,000."
He said the towns around Portland have too many restrictions on where to build housing, especially affordable housing. "These communities need to step up and relieve some of the pressure on Portland. I've seen it in Boise and Albuquerque and Austin. Everything else is rearranging the chairs on the Titanic."
Sales taxes and death
Wyse was asked if there could be a sales tax in Oregon to bring in more revenue.
"Nine times we have rejected a sales tax, it's in our DNA. There are a lot of different reasons. My point of view is if you adopted sales tax you could reduce the income tax and property tax, and rebalance the tax structure. But I think there's one of the reasons people are hesitant is this distrust, would the other taxes go down if adopted a sales tax?"
Wyse added, "That said, I don't think the voters are there."
Afterwards, Layla McLean, an attorney for Buckley Law, said she attended as an estate and business planning attorney. "My work is planning for tax issues, during life, after life, so when there is a senator and an economic forecast of any type that's of great interest to us, because it impacts my clients."
McLean was surprised by the growth numbers, and hadn't considered Clackamas, Washington and Multnomah counties separate from the rest of Oregon.
"It gave me a greater understanding of the issues before the legislature, as to how do you address a problem that is so different 10 miles down the road, where it's a huge problem in the metro."
Reporter, The Business Tribune
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