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Business group says Hales' fee increase makes 'no sense'


Update: Novick, Saltzman oppose increase

Mayor Charlie Hales released his final and potentially most controversial proposed budget on Monday morning.

The $493 million proposed budget includes $8.7 million in new funds to be raised by an increase of the city business license fee to 2.5 percent.

The Portland Business Alliance said the increase makes "no sense."

It's unclear whether Hales has the three votes on the City Council to approve the increase. "We always hope there are three votes for the budget," Hales said when asked.

Commissioners Steve Novick and Dan Saltzman told Oregon Public Broadcasting they did not support the increase. Commissioners Nick Fish and Amanda Fritz did not immediately respond to a request for comment.

Although the fee has not been raised since 1977, the increase — if approved by the council — would come on top of other business cost increases approved by the council in recent years. They include mandatory paid sick leave for employees and a steep increase in parks system development charges scheduled to take effect on July 1.

The 2017 Legislature also voted to raise the minimum wage in Portland to $14.75 in coming years.

Hales justified the proposal by saying that it would only increase the fee 0.3 percent on larger businesses, and that the Owners Compensation Deducation would be raised to $125,000 from $100,000, giving more than 2,000 a tax break.

Hales also said the money would help fund services needed to address "big growing pains" Portland is experiencing as it grows into a major city. They incude $31.8 million for homeless services and affordable housing and $11.1 million to improve public service by hiring more police officers, new outreach workers, and 911 operators.

"We're growing and many Portlanders and businesses are thriving. Yet many others are experiencing the pain that come from that growth — gang violence, homelessness, and the highest increase in housing prices in the country," Hales said.

But PBA President and Chief Executive Officer Sandra McDonough said, "Three and a half years after taking office, Mayor Hales is finally recognizing major issues impacting this community, issues that we have been saying for some time now need to be addressed and could have been with the existing budget. If he had prioritized these issues since he first took office, perhaps the problems facing Portland’s homeless community, its families and its neighborhoods would not be of the magnitude they are today. Now, with this proposal, he is seeking to put new cost burdens on the small business entrepreneurs who have fueled the budget growth he has enjoyed as mayor. That makes no sense.”

Other budget proposals

The mayor's proposed budget also includes $3.5 million to increase access to city programs for refugees and create a tribal liaison position. It also continues the Youth Pass programs that provides some Portland Public Schools high school students with a TriMet bus pass and the program to allow young people to participate in community center programs for free.

Hale's budget was boosted by a recent revenue projection that says the council will have $25.6 million more to spend than last year — $16.4 million in so-called one-time revenue, and $9.2 million in revenue that begins next year and will continue in coming years.

According to the City Budget Office forecast released last week, Portland is experiencing record revenue growth as the economy continues to recover. But city officials warn that is not enough to meet the increasing needs.

Among other things, Hales has promised to commit an additional $20 million to homeless and affordable housing projects, to be matched by $10 million from Multnomah County.

“Though the city is experiencing record revenue growth, the needs of the community have also increased,” says CBO Director Andrew Scott. “Portland has made many long-range decisions that have resulted in a city that is attracting young, highly educated residents seeking a high quality of life. The key will be managing the downside effects of such growth, such as rising housing costs and increased demand for services.”

According to the forecast, both the national and the regional economy are growing rapidly, which added to the city's revenue.

"The issues, like housing affordability, exist largely because Portland has become a victim of its own success. Job growth has been widespread and income growth is finally ramping up after years of stagnation. More importantly, the quality of life and lower cost relative to other West Coast cities continues to attract the highly educated and wealthy. This has ultimately fueled unprecedented revenue growth for the city, resulting in $25.6 million in additional resources in FY 2016-17 above what is necessary to continue existing programs," the forecast says.

Economic growth forecast

The primary drivers behind the forecast include:

• Lodging tax receipts continue to exceed expectations, leading to a $2.2 million increase in the forecast.

• A change in the administration of utility license taxes will also increase ongoing general fund revenue by up to $1 million.

• In addition to the low inflation cited in the February forecast update, the city is expecting very small increases in health benefits costs. Relative to previous expectations, this adjustment will save the city $1.7 million in ongoing costs.

The full forecast document can be found at: tinyurl.com/z6n29jg

Oregon Public Broadcasting is a new partner of the Portland Tribune and contributed to this story.