TRIBUNE FILE PHOTO  - A City Council majority on Monday indicated they will pass reductions to Mayor Charlie Hales budget, after he failed to convince them to raise taxes on business. A majority of the City Council is poised to hand Mayor Charlie Hales an embarrassing defeat on his proposed budget on Wednesday.

During a Monday morning work session, most councilors signaled that they will approve an alternative proposal at the May 18 budget hearing that does not include his proposed $8.7 million business license fee increase.

Hales continued arguing for the 14 percent tax increase at the session, even after it was clearly doomed. Among other things, he repeatedly said the existing shortage of police officers is already a crisis and scheduled to grow worse.

But by then, commissioners Nick Fish, Steve Novick and Dan Saltzman had come out publicly against the increase and participated in drafting the alternative budget. They were unmoved by Hales' arguments and directed the City Budget Office to submit the alternative proposal at the Wednesday hearing.

During the session, Novick reassured Portlanders that the alternative budget funds essential services without the tax increase. He said that despite the controversy reported in the press, the alternative budget includes an additional $29 million for homeless and affordable housing services, keeping the promises the council made when it declared a housing emergency last October.

Hales included the tax increase in the $501 million general fund budget for the next fiscal year he proposed two weeks ago. He said the money was dedicated to public safety and homeless programs.

But a majority of the council opposed the proposed increase, in large part because city revenues are already rising to record levels, generating an additional $25.6 million for the fiscal year that begins July 1. They were also annoyed that Hales had not talked to them about the increase before including it in his budget, essentially presenting them with a take-it-or-fix-it offer.

Monday's session followed a contentious May 12 public hearing on Hales' proposed budget. By then, top council staff members were already negotiating the alternative budget. But Hales kept pushing for the increase, anyway, warning — in an email to homeless advocates and others — that trash collection and other services to homeless camps would be cut without more money.

When advocates testified that homeless people were stressed out over the potential cuts, Fish accused Hales of needlessly scaring them because those cuts had already been ruled out. Hales angrily responded that everything in the budget could be cut without more money, prompting Fish to say, "The fact that this may have needlessly caused alarm to vulnerable people is disgraceful."

By the end of the May 12 hearing, the three commissioners were still against the tax increase.

Echoes of the past

The blow up was reminiscent of when former Mayor Tom Potter stormed out of a council hearing on naming 39th Avenue to honor migrant farmworker leader Cesar Chávez after finding himself in the minority. "I am irrelevant," Potter said as he left the October 2007 meeting.

The previous incident mirrors Hales' situation. Both men had declared they would not seek re-election but still had months to serve in their first terms. But they then found themselves on the losing ends of high-visibility votes, publicly confirming their status as weakened lame ducks.

Many of the largest budget reductions were in new or expanded programs in Hales' proposed spending plan. They included: $3 million for additional police compensation; $2.3 million for a new program to divert homeless petty offenders into housing; $1.7 million to begin implementing police body cameras; and $1.5 million to add a separated bike path on Naito Parkway. Altogether, the cuts to Hales' proposed budget totaled $8.9 million, almost exactly the amount to be raised by the business tax increase.

Some of the cuts could be partly or fully restored after the budget is adopted. For example, Fish said Multnomah County Chair Deborah Kafoury is working on a less-expensive version of the homeless diversion program that could be approved when the council considers a proposed merger of city and county homeless and housing programs later this year.

And the council may also need to find new money for police later in the year. Confidential negotiations between the city and the Portland Police Association are underway to resolve a number of issues. The "universal settlement" being discussed could increase salaries to help retain senior officers, resolve a number of workplace grievances, and require officers to immediately answer questions from investigators when they are involved in deadly use of force incidents.