Even as the tri-county agency Metro makes plans for how to spend a new $250 million-a-year income tax for supportive housing and homeless services, it is bolstering one crucial detail: making sure the ordinance enacting the tax is legal.
On Dec. 30, Metro went to Multnomah Circuit Court asking a judge to determine whether the income tax ordinance authorized by voters last May, known as HereTogether, complies with state law.
Called a "validation" action, Metro filed it to preempt a potential lawsuit based on concerns raised by the Portland Business Alliance and others.
Critics have claimed the ordinance approved to enact the measure may violate state law in ways that could hurt some businesses, particularly in Clackamas and Washington counties.
Validation "is an effective way to clarify these legal questions," said Nick Christensen, acting chief of staff for Metro.
Though the case is a narrow one, the legal issue it raises could draw wider interest.
The heart of the issue concerns when local governments have to follow state law, a question relevant to housing, land use and public employee retirement benefits, marijuana dispensaries and other entities and issues.
As far as the Metro income tax, the critics have argued that it penalizes businesses that are inside the district because they are disproportionately taxed on all their income, rather than just the portion of their income derived from sales within the district or the state.
"In effect what it does is create a tax advantage to businesses" that are outside Metro's boundaries but which compete with businesses that are inside it, said Jeff Newgard, a tax lobbyist who sits on a Metro advisory committee that has studied the issue. He stressed that he doesn't question the need or purpose of the tax, only its structure.
He did credit Metro for setting up a tax credit to address a separate issue regarding double taxation of some businesses.
The Portland Business Alliance, meanwhile, has argued that the income tax is at odds with how the state's business tax system only taxes businesses for the portion of business that occurs within the state.
A spokeswoman for the group, Amy Lewin, said the alliance intends to file a brief in the Metro case, but that it's not trying to defeat homeless services — just to address what it considers a legal flaw in the structure of the Metro tax ordinance.
Metro, for its part, argues that its ordinance need not be consistent with state law under the broad authority it holds under its charter — essentially the agency's equivalent to the U.S. Constitution.
"We are quite confident of our legal position," Metro Councilor Bob Stacey said, adding that the questions are valid.
The filing "is not meant as a rejection of concerns," he added. "It's just to make sure we are proceeding lawfully."
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