For those who believe that City Commissioner Sam Adams never stopped campaigning after taking office, it looks like he's shoring up support among an important group of constituents for 2008—small businesses. Opponents to his plan, though, say that support could come at a cost to the city.
By the end of the month, Adams hopes to introduce a proposal that will essentially slash the amount that small and very small businesses would have to pay in business license fees (BLF)—a 2.2 percent fee on companies' profits. Currently, businesses that make less than $25,000 per year don't have to pay the fee; Adams' plan would raise that figure to $50,000. That may seem like a small change, but it would exempt some 4,770 businesses from having to pay the fee.
Plus, Adams would raise the amount that business owners can claim as wages (as opposed to profits, which would be charged the 2.2 percent fee) from around $60,000 to $125,000. That should come as music to business owners' ears—the additional money they keep can go toward hiring more employees, for instance.
But here's where the plan runs into a roadblock: The cuts would slash between $5.2 million and $7.2 million (which includes a separate $2 million economic development fund that Adams wants to create) per year from the city's general fund. Not surprisingly, this has led to resistance from Adams' colleagues.
Commissioner Erik Sten, who's supportive of the concept of BLF reform, is concerned that services on the margins of the city budget—parks and housing—would be the first to feel the impact.
But Community Development Network's Sam Chase, an advocate for affordable housing, says he's not particularly worried. "Housing is a priority for this council, so I know they're going to protect low-income people," Chase says. "Adams has been a strong advocate, so I don't think he'd put this through if there wasn't a plan to protect housing."
Randy Leonard's office is far more adamantly opposed. "It is irresponsible to reduce revenue without proposing a plan to compensate," staffer Ty Kovatch said.
Adams counters in two ways: First, by pointing out that the city's forecasted budget surplus gives council some room to play with revenue. Second, he's proposing a plan to make large corporations in the city pay more than their current share.
Currently, companies who do most of their business outside the city can be exempted from the BLF—they only have to pay a $100 minimum. According to Adams' research, there are currently 2,658 businesses that made more than $1 million (920 of which made more than $20 million) that are only paying the $100 minimum to operate in Portland. Adams wants to set up a tiered system for these companies based on their number of employees—after all, the more employees a company has, the more city services they're using. So far, though, Adams is proposing that $1,000 be the maximum these companies would have to pay.
That cap keeps the numbers from adding up; even if all 2,658 large companies began paying the top fee of $1,000 per year instead $100, the additional revenue to the city would be less than $2.4 million—equaling less than half of what the city is losing.
"I think this proposal is about three-quarters finalized," Sten said. "But that remaining one quarter is a big one. The tiered system will determine how much this costs. Without that in there, it's a $7.2 million cost to the city. And that's too big a number for the benefit [Adams] is getting."
Sten added that he'd be open to making larger corporations pay even more—above Adams' $1,000 cap.
For his part, Leonard wants to see a more concrete plan to compensate for the loss, like the cell phone tax (or "utility license fee update") he unsuccessfully tried to pass two years ago.
According to a memo circulated late last week, Adams hopes to put together a resolution to bring to city council by November 29, although a staffer says that could be delayed a week. It's unclear if he'll have council support for the resolution without a clear accounting of what the fee reductions mean for the city's bottom line.