IT WAS A WHOPPING 90 minutes into Portland City Council’s first hearing on Mayor Charlie Hales’ proposed budget Tuesday before the ailing elephant in the room finally died.
Taking pains to applaud Hales for his “extraordinarily collaborative” approach, Commissioner Nick Fish nonetheless announced he wouldn’t back the most controversial element of Hales’ new budget—one knocked by some for being notably noncollaborative.
After a week of speculation while he was in Europe, Fish confirmed he won’t vote for Hales’ proposed tax hike on businesses.
“I can’t support that position for a number of reasons,” he told the mayor. “One of the things I’m hearing from the community is it’s not so much the marginal increase [of the tax hike]…but it’s sort of the straw that broke the camel’s back.”
With those remarks, Fish formalized what has looked likely since May 2, when Hales announced that, despite record revenues, he’d seek to increase the city’s business license tax by more than 13 percent. That hike would raise an additional $8.7 million a year, money Hales argues is absolutely necessary to fund a growing city’s growing challenges.
But it rankled Commissioners Dan Saltzman and Steve Novick in a year when Portland’s already got a $25 million surplus. Fish’s third vote in opposition is a nail in the tax hike’s coffin, assuming nothing drastic changes.
And now things get really interesting.
As the City Budget Office works up a new proposed spending plan without that $8.7 million tax bump, Novick, Saltzman, and Fish have forced a conversation the mayor’s office is convinced they won’t enjoy. Hales says there’s simply not enough fat in his budget to trim nearly $9 million away, and he’d like them to give it a shot.
Novick’s already proposed his own list of cuts, but if a majority of commissioners find they agree with Hales, it raises a question: If not from business taxes, where might new revenue come from?
As it happens, there’s a potentially obvious answer.
Before unveiling his budget, sources say Hales signaled interest to council members in enacting a tax on construction projects in the city. Such a “construction excise tax” is a new tool, made possible for the first time during the 2016 legislative session, and its use is very restricted. All tax money reaped from home construction projects needs to go toward affordable housing, the law says. But a full half of the tax revenue from commercial or industrial construction can go toward any purpose.
It’s here, sources suggest, Hales might indicate an opportunity for additional funds.
According to a memo drawn up by city budget staff [PDF], obtained via public records request, a one percent tax on the cost of commercial construction could generate more than $11 million a year—half of it suitable for any purpose. In other words it’d be more than $3.5 million a year in unrestricted cash.
Hales is clearly convinced that money’s necessary, but he may get push back from Saltzman, who’s also been eyeing a construction tax, and thinks it should go solely toward housing.
Saltzman's office hasn't returned a call for comment about whether he'd support an excise tax that paid for things beyond housing. We're also awaiting reaction from the mayor on Fish's position.