Portland’s Office of Management and Finance has marked, in bright red ink, the terrible chunk of money that Mayor-elect Charlie Hales and the next city council must whack from the city’s budget next spring: $25 million.
That number, long expected and roughly floated in other forums, was floated in the city’s latest five-year financial forecast, presented to the current city council this afternoon. It means another year of pain. Based on current spending, according that forecast, bureaus will need to reduce spending by 6.5 percent—a number that could grow for some offices if Hales, like Adams, also makes it his policy to spare the city’s public safety bureaus from deep cuts.
Also key: OMF is allowing for absolutely no more one-time funding for programs over the next five years. That writing has also been on the wall for some time. Historically, the council has used that one-time cash to string along programs that, in all honesty, are permanent—a cheat called the city’s “shadow budget.”
Why so grim? For now, it’s not the economy’s fault, although if growth sputters back into recession, things could always get worse.
This deficit, instead, is largely the product of “non-economic” factors: Tax compression thanks to the new library district ($10 million); the council’s decision last year to make permanent some one-time programs, like housing and business-development ($8.6 million); and the federal police reform settlement imposed by the US Department of Justice ($5.4 million). City bureaus, after years of cuts, also are using up more of their allotted budgets, leaving millions less to roll over.
“We probably shouldn’t think the economy can save us,” city economist Josh Harwood testified, noting the city is “expecting growth,” and that the cuts aren’t “a function of a depressed economy.”
Things could brighten a bit once the city inks legal agreements with Multnomah County over Sellwood Bridge spending mean to soften, at least for a few years, the effect of the library district. Mayor Sam Adams also got the council last week to approve a telecommunications tax plan that could raise up to $5 million a year for police reforms—but that money is already included in this forecast, at the low end of the mayor’s estimates: $3 million.
Planners, in the forecast, also took note of another potential threat to the city’s finances: generous labor contracts. All but one city union contract is up for renewal next year, and labor leaders won’t like what OMF had to say.
In the forecast, OMF invoked the $7 million unions received during the last round of negotiations in 2010—most of which went to the Portland Police Association to buy off some modest policy concessions—and urged the council to keep costs no higher than what’s required for cost-of-living adjustments. Or, maybe, seek out some concessions.
Most major city unions backed Jefferson Smith until his campaign imploded but have lately been cutting checks to Hales, as WW has reported this week. Either way, it’s going to be a rough year around the bargaining table.
“These are non-economic factors and somewhat unforeseeable,” Commissioner Nick Fish said about the spending cuts. “But that’s the hand we’re dealt.”
And yet, the City goes ahead and abuses the urban renewal system which diverts tax revenue from basic city and county services.
http://www.oregonlive.com/opinion/index.ss…
Isn’t something like 50% of tax revenue in Portland / Multnomah County basically swalled up by Urban Renewal debt repayment and pension liabilities?
Speaking of pensions and debt, which state far and away leads the nation in the amount of outstanding pension obligations bonds as a share of revenue? http://www.nytimes.com/2012/09/04/business…
Essentially, we sold pension bonds in an arbitrage gamble that the interest payments on the bond would be less than the investment returns. How is that gamble paying off? There’s a story here that demands local follow up.
I am a little surprised that you made no mention of urban renewal area funding. Maybe you are just quoting what you heard but the Merc hosted a pretty interesting discussion on the issue in partnership with the Bus Project a few years ago.
When I arrived in this town in 2001, about 16 percent of my general government property taxes were skipping the City’s general fund and going directly to URAs.
Looking at my 2012 property tax statement, 27 percent of property taxes going to the city are now paying for Urban Renewal debt.
That is a dramatic share of revenue being shifted away from the general fund in favor of subsidizing private sector development in the URAs as well as capital intensive public projects, such as the Street Car.
The auditor has been clear in her concerns about the effect of URA expenses on the city’s financial position and provides a lot of food for thought on this issue in this report:
http://www.portlandonline.com/auditor/inde…
She has also made it clear that the new URA adopted this year – the “Education Zone” – is one of her biggest concerns when it comes to the City’s immediate financial decisions and stability.
It would be great for the Merc to dig into this area of city funding. As choices are made for spending and debt in the URAs there needs to be a better sense of how those choices are affecting support for other basic city services – as well as school and county services.
Well I think Denis and I, between us, are running about a $25M surplus, so we’ll just go halvsies – yo, Denis, we got this, yes?
The Merc does a generally good job of city reporting. But keep in mind the city budget is over 3.5 billion dollars, so 25 million is roughly .7%.
Sure CC! But only if we can both simultaneously descend upon our “we got this” press conference like Howard Stern at the Oscars.
Sure, $25 million is nothing. Nothing and nothing adds up to nothing. Portland’s and Multnomah County’s finances are perfectly fine. No need to question urban renewal abuses or unfunded pension liabilities.
We have a leaf tax, and an arts head tax, how about a grass tax? Maybe a being tax? We’ve got inefficient streetcars to run!