A BEWILDERING BIT of tension between the region's two top officials—Mayor Charlie Hales and Multnomah County Chairman Jeff Cogen—appears to have eased in the wake of a hard-fought budget deal meant to save a handful of endangered social services programs.

The deal marked an about-face for what had become a frayed, testy relationship immediately after Hales released his draft of a city budget on April 30.

Hales—trying to close a $21.5 million deficit, nearly half of which stemmed from last fall's vote for a county library district—contemplated cutting $1.2 million normally spent on county programs. Cogen, despite Hales' entreaties to bargain for months, reacted with outrage—especially over Hales' plan to pull funding from a county mental health center.

Some of that posturing was expected. But the tone and tenor had threatened to open a wider rift. Behind the scenes, concerned city and county commissioners worked to soften up Hales and Cogen in hopes of avoiding an awkward standoff. Their efforts worked, and the deal that emerged on Thursday, May 16—an hour before a public budget forum—was a surprise even to some staffers and commissioners.

"I went out for Thai food and when I came back, they had an agreement," Commissioner Steve Novick told the Mercury. "I should go out for Thai food more often."

In a year that saw the two governments trade roles, with the city making deep cuts and the county holding its own with money to burn (thanks to a windfall after the library vote), Hales and Cogen finally deviated from stands built on principle and got their hands dirty with details.

"Both of us appreciate the collaborative spirit of our discussions to help the city deal with the budget shortfall it faces this year," they said in a joint statement. "We are optimistic this spirit will be a model for our future discussions."

According to data provided by Hales' office, both governments will split the cost of three county-run SUN schools Hales had wanted to stop funding. The county is picking up a needle-exchange program and recreation services for seniors, while also helping fund the region's one-stop domestic violence shelter.

The city, in turn, will pay its $634,000 share of the Crisis Assessment and Treatment Center (CATC)—the main lightning rod in the burgeoning budget debate. The county, with its better finances, is coming up with slightly more than the city, although the city has committed to spending more than Hales initially proposed.

City and county relations have been hot and cold in recent years, but mostly cold. Cogen and former Mayor Sam Adams were known to have a contentious relationship, even as individual commissioners and bureaucrats got along well. Hales made a signature push to cozy up to Cogen—a potential political rival and former city hall insider (he was Commissioner Dan Saltzman's chief of staff) known to have been intrigued by the mayor's race last year.

But those old bad feelings run deep.

The county has long kvetched about Portland's penchant for passing urban renewal districts, which wall off property tax dollars that otherwise would fill the county coffers in the short term, under the promise that improved neighborhoods will one day pay dividends.

But to help the county pay its bills, as it's struggled with the loss of urban renewal money and also endured cuts in funding from the state and federal governments, the city over the years slowly began paying for more and more programs that otherwise would have been the county's responsibility.

The city auditor's office, because of the budget spat, called out the muddy nature of the mutual relationship and pressed the city to do more to refine it.

Adams tried and failed to clarify that relationship, notching smaller deals, instead, to help fund part of the county's Sellwood Bridge rebuild while also giving the county two new buildings downtown on city land.

The budget deal is a good omen for deeper talks still to come. This deal holds off stickier discussions on how to fund after-school programs. And money for the CATC is promised only for another year.

The CATC, not on Hales' radar when he took office, was an unlikely sore spot. It wound up in budget discussions after the Mercury broke the news that although the CATC was built as a police resource, the police bureau had never taken anyone there directly.

The bureau argued the CATC's own rules kept cops away, and Hales followed the bureau's lead by looking to cut it. Cogen knew that was likely but pushed back with a fury hours after Hales made it public.

Hales loudly argued that it was a health program, not a public safety program.

But as the Mercury reported this month ["Throwing Away the Truth," News, May 8], the disconnect over the CATC has been the product of extreme miscommunication. Hales appears willing to let that sift out for another year. That conversation will shift further, sources say, after federal health care reform expands Medicaid rolls and potentially reduces operating costs at the facility.

Cogen's hardball approach over the CATC puzzled some in city hall. Solving that impasse may have given Hales the leverage he needed for the rest of the deal.

Novick, who helped raise the CATC issue along with Commissioner Nick Fish, said the overall agreement "looks like a good resolution." He pointed to the CATC funding in particular.

"I hope the CATC and the police will work things out," he says, "and the police will be able to start taking people there."