Illustration by Ryan Alexander-Tanner

THE FUNDING PITCH from the Portland Business Alliance (PBA) hit Mayor Charlie Hales' inbox a little after 2 pm on June 23—just four days after the Portland City Council had finally approved its budget for the fiscal year that started July 1.

At Hales' behest, that budget had crossed a notable line in city hall's on-again/off-again relationship with Portland's chamber of commerce.

It cut the $828,000 in transportation revenue that had been allocated to one of the PBA's most cherished programs—its Downtown Marketing Initiative (DMI). The PBA had long seen that payment as the city's end of a deal to raise parking rates downtown. Axing it altogether, including a popular campaign that saw the city's statues dressed in ugly Christmas sweaters, was seen as a betrayal.

And in six pointed paragraphs, the PBA's president, Sandra McDonough, was formally pleading with Hales, one more time, for what amounted to a partial do-over. And, maybe, a chance to make nice.

"A small gesture," she wrote, referencing retailers' "high level of concern and distress" over a broken "commitment," "would be greatly appreciated by the retail community."

Finally, this month, McDonough seems due to get her wish. On Wednesday, August 6, the council is expected to restore some of the cash it historically handed the PBA: $170,000 for a "bare-bones" holiday business promotion.

It's a remarkable turnabout so soon after Hales' rejection—sudden enough that the decision won't be unanimous. Commissioner Amanda Fritz balked during a vote last Wednesday that would have immediately paid the PBA from the city's contingency fund.

But building that kind of support was never the plan.

Emails obtained by the Mercury reveal another motive for Hales' reversal, beyond an earnest desire to soften any looming holiday blow for downtown businesses. Late on June 23, Hales wrote his chief of staff, Gail Shibley, and his director of strategic initiatives, Josh Alpert, to issue a simple order:

Do it. Tap money that's traditionally set aside for unexpected expenditures. Make the peace.

"I think it is a very affordable olive branch," Hales wrote, later calling it a "prudent bet on downtown health." "And if we can get three votes for a contingency draw, we can fund it."

If that seemed rash—given Hales' "hold the line" budget rhetoric all spring—that was because he had a stealth reserve of confidence.

Thanks to a still-humming local economy, the city budget office has told the Mercury that Portland's staring at a one-time budget surplus worth at least $10 million. That money—technically an accounting of leftover cash after the previous fiscal year—is about the size of a similar surplus divvied up last fall.

(And it's still just 1 percent of the city's combined revenues and spending.)

"Economic conditions are still generally positive," Budget Director Andrew Scott tells the Mercury, "and given that we forecast conservatively, we would expect this year's ending-fund balance to be equivalent or greater than last year's."

That preliminary figure hasn't been shared publicly. But it hasn't been much of a secret in city hall, and it's made it easier for most of Hales' colleagues to swallow any objections.

Except, that is, for Fritz.

"If I were going to vote to spend $170,000 today," Fritz said during the July 30 hearing, "I'd vote for a crossing improvement in East Portland, which is another project we decided we couldn't fund in the budget."

The DMI first found itself in danger this winter, alongside discussions over a controversial street maintenance fee. The DMI had been funded through transportation money that otherwise could have been spent on road fixes and safety projects—an arrangement City Commissioner Steve Novick questioned when submitting his proposed budget for the Portland Bureau of Transportation.

Acknowledging the deal with the PBA over parking rates, Novick suggested tapping the city's general fund—forcing the DMI to compete with other needs like parks and housing and public safety. Hales and the city council decided, in turn, that all of those things were more valuable than marketing.

The DMI got nothing, in fact—until McDonough reached out with her letter.

But then, starting in July, emails show, Hales' staff worked closely with the PBA to deliver on Hales' decision. Alpert, Hales' strategic director, found a way to immediately tap contingency funding instead of waiting until the fall. He promised to round up votes and also reassured the PBA that putting its name on the ordinance wouldn't be politically toxic.

Alpert was first to advise Hales that the move might rebuild a little bit of "good will," the emails show.

Cutting the DMI cash—and going back on what had been understood as a promise over parking rates—would have been a cardinal sin for the PBA no matter what else was going on in city hall, sources say.

That strife was magnified in light of this year's push to pass a street fee without voter approval. The PBA's then-top lobbyist had warned, in publicly posted documents first noticed by Willamette Week this winter, that cutting the DMI might muddy the discussion.

But the street fee's hardly been the only source of friction between Hales and the PBA.

The PBA was stung by Hales' decision last year to sit out a legislative fight meant to revive Portland's unconstitutional sit-lie sidewalk laws. It didn't like that Hales (or anyone on the city council) passed a sick-leave ordinance. Hales further disappointed the PBA when he didn't fight harder for the Port of Portland's dropped plan to develop West Hayden Island—part of an ongoing battle over where to site new industry in Portland.

The city's also been in early discussions, emails confirm, about raising parking meter rates downtown another 20 cents.

"It's not a secret," says Hales' spokesman, Dana Haynes, "that the Hales administration and the PBA have not seen eye-to-eye on a number of issues they are concerned about."

Hales and McDonough did manage to see eye-to-eye, at least, on the timing of this push. McDonough's email had requested "an answer by August 1." The original July 30 vote—squelched by Fritz—would have put the city two days under the wire.

Who says city hall isn't responsive?