Street Smart Economics | Portland has a representative City Council that is much more varied by ethnicity, gender and class than ever before. There are both short and long term solutions to explore.
Credit: Illustration by Etta O'Donnell-King/Street Roots
Year after year, the city of Portland announces a budget shortfall, prompting program cuts and the sale of city property. For 30 years, Portland’s “leaders” failed to fill the hole created by the 1990s sabotage of the property tax, a critical funding source for local governments and schools. This year is worse, with the end of federal COVID relief funds and big payouts to victims of police violence.
Mary C. King is a professor emerita of economics, Portland State University.
Statewide, property taxes are now assessed on just half of real market value, on average, down from 100% in 1996. It’s long past time to replace lost property tax revenues to fund our urgent needs, from housing and mental health programs to paving the streets.
We have ample resources locally and untapped tax strategies to tax the wealthy, who’ve pulled far ahead, helped by significant federal tax cuts at the top over the last 40 years. There’s no good evidence that the affluent are leaving town or would choose to upend their lives when they can afford to live wherever they want.
Portland is wealthy
Despite the exaggerated “doom loop” rhetoric of the Portland Business Alliance, or PBA’s, Metro Chamber, Portland is well off. Household incomes doubled in Multnomah County from 2012 to 2022, still rising by half when accounting for inflation. The number of high-income households ($200,000+) nearly doubled in just four years, according to the city budget for 2024/2025. Unemployment remains historically low, and the poverty rate fell dramatically from 2014 to 2022.
Some of that progress is an illusion created by people leaving for less expensive housing. For a truly vibrant city, we need to make it easier for young people and families to stay here, with more affordable housing and programs like Preschool for All.
Portland should stop prioritizing downtown office building owners above everybody else! City leaders have paid far too much attention to them and their lobbyists. The city economist says downtown office space generates just 4% of the city’s property tax revenue.
What options does the city of Portland have to fill the budget hole?
Here are just some of the possibilities.Some immediate fixes:
Increase the city’s inequality tax on firms with CEOs paid more than 100 times the median wage of employees. Almost entirely big, out-of-state corporations, they likely don’t even notice this tiny tax raising a few million dollars a year. The Pay Ratio Surtax increases their city business license tax by only a 10th unless CEOs get more than 250 times the typical worker when it pushes their business tax up by a fourth. Let’s double the business tax for corporations with CEOs paid more than 100 times their workers and triple it for the group whose CEO pay is more than 250 times their workers!
Stop the cops from saddling taxpayers with hefty bills to compensate people they’ve brutalized, demanding better vetting, training and discipline. Street Roots reported nearly $6.75 million in payouts between 2020 and June 2023. Since then, we’ve seen well over another $1.5 million more, cataloged by Portland Copwatch, which reports payments of $23.5 million to more than 500 people from 1993 through fall 2024.
Revisit the police budget: Stop the expensive arrests and jailing of people camping in our streets, shifting at least some of those resources to expanding Portland Street Response. Increase traffic enforcement and fining speeders, which should more than pay for itself. Add unspent money intended for new hires to the city’s reserves, to be allocated as needed for hiring, if available.
Rescind Prosper Portland’s $7 million loan to the Made in Old Town project, which was made in violation of its own standards. While Portland is pondering deep cuts to street maintenance, affordable housing, Parks & Rec and more, the city’s economic development agency is handing out big bucks to people with a business plan so weak that they can’t get regular loans.
Fine investors running unpermitted and illegal Airbnb rental houses. We can both make money and, hopefully, bring down rents and house prices, as has happened in British Columbia and Palm Springs. People listing an entire house for rent are legally required to live in it nine months of the year. That law is being flouted by speculators who are buying houses for short-term rentals and a place to park their money while prices keep increasing.
Fixes for the near future
Audit and reform Prosper Portland, focusing on its lending and “tax increment financing” strategies, shoveling property tax revenues out of local governments and public schools and into the pockets of private developers. It even stretched the definition of “blighted areas” to include the South Park Blocks!
Expand the tax relied on by the Portland Clean Energy Fund, or PCEF, to big, highly profitable banks and other financial entities doing business in the city. The very successful PCEF tax is a 1% surcharge on large retailers’ sales in Portland, paid only by companies so big that they have sales of at least $1 billion worldwide and at least $500,000 a year in Portland. The state has forbidden localities from creating new taxes like this since 2019, a year after PCEF was approved by city voters by two-to-one. However, since Portland already has the tax, we should apply the tax structure to other industries and uses.
Audit and consider ending the contract with the PBA’s Metro Chamber. Why does Portland need private services to duplicate city safety and cleanliness efforts in our business districts? Why should the PBA be the middleman contracting other organizations to do the work? The city’s 2025 contract with PBA was rammed through a lame-duck City Council in late 2024. It commits to paying between 45% and 95% of the salaries of seven PBA staffers, including the CEO and president, the VP for government affairs and the executive director!
What happened to the property tax supporting local governments and schools?
Measures 5 (1990) and 50 (1997) limited property tax revenue growth. Since then, property tax payments have not kept up with needs, which grew significantly. Portland added nearly 150,000 people. Rents and house prices have soared, putting many more people on the street. Our schools now have huge class sizes and the state taps the General Fund to partially replace property tax funding for the schools — shortchanging the schools and other needs reliant on the General Fund.
Measures 5 and 50 also created a system that’s quite unfair. Some people pay much more than others with similar properties.
Why hasn’t anyone fixed Oregon’s property tax?
It’s difficult to reform Oregon’s property tax system. Making it more equitable would mean giving up even more property tax revenue or raising some people’s taxes, many of whom are well-off and able to push back hard. Measures 5 and 50 were written into the constitution, making them more challenging to change than our laws.
Hope for the future
At long last, Portland has a representative City Council that is much more varied by ethnicity, gender and class than ever before. For the first time, the Eastside has a real voice. Despite the money spent, PBA candidates went down hard in city and county races. Locally, our future looks bright.
Street Roots is an award-winning weekly investigative publication covering economic, environmental and social inequity. The newspaper is sold in Portland, Oregon, by people experiencing homelessness and/or extreme poverty as means of earning an income with dignity. Street Roots newspaper operates independently of Street Roots advocacy and is a part of the Street Roots organization. Learn more about Street Roots. Support your community newspaper by making a one-time or recurring gift today.
