Three Portland commissioners don't support mayor's proposed business tax increase

David Guetler owns River City Bicycles in Southeast Portland. Mayor Charlie Hales' proposal would raise business tax fees for owners like Guetler from 2.2 percent to 2.5 percent. (KATU Photo)

A Portland business tax hike proposed by Mayor Charlie Hales is quashed. Three city commissioners say they're against it. The increase would have generated millions of new revenue for the city and was slated to cover police and homeless services. This leaves the final budget of the mayor's term in question.

Commissioners Nick Fish, Dan Saltzman, and Steve Novick all agree that the business tax increase isn't the right move for businesses or for the city right now. Since they won't support the increase, the mayor doesn't have the votes to pass his proposed budget for 2016-2017.

"I see no reason why we would want to increase the license fee. We have 25 million dollars that we didn't even know we had two weeks ago and I think that is more than sufficient for us to live within our means," Saltzman told KATU News on Tuesday.

Last week Hales announced his proposed budget for next fiscal year. He included what he called a "necessary increase in the business tax" from 2.2 percent to 2.5 percent. That would have generated an estimated $8.7 million in new revenue, increasing the overall revenue generated by business taxes by 14 percent.

The mayor also announced the city had $25 million in extra monies available, beyond the general and reserve funds. That money was generated by unexpected increases in collected hotel, business, and property taxes.

"We're witnessing an historic windfall of city revenues which are paid for by city taxpayers," Saltzman said.

David Guetler owns River City Bicycles in Southeast Portland. The store has been open for 22 years. Guetler has a staff of 70 employees. He said an increase in business taxes, even though it would only be a couple of hundred dollars, adds to the growing list of expenses that come with operating a business.

"We provide health care for all of our employees. We give paid vacations. We do the 401(k)," Guetler said about hiring productive, happy employees.

Guetler is glad the city commissioners are going back to the drawing board on the budget to develop one without the increased business tax.

"I think that's a great thing because it's very expensive doing business in Portland here," he said.

Guetler said he knows the city is in need, but he doesn't understand why businesses should have to kick in more than what he calls the endless list of taxes they already pay.

Saltzman said the mayor's proposed budget creates over 200 new jobs, but he's concerned about being able to pay for those in the future. Saltzman said the $25 million windfall makes it possible for the city to live within its means, and still add to homeless services and law enforcement.

He thinks the commissioners, and the mayor, can develop an alternate budget that takes that into account but doesn't raise taxes for businesses.

"The budget that we ultimately craft -- that reflects the support of all five of us -- I think will speak to those priorities," he said.

Hales expressed doubt to KATU News in a statement Tuesday night that the level of services proposed in his budget could be sustained by using some of the $25 million windfall, and not generating new revenue with an increased business tax:

Portland is a growing city that's facing real challenges: youth violence at record highs; systemic hurdles to access and opportunity; a housing affordability crisis; thousands of people sleeping on our streets. To address these challenges, we need more revenue. The boom years we've experienced came after a record budget deficit $21.5 million cut from the General Fund. We need to be pragmatic and responsible leaders, and take advantage of our prosperity to prepare ourselves for the future. At today's work session, my City Council colleagues expressed doubts about the proposed Business License Fee increase. That is one option to raise revenue with little impact on most Portland businesses, but a large benefit citywide. I am open to other options my colleagues propose, such as the planned Construction Excise Tax. Cutting the police and homelessness investments in this budget would be a disservice to Portland.

A spokeswoman in Commissioner Amanda Fritz's office told KATU News Fritz is waiting to make a decision on the business tax issue until she hears from the public about it. A public hearing is scheduled for Thursday from 5:30 p.m. to 9 p.m. at City Hall. A work session is set for Tuesday, May 17.

City Council will vote on the 2016-2017 budget on Wednesday, May 18.

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