What's driving Portland's huge budget gap
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Illustration: Eniola Odetunde/Axios
The Portland City Council is looking for ways to address a massive budget shortfall, but one of the drivers of the deficit — declining property taxes — is an ongoing issue with no easy fix, some experts say.
Why it matters: In a memo to city leaders last week, city administrator Michael Jordan outlined areas that could see potential cuts, including cuts to summer programs at parks, reductions in street paving projects, and layoffs of at least 120 city employees.
The latest: In a joint statement, Mayor Keith Wilson and Council President Elana Pirtle-Guiney said the city was committed to "exploring every option, thinking creatively, and working together as a team to make sure we keep city services moving."
Context: In recent years, Portland has faced declining property tax revenues due to two state tax measures passed in the 1990s.
- One capped property taxes at 1% of a property's assessed value and another capped assessed value growth at 3% a year.
- Together, the measures have provided predictability to property owners, but they've also cut deeply into tax revenues, according to the League of Oregon Cities.
What they're saying: Paul Manson, a political science professor at Portland State University, said with taxes constitutionally limited, rising costs of labor, inflation and increasing need for public services will continue to strain city budgets.
- "There's a disconnect, and it gets harder every year," Manson told Axios.
Yes, but: This problem is not unique to cities like Portland, which is also facing rising labor and healthcare costs as well as expiring one-time federal funds.
- Mary King, an emerita professor of economics at Portland State, said the tax measures have had a devastating effect on municipal budgets.
- "Year after year, we have a structural deficit because property taxes are not keeping up with population and needs," she told Axios.
- King noted that, because of the cap on real estate assessment growth, Oregon taxpayers were only paying taxes on 50% of their properties' actual value, per state statistics.
What we're watching: In his memo, Jordan said the upcoming budget cycle will "require difficult and significant reductions to a combination of City staffing, programs and service delivery."
- The city council will need to come up with a new two-year budget before the start of the next fiscal year, which starts on July 1.