slides: 11 Ways to Pay a Portland Street Fee Without an Income Tax

Tuesday, November 18, 2014

Cornelius Swart, GoLocalPDX Director of Content

A new city income tax may not be the only way to pay for Portland’ crumbling roads, according to critics, who say there are already a number of alternative methods in place in other cities.

GoLocalPDX spoke to a handful of political wonks to ask them about different ways to come up with the $46 million per year that Mayor Charlie Hales and Transportation Commissioner Steve Novick say they need to fix city streets. Despite many conflicting views, most agreed that the Portland Bureau of Transportation (PBOT) needs more money and that parking was an untapped gold mine.

Slides Below: 11 Ways to Raise Money for a Street Fee without an Income Tax

The new tax could be put before the city council as early as Dec. 3. The personal income tax would raise approximately $23 million a year, costing people who made $29,000 a year as little as $24 and those who made over $300,000 a year as much as $900. Business fees would raise an additional $23 million.

“It’s a major blown opportunity,” said economist Joe Cortright. “I hoped they would have come up with a better solution.”

Sandra McDonough of the Portland Business Alliance said her group supports the city’s business fee, but said voters should weigh in on a personal income tax.

“We just can’t support an income tax,” said McDonough. “We don’t have an income tax in Portland. That’s a very big change.”

Lobbyist Paul Romain has already promised he’ll refer the issue to voters in May - but the question many asked was whether the tax was even the best way to raise new revenue for PBOT.

Spending Priorities

“PBOT has had plenty of money over the years, they’ve just misspent it,” John Charles of the libertarian-minded Cascade Policy Institute said.

Charles’ view might not surprise those familiar with the fiscally conservative group, but the city’s own auditor has been saying for six years that the Portland Bureau of Transportation could be spending more on street maintenance. “We’ve argued over the years that the city could maintain more roads with its existing budget,” said Drummond Kahn, director of audit services. “Even though revenues are up, spending on maintenance is down.”

In a January of 2013, the auditor’s office issued a report that stated the money that could have gone to street repairs went to “streetcar operations, transit mall upkeep and downtown marketing.”

In that year, PBOT spent $3.8 million in downtown marketing alone, according to Kahn. In 2013, PBOT spent $800,000 on Transit Mall clean up efforts, but PBOT spokesman Dylan Rivera said those were limited partnerships and those projects aren’t in the budget anymore.

“We’ve been turning over every rock to find cash,” Rivera said. “PBOT just needs more revenue.”

GoLocalPDX spoke with other critics who suggested putting a moratorium on taxing powers enjoyed by other bureaus in order to let PBOT raise more money.

Portland Parks and Recreation has the ability to level development fees - System Development Charges - on new construction, while the Portland Development Commission’s taxing districts drain a vast amount of tax dollars. In 2012, 25 percent of all city property taxes went to pay down debt on the Portland Development Commission’s urban renewal projects. Some suggested capping those agencies' ability to issue fees and taxes in order to increase PBOT’s ability to raise cash.

“We’ve done a lot of scientifically-weighted surveys,” Rivera said. “We’ve done a lot of workshops and no one has said they wanted us to take money away from parks or PDC to pay for roads."

Parking Gold Mine?

Smart Park: Photo Credit: Oran Viriyincy, Flickr

While the city said its income tax was designed to evenly distribute the burden - not pit biker and transit users against car and trucker owners - some scoff at the idea.

“Traditionally transportation funding comes from user fees,” McDonough said.

User fee-driven mechanisms, like a vehicle registration fee or a gas tax, is a typical way to pay for road improvements in dozens of other towns in Oregon.

Then there’s parking. Right now, PBOT gets about $45 million annually from revenues associated with parking. That money includes tickets, parking meters and revenue from Smart Park garages.

Parking meter revenue is ‘unrestricted’ in that the city can spend it on whatever it wants.

City documents state the six downtown parking garages owned by the city charge “below market prices” and generate about $5 million a year that can be used for PBOT’s “operational support.”

Rivera said PBOT doesn’t even manage parking as a revenue generator.

“It’s managed for access,” Rivera said. “It’s about keeping people circulating downtown and getting turn-over for spaces for the local businesses.”

Cities like San Francisco do the opposite. Dynamic pricing is a newly emerging practice that uses supply-and-demand to charge more for parking that is in a more desirable location or during peak hours. Seattle is implementing its own dynamic pricing system next year.

Portland meters are actually capable of dynamic pricing - they just aren’t programmed for it, according to PBOT.

“The city uses limited dynamic pricing for Portland Timbers’ games,” Cortright said. “And it’s worked great. I had hoped that things like that would have informed how we pay for our transportation system.”

Cortright said increasing fees on parking just makes more sense, since it captures revenue for out-of-towners and every day users who are putting the most amount of strain on city pavement.

“Free parking is like socialism for cars,” Cortight said. “Anyone who uses the public street for private car storage should have to pay a fee. It would make a lot more sense to charge for parking.”

Cortright's CityObservatory website pointed to another example of smart management of city assets in a post about Commissioner Novick’s recent reshuffling of how handicapped parking was managed downtown, which resulted in a net gain of 700 parking spaces.

“We have a lot of very valuable real estate out there,” Cortright said of parking. “And we are just giving it away for free.”

A big ask better than a lot of little ones?

Activist Chris Smith served on the city’s Safe, Sound and Green Streets Committee from 2008 to 2009. His work group suggested several ways to pay for road improvements, including a gas tax.

“I don’t see anything fundamentally wrong with the income tax,” Smith said. “In liberal Portland, the policy of a progressive income tax will be interesting to see play out with voters.”

That said, he said he’d support anything that got the job done without unfairly burdening one group or another.

Smith said switching the income tax with things like parking meters, spending cuts and gas taxes might be trading a lot of small political battles for one big one.

He said there might be wisdom is just putting all your eggs in one income tax basket.

“If you're going to have a fight, then just fight for one thing.”

Related Slideshow: Ways To Fund Street Repairs Without A Street Fee

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Portland Gas Tax

Currently, there is a $.03 Multnomah County gas tax. The tax revenue is split about 20 percent to Multnomah County and 80 percent to the city. Every $.01 increase in the tax would next about $1.36 million to the city, according to PBOT’s budget. Given that, the City of Portland has the power to levy its own gas tax.

The Politics: Hugely unpopular for not a lot of cash, but perhaps less unpopular than an income tax.

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Dynamic Pricing

Seattle and San Francisco use “dynamic pricing” on their parking meters. That means that the price to park goes up depending on the time of day and the location of the meter. For instance, if you are parking right in front of the Schnitz at 7 p.m. on a Saturday night, it’s going to cost you more than a $1.60 an hour.

Portland’s current meters could be programed for dynamic pricing, according to experts, and with 9,000 meters in the city, that could add up.

The Politics: Despite some grumbling, the city doesn’t need anyone’s permission to raising parking meter fees. Parking revenue is completely unrestricted, meaning it can be spent anywhere and on anything.

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License Registration

With 692,201 registered vehicles in the county in 2013 a $20 vehicle license registration fee, with a 20/80 split to the county (like with the current gas tax), could generate $11 million for the city every two years.

The Politics: This would have to go through the Multnomah County Board. The county doesn’t really need cash for infrastructure at the moment, as it has a few big federal grants lined up to pay for upcoming bridge repairs. The challenge would be offering the commissioners a deal sweet enough for them to take the political hit.

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More Parking Meters

A parking meter costs about $1 an hour to operate. So at $1.60 and hour, about $.60 is pure profit. More meters are already in the works for Northwest Portland. Meters in all major shopping districts from Southeast Hawthorne, Division and Belmont Streets to Northeast Alberta Street to North Mississippi and Williams Avenue could raise money for improvements in those areas.

The Politics: Neighbors and businesses would whinge endlessly. But many studies say that parking meters benefit businesses by keeping spaces turning over. Residents could be issued parking stickers to exempt them from charges.

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Raise Smart Park Fees

The city controls 3,800 spaces in six downtown garages. Smart Park cost about $11 million a year to run, according to PBOT’s budget. All told parking charges from meters and Smart Park brings in $45 million a year but the system is not operated to maximize revenue. Dynamic pricing might be hard to implement at the garages but the city could raise the rates.

The Politics: Downtown business interests might complain that raising parking rates would stop people from shopping and visiting downtown. The public interest would have to decide if that’s a risk to take, given the alternatives are an income tax or tattered roads.

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Shift SDCs from Parks

System Development Charges are fees that different city bureaus level against new construction projects in Portland. Parks, PBOT, the water and environmental services bureaus can all level SDCs at developers.

The rationale is, if new development puts a strain on city infrastructure, like roads and sewer lines, then it should pay extra to upgrade the systems. However, most SDCs get charged to developments in the city’s center, while the revenue goes to pay for projects all over Portland.

Over the last four years, Parks & Rec has averaged about $9 million a year in SDC revenue. The city could pull the bureau’s power to charge and let PBOT charge more.

The Politics: It would be a fight with parks supporters. Parks has said it needs $49 million a year just for new parks acquisitions. But it might be more logical to raise that money through bonds, or repurposing taxpayer-owned golf courses, especially ones in park-starved parts of town.

Photo: Berkeley Park in SE Portland, via Wikimedia Commons

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Raise Retirement

Raise police and fire reitrement.

Police Chief Mike Reese announced his retirement this year at the ripe old age of 55. But he qualified for retirement much earlier, at age 50. Putting five years on the clock would certainly save the taxpayers some cash that could be used on roads or anything else.

The Politics: You’d have to face the union and that wouldn’t be pretty.

Photo: Former Portland Police Chief Mike Reese

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Reform Retirement

Portland’s Police and Fire Retirement Fund was set up by voters in 1948 and has resulted in a huge hole the public must now dig itself out of. Despite voter-approved reforms in 2006 and 2012, the obligation is still a fiscal time bomb. As of June 30, 2012, unfunded liability in the fund was in the neighborhood of $2.9 billion.

The Politics: Public employee pension obligations are the stuff of municipal bankruptcy court. It’s a hard fight, but reforms were suggested by Portland’s City Auditor’s Office as recently as Jan. 2013.

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Fix Tax Compression

In 1996, Measure 50 cut and capped property taxes across the state. It froze the assessed value of homes at their 1995 level and limited growth in value to three percent a year.

In Portland, the result is a system in which homes that have increased in value rapidly pay very little taxes and homes that haven’t increased in value much can pay sky-high taxes. The short hand for the squeeze in tax equity is “tax compression.”

The city loses about $24 million a year due to tax compression, according to the city auditor. If the city, county or state could figure out a way to fix the issue there could more money for everyone: They’ve had 20 years to think about it.

The Politics: There has been endless talk about tax reform in Oregon. The Governor put it as a major priority of his fourth term. All the old tax-revolt warriors have long since left the scene, but the political will to do much more than talk will be hard to find.

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Stop Urban Renewal

About $.25 of every $1 that the city gets in property tax revenue goes to pay down debt on urban renewal projects. Mayor Charlie Hales has talked about sunsetting urban renewal districts.

On the immediate horizon, the Eastside Industrial URA has the power to issue new debt up until 2018. One step forward would be to stop that right now.

The Politics: Urban renewal is a cash cow for commissioners and their pet projects. No one really wants the system to change. But if it’s a choice between taking a hit on pet projects or a city tax revolt, commissioners might support clipping their own wings a bit.

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Put PBOT Out to Bid

Private companies can pave roads and clean them too can’t they? What if they could do it for less money than the city? PBOT could put services like street repair and cleaning out to bid.

It might not save a lot of cash, but it might win trust with the voters by showing them that the city was trying to get the best price for the public’s money.

The Politics: “Privatize” is dirty word in liberal Portland. But then, "income tax" might prove to be even worse.