Early estimates from Portland’s budget office have the city’s general fund down $75 million for the next fiscal year as a result of COVID-19, according to a presentation made to the City Council on Tuesday.
With local businesses hurting and tourism nonexistent, the city’s budget office is predicting a $20 million drop in lodging taxes and a $45 million decrease in revenue from business income taxes for the fiscal year beginning in July. The office also expects more Portlanders to fall behind on property and utility license taxes, which could account for some of remaining $10 million in the expected budget shortfall.
This forecast, warned city economist Josh Harwood, is both conservative and incomplete with so many aspects of how the pandemic will play out still unknown.
“It’s a little more art than science at this point,” Harwood told the council.
What is clear, he said, is that Portland is more exposed than it was during the 2008 recession, when business income and lodging taxes made up about a quarter of the general fund budget. For the upcoming fiscal year, he said, more than a third of the general fund comes from these sources.
Depending on the financial state in which the city ends the current fiscal year, Portland might be able to use surplus funds to help with next year’s shortfall, according to city spokesperson Dylan Rivera. But where the city’s going to be financially at the end of June is also hazy as the deadline for tax filings has been pushed until next month.
However, Hardwood appeared optimistic as the economy was strong pre-COVID, and many of the taxes the city will collect are based on this pre-pandemic economic activity. Though, he warned, there are city bureaus that are already hurting.
According to Harwood, the pandemic has decimated budgets for the city’s parks bureau, which gets a good portion of its funding with fees from now-cancelled classes and programs, and its transportation bureau, which relies on revenue from gas taxes and parking revenue. Both have fallen precipitously.
The city’s bureau of development services will likely be the next to see its funding decline as the development fees they collect dry up. While Gov. Kate Brown classified construction as essential and construction projects begun pre-COVID are allowed to continue, the bureau is expecting construction to decline in the next three to six months, according to Harwood.
“It’s not a financial crisis that hits everything in the same way,” he warned. “This is going to be a little more nuanced.”
The city has already taken several steps to try and slow its spending. City Budget Director Jessica Kinard said the Portland has begun a hiring freeze. The mayor’s taken a pay cut. They’ve frozen raises for non-union city employees and required them to take a mandatory 10-day furlough period. The parks bureau laid off 950 part-time employees in early April, and the City Council has authorized $100 million in revenue bonds.
But the city is not expected to be able to use any of the $114 million they’re receiving from the federal government through the CARES Act to assist with the budget shortfall. In a presentation to the council Tuesday, Office of Government Relations Director Elizabeth Edwards said the city had officially received the millions they were expecting from the federal government Monday. But they still don’t know how they could use it.
“I am somewhat dismayed that despite having received the funds, we are still waiting on additional guidance that we know is coming from the Treasury (Department),” Edwards told the council.
However, a few of the strings attached have already been made clear. Namely, the money can’t be used for “lost revenue,” and instead must be spent on “necessary expenditures” related to COVID-19.
Portland Mayor Ted Wheeler said, federal rules pending, he had two priorities for the money: supporting small businesses and providing “financial stability” to households in the form of rent money and other household necessities.
“Those are two significant buckets I’d be interested in,” he said. “But the bottom line is until we get the framework from the federal government, it’s really hard for us to define how we would spend those dollars.”
