PORTLAND, Ore. — As twelve new city councilors and a first-time mayor take charge of a transfigured city of Portland government in January, they'll immediately face a problem that's been growing for years — a budget in big trouble. And in some cases, layoffs may be the only way to solve it.
The Story's Pat Dooris recently sat down with Michael Jordan, interim city administrator for the city of Portland. Jordan has been in charge of transitioning the government over to what it will be come January, which is no small feat. That includes breaking down the city's siloed bureaus, trying to figure out where everything is and what it costs, and then building it back up under an administrator-led structure.
Layoffs, Jordan said, are a last resort. But he's also being frank that Portland may need to go there.
"We'll look at, you know, materials and services budgets. We'll look at 'Can we do business more efficiently in other ways?' Vacancies — we have a significant number at any given moment," Jordan said.
Of the city's 7,000 or so positions, Jordan said that about 5-6% are vacant. Not all of those can just be cut — it depends on the position, the department and the reason why it's vacant. But generally speaking, vacant positions will be the first to go.
Layoffs don't happen often at the city of Portland, but last year was a prelude to this coming budget crisis. Mayor Ted Wheeler asked the commissioners to cut 5% from their bureaus. Most of it was accomplished without major cuts to service or layoffs, but there may have been some of that as well.
"Last year was the first time in my nine years that we had to cut budget as guidance, to build a budget with cuts," Jordan said. "And I don't know exactly, I'd have to go back and look, but I would not be surprised if there were some layoffs last year. Not many, but some. There may be more this year — and this constraint is going to go on for, I would say a few years."
The "constraint," Jordan added, is different for the various parts of city government. But for now, he said it's inescapable. And that's largely because the city has been taking on more expensive problems with less tax revenue.
"The General Fund has two problems," he explained. "One, we are running a number of very expensive programs that ... didn't even exist four years ago. The shelters, 1,000 shelter beds that have to be around the city, all of the street coordination that goes on, the people that go out and meet with homeless people and navigation. We're paying for an office that does that.
"The (Impact Reduction Program), which are the ones that clear up camps, clean up litter, take care of all those issues. We're spending, I would say, well north of $100 million on that, that didn't exist five years ago in the fund."
That's the first problem: the expenses. The second problem is revenue — half the money that comes to the city is from property taxes. And because so many of the big office buildings downtown are vacant, property values have gone down. And with lower property values come lower taxes.
"Property taxes are allowed to grow about 3% per year, and then if there is new construction, you can add to that a little bit," Jordan explained. "So, our property tax revenue has grown from 3-5% per year, depending on the amount of new growth, new development. This year, we're anticipating that property taxes will grow less than 1% ... that is primarily because of the shrinking value of downtown property.
"So, it is now gone below assessed value — real market value has now gone below assessed value and is now actually constraining the amount of property taxes that are collected on downtown, to the point that our total property tax is now dropped below 1%."
So, however you feel about downtown or the viability of office work in this day and age, those downtown vacancies have become a real drain on the city budget — and thus far, that trend has not shown any signs of reversing.
Why the shelter business?
With Portland in danger of going off a budget cliff, Dooris asked Jordan why the city has shouldered so much in terms of homelessness. Historically, Multnomah County has been the entity responsible for social services in Portland, and that's still the case overall — the county heads the Joint Office of Homeless Services, which the city pays into, and it receives funds from the Metro Supportive Housing Services tax that Portland does not.
But for a few reasons, Portland picked up more and more slack during the pandemic, Jordan explained.
"I think the reason we are in the sheltering business at all, which is the biggest part of that amount, is because the county was not in that business ... and I think Mayor Wheeler a few years back just decided we're not going to be able to get the county to do this," Jordan said. "And we believe this can be a good way to approach the homeless problem. And so, we just started doing it and it has grown."
Portland got the ball rolling on Safe Rest Villages in 2021, and the first village opened in 2022. The city now supports multiple villages, RV park sites and mass outdoor shelter sites.
"And to be fair, in 2020 and 2021, we got quite a bit of federal money through the (American Rescue Plan) program, but that was one-time money," Jordan added. "And so, we actually built that program with one-time — much of it, not all, but much of it — one-time federal (funding).
"And to, I think, Mayor Wheeler's great credit ... he couldn't even get anybody to stand next to him at a podium when he announced this program four years ago. Now, the county is helping to pay for some of that program through the intergovernmental agreement that you've heard a lot about lately. That we are still in that agreement really transitions those shelters to the county and they will pay for them in the future."
Jordan said he can't be sure how quickly that transition will happen. Right now, Portland has a three-year agreement with Multnomah County, and they're hoping the transition will happen next year. But not only is the process complicated, there's a chance that the agreement doesn't survive the year.
READ MORE: Portland commissioners abandon push to end homeless services partnership with Multnomah County
And while Multnomah County currently gets many millions of dollars each year from the SHS tax through Metro — $140 million in the 2024 fiscal year — Jordan said that it could be up in the air as well.
"Metro is looking at potentially going back to voters with a restructured tax," Jordan said. "That might increase the (eligible) income, might lower the rate of the of the payment, might also carve off some of that money to go to actually building affordable housing ... Right now, it's restricted to only services that support the houseless effort.
"So, if the demand is constrained by changing the way the tax is collected, and you carve off a fairly substantial amount to actually build housing, that leaves a constrained amount to pay for services like sheltering. And so, it's a challenging environment and really complicated. And I don't want to over-complicate it, but I think it all adds up to a pretty challenging time for the next few years."