May 28, 2014

Re: Street Fee proposal

Dear Mayor and City Council Members,

The Pearl District Business Association, a membership of 197 businesses located in the Pearl District is asking for a “NO” vote from you concerning the proposed Street Fee. We would like to see this issue brought forward to the City’s voters as a ballot measure.

The tax burden on businesses under the plan is much higher than for residents – that is unfair and unacceptable. Businesses will pay a much higher fee rate. At the $11.56 monthly residential rate, the fee equals 1/4 of 1% based on Portland’s average annual taxable income of $53,800. For businesses, the rates equal 2-6% and up based on comparable business net taxable income. That’s 800-2000% more! We are a district of mostly small business, whose margins are very small.

The street fee plan will lead to wildly different costs for the same business type; lack of equity greatly impacts businesses. If a business is directly billed, the cost could be substantially higher than if a landlord receives the bill and must divide it among tenants. Example: a 1500sqf Apparel Store in a 9000sqf building billed directly would pay $1446/year. Across the street, the cost for another apparel shop at the same classification passed through from the landlord at .166% of space would be $984 a year. If the building is instead classified as Specialty Retail Center then the cost drops to $745. The directly-billed shop would pay almost twice as much! But if the building is dominated by a coffee shop and a restaurant, the apparel shop fee might be much higher – $1240. The unequal treatment of similar businesses due to the flawed fee billing process is a major issue and needs to be fixed.

Given the large amount this fee would cost businesses, a public vote should be required. The typical proposed fee for businesses is equivalent to a tax increase of 2-6%. In comparison, only 31% of residents in a PBOT poll favored a 1/2% sales tax or 1% City income tax option. A fee of this magnitude should require a vote of the citizens affected by it and not simply be put into place by the City Council. 

This considerable new tax would be on top of other increased costs that are impacting business. These include higher water and sewer rates (plus FOG fees and capital expense if food-related businesses), mandatory paid sick time off, increased property taxes, rising lease rates/nnn, higher medical premiums, and more. The economy is generally flat and these increased expenses cut into an already small profit, directly impacting small business vitality.

The Pearl District was created with a mix-use concept, what about Condominium buildings where ground commercial units are owned individually and the water bills are sent to the overall association?    The bylaws in condominiums stipulate how utility allocations are made – based on a square foot percentage of the overall billing.   These fees could not be re-allocated from a water bill any differently than water/sewer charges.    Also, how is the City going to monitor when uses of commercial space change – say a restaurant space becomes a dress shop?    And how do they adjust when a space is vacant – no use or occupancy when it is in a condominium which has one water/sewer bill for the entire building?    A perfect example is Saks Fifth Avenue (clothing store) changed in part to a 16,000 sf. brewpub.   What happens when spaces are re-configured and there is no separate water/sewer billing to be address?

The above are just a few of the concerns from the Pearl, we ask again for a “NO” vote, please allow us more time to be involved in this important process. We were not involved with the passage of the ‘sick leave’ act, please do not again, leave us out of the process.

Tracy Morgan, President of PDBA
Carolyn Ciolkosz, Executive Director
Adele’ Nofield,  PDBA Member