You are about to be taxed $1000 a year or more in many cases. Your immediate action is needed to stop it.
Attention Pearl District Businesses,
Here’s what you need to know (please excuse the length – this is very important and there’s a lot to explain):
Mayor Charlie Hales and Commissioner Steve Novick announced last Thursday that they intend to fast-track the new street tax (they call it a transportation user fee) for a City Council vote in two weeks. It will be presented to Council this Thursday 5/29 with a vote to come the following week. They are ignoring suggestions from Venture Portland, Portland Business Alliance, Oregon Restaurant and Lodging Assoc. and many others in the business community to slow down this very flawed plan and make needed fixes before cramming it through – and allow voters to have their say.
We can all agree that well-maintained roads are critical for business success and something needs to be done for Portland’s deteriorating infrastructure. But the burden on businesses under the City’s current plan is much higher than on residents and many of you will pay more than you should due to a flawed tax calculation system.
This considerable new tax would come on top of increases on other current expenses: higher water and sewer rates (plus FOG fees and capital expense for food-related businesses), mandatory paid sick time off costs, higher medical premiums with the Affordable Care Act, increased property taxes, rising lease rates, and more. With a still sluggish economy, the pile-on of all these costs reduces the small profit margins in neighborhood businesses – directly impacting your business vitality and prosperity.
Here are the Details:
— Every business will be assessed a tax based on the type of business and square footage, using a generic national manual from the Institute of Traffic Engineers that estimates trips per day to a business. Rates are highest for 5,000 trips a month or less (the lowest category – even though most of you generate far fewer) and then are discounted above that. The lowest monthly fee examples given start at $45-50 a month and quickly go up. Homeowners will pay $11.56 a month, less in multi-family buildings. Here is a link to the City’s online Transportation User Fee Calulator.
— The tax will possibly be billed to whoever pays the water bill. That is the only system allowing the City to send a monthly invoice. If you pay the water bill then you will also be taxed directly. If your building has a shared water bill, then the landlord will have to pay the new tax and decide how to pass the charge through to you.
— The plan is for the tax to start being collected in July 2015.Commissioner Nick Fish, who runs the Water Bureau, says he will not use their system to bill the new street tax. So that could add an interesting wrinkle.
— The tax you pay will be based on your business or building type. If you directly pay a water bill, you will be assessed the street tax according to a business type times square foot formula and billed directly. If you have a shared water arrangement, your landlord would be billed based on the predominant use of the largest developed square footage (maybe based on a different category) and then will divide the bill however he/she sees fit. So it’s possible a business that would pay little tax if billed directly might pay a lot more based on the percentage of total building square feet in a higher tax category – or it might be the reverse scenario. Yes, this is confusing and the City is not exactly sure how this will work.
— The City says Portland residents will not be double-taxed. A credit will be provided for single-owner businesses (owned by an individual or jointly by spouses/domestic partners ) with fewer than 10 employees that are owned by a Portland resident. They would receive a monthly credit for the amount of the residential fee. There is no explanation how this would work for street bills going to a landlord with multiple businesses with varying ownership.
— Voters would not get a chance to vote on the tax itself. Hales and Novick want to enact it directly through Council (for fear it won’t pass otherwise), but want a vote to place language in the city charter limiting how street fee revenues could be used.
Reasons the Tax Should Not be Approved
— 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!
— 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 generic national categories used to set business fee rates do not reflect Portland’s neighborhood businesses and will lead to excessive costs. Using trip rates for much larger business types doesn’t make sense for our neighborhood districts, where many businesses have minimal employees, work out of small spaces and generate far fewer than 5,000 trips a month. Using boilerplate data will just cost Portland businesses more.
— Trip generation categories are missing, confusing and should be simplified. Many typical Portland businesses are absent from the calculator and can’t determine their category: non-drive through coffee shop, bar, pet store, dry cleaner, flower shop, boutique, housewares/crafts, barber shop, spa, bakery, wine shop, small bookstore, to name a few. Categories should be streamlined and have definitions. Example: Restaurant types are spread all over the list. What exactly is a “fast food restaurant’, ‘high-turnover (sit-down) restaurant’, and ‘quality restaurant’ – plus there is no appropriate category for brewpubs or our chef-driven low-turnover smaller cafes and restaurants.
— 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.
— Guarantee that funds generated by the street fee will be used only for transportation projects – and also protect PBOT’s general fund dollars. Charter protections must be written into the fee to dedicate all collected revenue for transportation projects only. PBOT’s existing general fund budget should be maintained at current levels so the City’s investment in transportation maintenance/safety remains the same and is not reduced by funds transfers.
— 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.
Action You Need to Take This Week
At this point, the fee plan is being pushed to a City Council vote by Mayor Hales and Commissioner Novick (who is in charge of the Bureau of Transportation). Commissioners Fish and Saltzman have come out against passing the plan through Council and want to see it referred to voters. That leaves Commissioner Amanda Fritz as the critical swing vote. If she votes no, then the fee will either be reworked (hopefully with major input from businesses) or will be referred to voters. That is our goal.
Please email and/or phone the Mayor and Commissioners as soon as possible to share your thoughts on the proposed Street Fee. You can easily write your letter once and then copy it to each person on the list. Contact information for City Council is listed below. Please work from the top of the list and definitely contact the first three. Please also contact Commissioner Fish, who represents Portland’s neighborhood business districts and is a strong ally on this issue. Please utilize some of the talking points above and let the Mayor and Commissioners know what a new high-cost expense would mean for your business: would you have to cut employees back, reduce benefits, put off capital investment, take an income cut again, etc.
You can also attend the Street Fee hearing on Thursday, 5/29 at 2pm at City Hall. Attendees will have up to 3 minutes to address Council on the issue, which is another great way to have your concerns heard.
Please let me know if you plan to be at the Council meeting.
Please also cc myself and Heather Hoell at Venture Portland on any email sent to the Mayor or Commissioners, so that PDBA and Venture Portland can best represent your business.
This information was graciously shared by Murray Koodish, President of the NE Broadway/Wiedler Business Association.
Commissioner Amanda Fritz
Mayor Charlie Hales
Commissioner Steve Novick
Phone: 503. 823.4682
Commissioner Nick Fish
Commissioner Dan Saltzman