The record · Transcript
Council Session — 2025-08-11
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Session summaryEditor-reviewed
The Portland City Council Finance Committee met on August 11, 2025, with the body's roll call confirming attendance. Agenda items included approval of prior meeting minutes by unanimous consent, and consideration of reappointment and appointment of two individuals to the Revenue Division Appeals Board, with background provided on the board's role in reviewing tax disputes; votes occurred on this item, with outcomes recorded in the vote ledger. The committee received a lengthy presentation from consultants and city staff on an Internal Service Fund rate-setting project, covering findings on cost construction, cost allocation, governance structures, communication strategies, and plans for continued implementation support through October. This was followed by a presentation on citywide revenue reporting, discussing categories of taxes, service charges and fees, and grants, along with forecasting timelines, budget development processes, and discussion of the "fall technical adjustment ordinance" and its treatment of one-time versus ongoing funds. The final agenda item concerned authorization of system development charge financing contracts, private plumbing loan contracts, and safety net loan deferral contracts, including discussion of interest rates, defaults, and qualification criteria; a motion was made and seconded to refer this item to full Council with a recommendation to pass, and votes occurred, with outcomes recorded in the vote ledger. The meeting adjourned at 1:48 p.m., with the next meeting scheduled for September 8.
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0 Actionscript. I would like to present. My Koyama Lane.
1 Yeah yeah yeah yeah.
2 Somebody asked me. To. Be. Yeah. You know, I.
3 Guess test, test, test test. Aaron, are you seeing captions? Yeah.
4 Great.
5 Great. Thanks. I see captions in the room.
6 All right. What are those? Hi. Okay. Good question. Okay, great. So. You see.
7 The view in the room? We're going to start about five minutes late because of the last committee getting reset. Thanks for your patience.
8 And you know. We're. First of all, my life is. Not.
9 Good afternoon. I'm going to call the meeting of the finance committee to order. It's Monday, August 11th at 12:05 p.m. Clerk. If you could call the roll, please.
10 Pirtle-guiney.
11 Here.
12 Novick here. Green here. Avalos.
13 Present.
Procedural episode · turns 14–22
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14 Zimmerman here. Thank you. Claire, if you could read the statement of conduct, please. Thank you.
15 Good afternoon and welcome to the meeting of the finance committee to testify before this committee in person or virtually. You must sign up in advance on the committee agenda at Portland.gov/agenda/finance committee or by calling 311. Registration for virtual testimony closes one hour prior to the meeting. In-person testifiers must sign up before the agenda item is heard. If public testimony will be taken on an item, individuals may testify for three minutes unless the chair states otherwise. Your microphone will be muted when your time is over. The chair preserves order disruptive conduct such as shouting, refusing to conclude your testimony when your time is up, or interrupting others testimony or committee deliberations will not be allowed. If you cause a disruption, a warning will be given. Further disruption will result in ejection from the meeting. Anyone who fails to leave once ejected is subject to arrest for trespass. Additionally, the committee may take a short recess and reconvene virtually. Your testimony should address the matter being considered. When testifying, please state your name for the record. If you are a lobbyist, identify the organization you represent. And finally, virtual testifiers should unmute themselves when the clerk calls your name. Thank you.
16 Great. With that, let's roll into item number one, please.
17 Item 1st may fifth through 2025 through June 23rd, 2025 finance committee minutes.
18 All right, colleagues looking to approve these on unanimous consent. Are there any objections to that? Please indicate that. Okay. With that I think the minutes are approved unanimous consent. And we can move to item number two, please.
19 Item two reappoint adam abplanalp and appoint greg freeman to the revenue division appeals board.
20 All right, mr. Barry, I'll let you take it away, please.
21 Great. Thank you. Chair. Good morning. Committee members. For the record, my name is jonas barry, the city's chief financial officer. The proposed action before you will move forward to important volunteer positions on the city's revenue division appeals board. Due to the highly specialized nature of the content before the board, these can be difficult positions to fill and can be a thankless role. So I would like to take a moment to thank mr. Abplanalp and mr. Freeman for their willingness to accept this responsibility, and salita holt is here from the revenue division to provide a brief primer on the board and the candidates.
22 Hello. Good afternoon. I'm selita holt. I'm. I use she her pronouns and I'm the interim audit and accounting manager with the revenue division. We are here because the revenue division is seeking to fill two positions on the revenue divisions appeal board, and we call it for short. All right. The revenue division administers various taxes on behalf of the city of Portland, Multnomah county and metro. These taxes include the business and personal income taxes, transient lodging tax, utility license fee, and the clean energy surcharge, along with arts and other programs. Dab is a five member volunteer board comprised of members of the public, that rules on appeals from tax filers who disagree with the revenue division determination. And just to provide some background on the appeals process, when a taxpayer tax filer files their tax return with the division, they will review or audit the filed return. When adjustments are made by the revenue division to correct the return, the taxpayer could protest these adjustments with the revenue division and explain why the return was correct as filed, and provide additional information to support their claim. If the revenue division does not accept the taxpayer, taxpayer's explanation or evidence, a final determination is issued by the revenue division, which would include a detailed explanation for the adjustment and the code and law that supports that final determination. If the taxpayer still disagrees, they can appeal to the revenue division, appeals board or dab, and the board will review the facts and facts of the case here and review testimony, and then make a decision whether or not the revenue division's adjustments were correct. And then these decisions are final. Portland city code requires that appointments to the revenue divisions appeals board be made to provide an appropriate level of expertise in accounting methods and tax laws. The two potential appointees that I'll introduce in a moment meet these qualifications required by code and should serve the public, the city of Portland, and our partner agencies well in any matters coming before the board. So two board members have expired. And so we are seeking to fill these two positions, one with a reappointment and the other is a new appointment. These positions are appointed by the mayor, subject to approval by city council, and serve 2 or 3 year terms with staggered end dates. These appointments are structured this way to fill existing terms with little to no interruption. And just a heads up, we'll be back later on this year to fill a couple more board positions. Today, I'd like to introduce craig freeman as the new appointment to the board and adam knapp as the reappointment. And just to let you know, adam had every intention of being here today but won't be present. He is sick today. So adam is the current chair. He's a licensed cpa. He's the managing partner and ceo of cobalt pc, and he has served on various tax, accounting and legal committees and boards. Adam has served the public and city well in the past, and we strongly support his reappointment. Craig is a licensed cpa, a senior manager at geffen mesher with more than 20 years of tax professional experience. This board position also requires approval by metro by intergovernmental agreement, and they have approved. Mr. Freeman. We believe craig would make an excellent new board member. And just a little bit more information. We have conducted outreach towards increasing diversity on this board to meet the requirements of this position. This outreach has been targeted to individual individuals that have strong expertise in accounting as well as federal, state and local tax laws. The revenue division reached out to local accounting and tax professional organizations, including the Oregon society of cpas, to specifically identify individuals that could add to the board's diversity. So thank you for your time. I'm happy to answer any questions that you may have. And we also have craig available online in case you have any questions. And as I mentioned earlier, adam will not be available. But if you have questions relating to him, I have his interest statement.
23 Great. I thought you were craig sitting there. I was online. Okay, so with that colleagues, there's nobody signed up for testimony. So if there are any questions I would open that up to folks to use this time. And councilor Green.
24 Not a question. I've reviewed the backgrounds and interest statements of both the appointees. This is an impressive set of people who are desiring to serve our city. And so I'm really grateful for their interest in this, and I intend to support the appointees. Thank you.
25 I do see that craig is online. I'm going to ask the question. First off, thanks, mr. Freeman, for stepping up and volunteering. I just have a question. If any member of your household is a city employee, if you could answer that, that would be helpful.
26 Thank you. Yes, I am happy to answer. No. No one in my household is a city employee.
27 Thank you. Looking to staff? Do you know the answer for that? For I'm going to screw up adam's last name here.
28 I don't know for sure, but I presume no, since he has been on the board for numerous years.
29 Okay. Thank you for that. Appreciate it. Staff. Anything else to report? No. Okay. To the committee. I'll definitely entertain a motion that we accept this confirmation. Accept this report.
30 So moved.
31 Second, great.
32 Vice chair pirtle-guiney moves and counselor Green seconds. With that. Can we call the call the vote, please?
33 Pirtle-guiney. I Novick. I Green. I Avalos. I Zimmerman. I with five eyes. The report is referred to city council.
34 Great. Thank you. Appreciate the report and telling us a little bit about the process. And thank you to the volunteers. We'll send this to the full council. Thank you. All right. We can move on to item number three then.
35 Clerk item three internal service fund rates.
36 I'm sure all the business managers across the city are tuned in right now. So as dca, morrissey and others take their seats in terms of this, this topic and where we're going, I appreciated the city administration's willingness to kind of give us some waypoints and some check ins throughout this process. And so, colleagues, this is an opportunity for you to, I think, get get a good brief and see the direction that things are going. Any of us who spent time previously or in this role in internal service rates, know that these processes can become an animal that can be hard to interpret and sometimes isn't always the easiest tool for us in terms of making decisions. And when that's the case, I think it's a good time to take a look about whether or not it's realistic with where the city, the footprint of our business offices, all of our bureaus is moving forward. So I'm certainly looking forward to this. I think it's a good time to do it with the restructure, and I'll turn it over to miss morrissey.
37 Good afternoon, council members. My name is sarah morrissey. I use she her pronouns, and I'm currently serving as the deputy city administrator of city operations. We're here joining you today to share an update on the internal service fund project, which is one of the larger city operations and budget process improvements that are underway. The primary goals of the project are to make our internal service rate processes more transparent, consistent and efficient for service providers, customers and decision makers. The project deliverables that you'll hear about in today's presentation are providing a new level of clarity to help decision makers understand tradeoffs and make informed choices. We are joined here by jessica kennard with equilibrium collaborative. She will be presenting on the project with her colleague marissa pirazzoli, who will be joining online. And then we're also joined by ruth levine, budget director for the city of Portland. So I'll turn it over to jessica.
38 All right. Thank you, dca morrissey, for the introduction. And good afternoon, councilors. It's a pleasure to be with you today. Again. For the record, my name is jessica kennard. I use she her pronouns and I'm joined online by my colleague marissa pereira tully. We are consultants with equilibrium collaborative. Marissa or no. Tate is running the slide. You could move us along, please. Thank you. So I believe we requested 30 minutes on the agenda for the for this presentation today, but I just plan to use about 12 minutes of that for my presentation and then reserve the rest of the time for questions. I'm going to provide a quick overview of the project, followed by the overarching findings and strategies. Provide a quick overview of the solutions that we're proposing, and then again, leave hopefully plenty of time for questions. Next slide please. So I'm going to begin today with a very brief primer on internal service funds in Portland at the city. As with other government jurisdictions, you have several functions and activities that are provided in service of the agency at large, as outlined in city financial policy. Fin 2.08. You have two types of central service functions. You have general support services, and then the exchange of goods and services for payment. General support services indirectly serve city bureaus or the administration of the city at large, and they include functions like the city budget office, your offices, and government affairs, among many others. And then these functions are supported by the general fund overhead model. Internal service funds fall into the category of the exchange of goods or services for payment, and includes the includes functions like fleet facilities, technology services, risk management. These are. These are services that directly serve bureaus and these provision the provision of these services are supported by direct payments that are budgeted from bureaus. So and bureaus are known as sort of customers or service recipients. In these cases per financial policy, these payments should come with agreements known as interagency agreements. Next slide. So within the category of exchange of goods or services for payment, there are two types of interagency agreements. There are bureau to bureau ias which are agreements between one bureau and another for a specific and often an ad hoc service. Examples include one bureau wants to directly pay for and use another bureau staff time, or maybe access a contract that another bureau has procured. These agreements are typically initiated by the customer, the person requesting or receiving the service, and then, in contrast, services from central service providers have centrally established rates or cost allocation models, and customers may not always specifically request that service. So as is the case with facilities or certain technology costs. So the focus of our our project is on the central service provision of fleet facilities, technology services and printing and distribution. Next slide. So one of the foundational challenges of government central services is that customers typically have little control over the services they receive or what they pay. As part of this project, we interviewed seven comparator jurisdictions for our comparative research, and this challenge was echoed across the board by all of these other jurisdictions. This is because many of the services are mandatory or they're set by city policy. Internal service funds are also required to fully recover the cost of providing that service. Otherwise, they would require a general fund subsidy, which typically jurisdictions don't elect to provide. The prevalence of the provider bureaus fixed costs, at least in the short term, makes it so customers really have limited flexibility on their side. In terms of managing costs. This does not mean that city decision makers don't have the ability to control costs or impact costs or service levels. In fact, you all do in the short term and in the long term. But typically customers have limited control. And that leads to sort of a natural tension that you always see across jurisdictions. Next slide. While the scope of our project is focused just on internal services of fleet facilities, technology services and printing and distribution, some of the service solutions that we propose can translate to and will benefit all of the internal services. The original goals of the project are listed on this slide. It's to simplify the methodology and the process of setting and allocating internal service fund costs to improve the transparency and the alignment of these costs to service delivery, and then to provide clarity around the expectations, the decision making and the governance of service delivery. In our initial interviews, we discovered a whole host of challenges, some of which pertained to billing issues or the quality of services. Those two areas were out of scope for what we could accomplish in the amount of time that we had. But some again, some of the solutions that we proposed may may provide benefits to those areas as well. Next slide please. So one core challenge that we discovered that underpins the inefficiency that we see in the process, in setting rates in Portland is a sense of confusion and distrust. In our interviews with stakeholders, we discovered a number of challenges highlighted on this slide that all contribute to and manifest distrust between customers and providers. This became an especially notable finding in the context of our comparative research. What we found in interviewing other jurisdictions is that Portland is not unique in many of the technical construction aspects of its rates. While there are some bright spots from other jurisdictions that were drawing upon in our recommendations, most other jurisdictions have very complex rate structures. They don't have good documentation on the rates, and they don't have service level agreements with their customers. However, despite this, by and large, these other jurisdictions don't have the same level of conflict and disagreement that we see between customers and providers in in Portland. From our interviews, it seems that generally customers in other jurisdictions trust or at the very least, they accept that either the process or the people setting the rates are empowered to do so. As a result of this key finding, what we're working on in this project has an underlying theme of building back this trust between customers and providers. Next slide please. So we started this project thinking that our goal was to really simplify the rates and the rate making process. But through interviews and comparative research, we realized that there's a balance that must be struck between simplicity and accuracy. These rates are naturally complex, and when you try to oversimplify the rates, you you simplify the inputs or the cost allocation, you can end up with unfair charges to various customers. So we've amended our goal to focus on transparency and clarity to reduce confusion and improve efficiency, keeping building trust in mind. The strategies and solutions we have developed center around three areas on this slide. Creating standardized and clear rate construction and allocation practices, creating defined governance structures, and creating more effective communication. Next slide. So this slide shows a highly simplified model of that describes the interaction between two key rate making process strategies, where we identified distinct issues within cost construction on the left, which primarily relates to the process of identifying and aggregating cost inputs, a number of challenges arose related to understanding the details and decisions that were being made within the cost inputs, why and how costs are growing the way they are, and how costs can be contained within cost allocation on the right, which relates to the end charge that a customer receives for a service. The number of challenges arose related to whether allocations were being made based on a customer's level of use, or if the changes were the result of an allocation method where the customer's behavior actually didn't have any control over over the end charge. So it's helpful to think about these two issues when you think about issues of cost control. And the first area in cost construction, that's where one can holistically understand and make decisions that influence the total costs. Because these funds must fully cost recover, cost allocation is really just a way of dividing the pie so it can influence different customers differently, but you're not going to impact the overall costs. Our final white paper organizes our deliverables around those two theme areas. But in the interest of keeping this presentation brief, we're summarizing our deliverables for both of those issue areas on the next slide. Next slide please. So in order to support standardizing clear rate construction and allocatio, we're providing documentation. We're providing guidance. And we're working to help Portland implement some process reforms that are detailed on the slide to enhance clarity and confront key sources of confusion. We've defined and documented key terms that frequently are used in this area with different underlying meanings. We've also mapped the cost construction allocation processes we are in the process of, and we're in the process of collaborating with business operations to document the level of customer discretion or control that they have over different service codes. To enhance consistency and trust, we've created a variety of guidance documents, which include standardized cost allocation criteria to be followed, cost allocation guidance and a decision tree. And then we've provided recommendations to improve the process of building these costs and allocating them then to enhance transparency and efficiency. We're collaborating with key actors to institute reforms, including the creation of a new process for early budget review of cost growth rates, as well as improved communication around internal materials, materials and services inflation. And we're supporting the bureau of technology services in significantly reducing the number of service or billing codes that they currently deploy. So in our comparative research, we found that a recommended practice was grouping certain allocation methods and ending up with just a handful of service codes or billing codes for each service area. In contrast, the city of Portland has over 450 service codes currently. Within the four funds we looked at, it was over 400. Technology services has 177 of those codes. So we're working with them to well, it's not simplifying the underlying rate. It will simplify what customers see on their side and should also lead to hopefully less time required on the part of staff to really build those and push those rates out and change them. Next slide please. So ec is also providing documentation, guidance and reforms to support a defined governance structure. This is really important for building trust and relationships. Our comparative research found that other jurisdictions have governance structures where decision making roles and abilities are clearly defined and acknowledged. But one key challenge in Portland is that there was not a clear sense of who's authorized to make various decisions around rates, and there's no formalized process currently in place to support informed decision making and accountability around rate construction. So we're providing, again, documentation that defines the decision makers in their roles and their responsibilities. We're creating guidance and frameworks that provide a standardized and predictable process for decision making around various issues that may arise. This project was informed by a project advisory committee, which consists of 17 city staff, including customer financial managers, provider bureau directors, business operations managers, and citywide financial managers. And based upon their feedback, we are proposing the formation of two administrative governance advisory committees, one to provide transparency and input around high impact and strategic issues, and one to provide transparency and impact around mid-level technical issues. The bodies are meant to help build relationships, trust and decision making, and transparent accountability, which is particularly important at this moment. But as you all know, committees are very time intensive. We recommend that the city consider standing up these committees now, but meeting only as needed, and then periodically assessing them and deciding whether they need to change or scale down those committees. Next slide. So finally, on more effective communication in our interviews, we found that failed communication efforts are one of the root causes of frustration and distrust. Effective communication, of course, requires providing the right information in the right format at the right time to the right people, which is really hard to do when you have a complex issue area in a lot of stakeholders. We've developed a suite of communication tools, guide and recommendations that aim to improve the ability of business operations to both communicate information out to stakeholders and receive information in through effective customer engagement. The items that we are delivering are listed on this slide, but in the interest of time, I'm going to move on. Next slide please. Okay. So our initial contract term expires on August 20th. We're planning on providing our project management team with our final deliverables, which includes a white paper by that date. And we do anticipate coming in slightly under budget on our final contract by that time. So we have been able to extend our contract and plan on supporting doing some implementation support through October on some of these items. And that concludes my brief presentation. We are now available to take any questions that you might have.
39 Okay. Thank you. Looking to see if I have any hands up in the queue here. Councilor Green.
40 Thank you, mr. Chair. I was hoping not to be the first one in the queue, but I couldn't wait any longer. I really appreciate the presentation today. I care a lot about rate setting in general and this internal stuff is also rate setting, so I find it very engaging. Thank you for listing out the policies on the slides that are internal. So it's helpful for us to kind of understand that connection here. I have a specific question on two slides. So if you go to slide nine. Slide was really about when you communicate with your focus groups, you know and identify the need for standardizing clear rate construction and allocation. Yes, this is it. This is great. So you talked jessica. You talked about what you heard from your customers and the folks that you interviewed about the need for clarity and cost control. Yes. When I look at this, I mean, I see the way that rates flow from costs, but I don't what I don't know, maybe you guys are still trying to figure this out is what is the feedback loop that gets back from the customers to say, wait, are you doing cost control? And how does that work? Because because the way I see it, it's like you've got you've got one bureau or service area over here that has the purview over the program. And then exercising some administrative discretion to, to, you know, do whatever approach is, is viable. And then then and then they pass on, you know, a cost through a rate setting process to another bureau or another service area. Does that is that something that you guys are envisioning happens in, in internal to the new kind of city administrator structure, dca structure, centralized ops, or is it or is there any role for council engagement on this? I wonder if you guys can speak to that.
41 So I have a couple of thoughts, and then I'll turn it over to sarah to address the second part of the question. So this that's a great point. And I actually, you know, if I had thought about it, I could create sort of a loop for this chart that's on this slide. This is done every year. The process of aggregating cost inputs and putting them out to customers is part of the annual budget development process in business operations, is calculating rates every single year and sometimes making changes throughout the year. So this is certainly like an iterative process. And one of the deliverables that we are working on is actually with the city budget director and with business operations, and it's at a at early on in the budget process for them, for business operations, to provide information to ruth's team director, levine's team around the cost growth and what what is going into those cost inputs, what are the drivers and how much are our rates growing just for the process, just to continue current service levels. And then her team is going to review it, analyze it. And that is really an opportunity to illuminate, like what are the big things that are driving costs and what and then have a conversation. If leadership wants to have a conversation around what are the ways and the opportunities that we can constrain these costs, how are we going to do that? And so that's meant to both provide transparency and then tee up the conversation for decision makers around cost containment.
42 And I'm going to pass it to ruth for the budget development piece of it.
43 Sure. Yeah. And for the record, ruth levine, I'm the budget director. So, yeah, I mean, I think this is another area where, you know, if you think about current service levels feeding into sort of the base budget, like where do we start budget development in December, then, you know, this that would be sort of like, all right, we've we've combed through and we've said here are the like truly required things that go into just maintaining this. There's not like a bunch of discretionary adds to these costs. It's like, nope. If you want to keep that software contract, it's going to go up by this escalator, right? And then it would pass to sort of mayor's proposed development to say, you know, if, if, if there's a kind of constraint on that like this passed in 24, 25, then mayor wheeler put a constraint on the on the internal service funds of 5% that there's like a point of discretion for leadership there. And then likewise, I think, you know, council can also look at places where you think, you know, the. There might be savings. And I think doing this documentation in a more clear and transparent way will hopefully provide information to you all on what are a lot of very complicated, you know, rates. It's very hard to parse through technical details of 177 bts codes. Right to say like, but do we really need this thing? So hopefully it's communicated in a way that you all could actually engage with a little bit more easily. I think where the complexity comes is the process of allocating any changes that are made. May take a year to like, fully get rolled in to the allocation methodology. That's just the sort of complexity. But there are there are opportunities certainly to even even towards the end of budget development to say we're going to we're going to not fund this particular piece at this rate that even though it's been assumed in the mayor's proposed.
44 I appreciate that response. Director levine, I I'm looking forward to the documentation myself. One of the things I hope it it shows and I don't know if there's plans for this, but, you know, when you do a cost of service rate setting process, there's always some winners and losers as you spread the fixed costs of the thing out across bureaus. So I'd be curious to see how those play out based upon the methodology, because I imagine when you did your benchmarking, there's different methodologies. And so some sort of a comparative analysis on the distributional aspects of that when choosing different methodologies would be helpful for, for my consideration at some point.
45 Yeah, we did in our interviews, we asked other jurisdictions about that. And I'm recalling one of our interviews with the city of minneapolis, actually, the woman who was helping us there said that, you know, I just communicate out that whenever they use an allocation method that, you know, for something that has a lot of fixed costs, they usually use a proxy like fte or your total budget or something to try to distribute the cost. But there are always winners and losers. And she says, you know, we just do the best we can. We have to tell folks that this is an estimate. It's the best we can do using the best data we have. And that's and that. And folks seem to kind of accept that. But you're right that there are always winners and losers. So hopefully some of that information will become more apparent and transparent out of this project.
46 Thanks to councilor Novick.
47 Hi, I appreciated your explaining that you didn't want to sacrifice fairness for lack of complexity, and that the idea is to get the complexity less confusing. I was this is like an idle speculation question for ruth and sarah, really. But do you think it's possible that a reason why there's less trust in Portland city government than other cities was that we had this commission form where it was just sort of more division in general?
48 Yes.
49 I appreciate that wild speculation.
50 And I'll just share from my experience in working in a mayor's office, every time you would get to the budget development phase and you would do you would get the rates, there would always be kind of a background negotiation between council commissioners and the mayor's office and the whole component about fairness, right, would come into play. And so I think that our new form of government and building that trust and building a more documented process with more transparency on the front end and a reduced number of rates, is going to be really important to build back up. But yes, I, I would agree with that premise.
51 This isn't quite the same thing as it wasn't a matter of rates, but one of my favorite stories of the old system of government was biz used to pay PBOT a certain amount of money each year to help clean the streets, and when your bs decided they were tired of that, and they proposed a budget that had no money for helping PBOT clean the streets. And of course, I was the PBOT commissioner and I went ballistic and said, well, obviously they should help pay because the streets aren't clean. Then the storm drains got clogged, blah, blah blah. And nick was like, no, no, no, it makes no sense for us to be paying for it. So charlie, bless his heart, cut the amount the bs had previously been paying PBOT in half. That was his political choice between two competing commissioners, and I hope the same thing didn't happen in terms of rate setting, but I can imagine people suspecting that it did. Thank you.
52 It's a wonder that government got thrown out. Thanks. Councilor Novick councilor Pirtle-guiney, please.
53 Thank you so much for being here and sharing the information with us. It sounds like we're moving toward, excuse me, a simpler, more transparent system that still divides costs effectively. I'm wondering about next steps and timeline. And sarah, this is probably a question for you. How does this get rolled out? Does this become part of this coming budget, or does it not really come into effect until what would that be? 27, 28 and should we be expecting to hear pushback from bureaus as this gets divided differently? Should we be expecting councilor Greene mentioned winners and losers seen effects in the coming budget. I want to make sure I understand what this leads to for council.
54 Yeah, and I'm actually going to pass that one to ruth as she runs the budget process.
55 Yes. So I think there are definitely there are definitely recommendations that ec is delivering that we will implement this year. So the big one is the on that slide sort of better documenting the cost inputs to be able to describe like line by line, why things are increasing rather than just kind of having a bill come due. And folks say that's higher than we thought. So that's definitely happening. I don't anticipate methodological changes this fiscal year in terms of actually changing the allocation allocation methodologies for specific services. You know, just because it takes time to roll those out, I think and I think there's still going to be work ongoing about, as jessica was talking about, sort of grouping some of the charges together in a way that's more transparent. But I think the pieces for this fiscal year are really going to be hopefully really documenting what is in that current service level rate and how much is it going up by. So I don't anticipate they're going to be a lot of winners and losers from any changes that happened this fiscal year. And I think the we're also, as jessica mentioned, hoping to stand up initial iterations of the sort of governance committees that were talked about to at least meet a few times and test out. And part of the idea behind those is to say that ec is delivered a whole bunch of decision matrices of like, if there is a high impact decision that is going to impact is going to result in winners and losers, that those get fully sort of ventilated in that context. So those are the kind of main changes that we're planning to implement for this budget development process.
56 And when you're talking about the grouping to make things easier to understand and more transparent, is that on the front end for what we see, or is that actually on the back end so that we have a simpler process that potentially is more efficient to work to work within for all of our city staff as well?
57 So what they're doing is they're they're grouping. They're grouping codes. All of the 177 service codes. If there are a number of those, say 80 of those, all are fixed charges. And the customer actually doesn't really have control over what they what they get charged, they're just going to they're just going to be charged for what they get based upon the allocation proxy. All of those will be grouped together. And now they'll see sort of a single institutional or corporate charge. It doesn't, it doesn't. We retain the complexity underneath. All of the inputs are still going in as they did before, but it looks a lot simpler for customers. And the point being there is that because customers can't influence the cost anyways, they don't really need to know what these 80 different charges.
58 Cost is x yes.
59 Yeah.
60 And then the increases would still be documented in that sort of in the excel sheet that's going to line item out all the increases. Like you'd still be able to understand what's changing. But on the bill that like offices are paying each month, it's not going to have 77 different or 177 different charges.
61 Thank you.
62 Councilor Avalos.
63 I'm curious if this new structure ensures more equitable cost sharing, especially for smaller bureaus or equity focused bureaus. I know that's a word that's challenging right now, but that historically get hit with these kind of bigger flat overhead rates. I guess I'm just trying to understand internally, if you have a plan for having those bureaus, I guess maybe pay less or have an equitable structure. I'm not sure that I heard anything specific to that.
64 Yeah. Thank you for the question. So I think so the rates predominantly at a at a simplified model, they're either going to be charged, customers are either going to be charged on their level of use. So if they use more then they'll be charged more. Right. But they probably have a small bureau won't be using more of a service, or they'll be charged based upon sort of a broad proxy for these costs that really can't be changed. And usually the proxies that are most typically used are fte number of staff, sometimes size of your budget, and sometimes things. If it's a specific service, it might be, you know, things like your email, number of email accounts or something. If it's a specific technology service that that's a good tie for. So in all of those cases, a smaller bureau should should have a proportionally smaller cost. That being said to councilor Green's point, there's always winners and losers. And I think hopefully the governance tools that we've created will help customers and decision makers have more productive conversations and help troubleshoot how how do we resolve some of those governance issues and those the issues that may arise out of having winners and losers?
65 And I would just add, I think part of it would be the documentation and transparency so that we can have that conversation. If there are bureaus that feel like we're using the wrong proxy, or they are being hit with a higher cost, then that's a discussion that we can now have at that governance committee.
66 Yeah, that kind of leads to my second question. And maybe the governance committee is the place for these discussions. But how will service quality be measured? So what happens if a bureau feels they're paying for services that don't meet their expectations? How will you mitigate those kinds of conflicts?
67 So the first thing is what we saw in our comparative research and in our sort of outside research is that performance and quality of service is often documented in service level agreements. And we don't have a lot of we do have some in Portland. You do have some service level agreements that are in place, but we don't have them across all services. So that is definitely a need that's been identified. That was not something that we were within the scope of this project we could take on. I will also say in our comparative comparative research, as I mentioned earlier, not a lot of other jurisdictions have robust service level agreements because they take a lot of time to create and to maintain. But that's really where you want to have a conversation. I think first between bureaus about what our service expectations and then performance. And then there could be other conversations that you choose to engage around performance.
68 Well, and I would just add, as part of the core services realignment project, we are developing service level agreements and key performance indicators for services between customer bureaus and providers. And so that is a component, but that is a different project outside of the scope.
69 A couple of questions myself, I think this is a service agreements is important factor for me. The. Kind of to councilor Novick point and others is internal service rates should be annoying in every government, but distrust is a big problem and that that is in my experience, having worked in a few other governments and been the central services dca in one of them, the distrust is a unique Portland issue, at least in terms of my sense of how live that wire is. And it comes from this previous bureau centric idea versus one city idea. But given that, I would also say a service agreement is also something that shouldn't have to exist in a city that all works for the same boss. So I hope that we approach service level agreements very sparingly and only in the most extreme circumstances, because at the end of the day, if the city administrator. Directs work from one bureau in assistance to another, that shouldn't be unusual. It shouldn't be strange. That's called work. That's called normal expectations. One of my one of my questions to you is, you know, a lot of places we really value longevity in terms of especially in business services, because those are the people who know where everything's buried, everything's hidden. I am concerned, though, that in this new form of government, when I have this conversation across a lot of with a lot of employees, that they often don't sense that what they're looking at is not great, because the only model they've ever seen is the Portland model. So I have a lot of concern that we are entering into this, not knowing that there are other ways in which this can be accomplished, and I hope that you'll have an eye toward that, because I think not only in implementation and you can put all the spreadsheets in the world you want, but there's a coaching that goes along with this. There's a you know, I think it's really great that you're moving to a direction of, here are the things you can affect. Here are the things you cannot affect as somebody who, you know, took on an office one time and was told this is not an area you touch. And then when you dig into it, I was able to reduce by thousands of dollars my footprint because things had just grown without ever being accounted for. And I was. I inherited an office that was paying for a lot of stuff that was no longer prevalent. That's really it's quite helpful for a manager to know, here's what I can and what I can't affect. But to the question about. If I'm not getting what I need from a bureau, I hope we all understand that all of these work for the same boss. And again, I would say that's where you go to say, I don't feel like I'm getting enough air support. So I'm now considering hiring my own air person because of that. That should be a key indicator of a problem exists, or my operations have grown so much that it might be best to bring into an internal services. I hope that that's the direction that we're going. You know, miss morrissey, as we go through. I just hope that the teams that you bring together, that they are operating from a perspective of there are no sacred cows, right? Everything should be looked at. Everything can be touched. If we can do that and we can coach up the other idea that other models do exist. Annoying is okay because nobody likes to pay for something right off the top for out of your budget. But distrust should be a huge problem, right? We should. We should kill distrust wherever possible in this. And if everybody is working in the same pyramid for the same city administrator, I think distrust will will reduce over time. And this will take five years, I think probably culturally to really get to. But it means empowering at the at the every business manager, empowering them to say this seems odd. I want to get into it instead of being told that's just how we do it. If we're saying that, we probably have the wrong people in the place. So no more saying this is just how we do it, but you'll have our support. I appreciate kind of doing this deep dive. Can we just quickly do a rehash in the last minute of the next steps, please? I think I saw a couple things indicated, but let's just do that before we close out.
70 Sure. So our our original contract was set to end on August 20th, and that's when we will provide our final deliverables to our project management team, which consists of dca, morrissey, the cfo, cfo, director levine, and our our business operations manager, aaron rivera, as well as our project manager, tate white. And so we'll provide all of our deliverables to them on the 20th. And then we are going to have conversations with them around their highest priority implementation projects that they want us to help support. We have a list in that white paper. There's a list of items that we have that we would recommend implementing within the first six months. The big one is the one that ruth described. There's also a handful of smaller communication items, like making sure that their email communication listserv is updated, and creating a process to make sure that when they're communicating out, they're communicating to the right people, updating their website, helping them set up their first governance committee. All of those types of things are items that we've recommended be implemented within the first six months. And we are available to support with a handful of those at their direction.
71 Okay. Well, I appreciate your service. I know the contract is coming to the end. I'm sure the team appreciates the help and we'll look forward to the coming year. Great. Thanks a lot.
72 Thank you, thank you.
73 Okay. Clerk we'll move on to item number four, please.
74 Item four revenue reporting.
75 All right. Go ahead, mr. Barry.
76 Great. Thank you chair. Once again, for the record, jonas barry, the city's chief financial officer, here to present some information about revenue reporting just to bridge between the last item and this item. I am thrilled to talk to you about this, because I was just listening to the prior conversation, recognizing that in a couple of decades, it's been extremely rare to have anybody sitting at the dais who has the interest in, in doing this kind of deep dive, with the possible exception of the esteemed councilor Former commissioner Novick. So it's just it is exciting to be here and have this transparent conversation with you today. So the genesis of this is really kind of during last year's budget cycle, a number of questions, requests, comments around having more clarity about the revenues that the city collects and how we can be better at at reporting and communicating the status of those revenues. So the conversation today, the objective is to sort of start that education and kind of transparency about the mix of revenues, including collection, forecasting and kind of interactivity with council decision making. We'll kind of present and maybe if you can jump just to the next slide on the agenda present for maybe 15 minutes or so with plenty of room for q&a, there is sort of an implicit ask at the end of this, which is what would you like next? This, this committee as a, as a proxy for kind of the interest of the full council. So I'd love to get thoughts about kind of how we proceed next as far as reporting on this next slide please. So in the city, like most large cities, revenue collection is a very large and sometimes complicated undertaking. We have multiple points of collection. We have multiple. Technologies, multiple teams that are responsible for different sort of pieces of the city's entire revenue mix. So think about something as diverse as like a maybe a parks fee, a one time parks fee collected at a parks facility versus property taxes or something. That's a very large. So it runs the gamut. You pay the meter, right. You put your I guess it's an app. You don't put a credit card anymore. You pay your parking on your app. That's a city collection, a collection point of city revenue. And there's a lot of interactivity in the revenue universe between, you know, legal, you know, strict, restricted, unrestricted revenues boxes around, you know, technical legal requirements around collection. Obviously in our activity, with accounting, with budget, with the treasury department, with the various bureaus and service areas that share responsibility for that and with the community. Ultimately, when we're talking about revenues, that means we are collecting money from somebody, whether that's someone who lives in our community or someone who lives outside of our community and contributes to that, that revenue mix. So it is just it's a lot. It is all that to say. For purposes of this conversation, we've kind of started by bucketing into the kind of three major categories of revenue. And you can see those listed here. But essentially the buckets are taxes. So these are tend to be what the big revenue streams that we tend to think of, particularly property tax and business license tax. We also get a significant amount of revenue sharing from the state, which is a tax or the city share of a variety of shared state taxes. Some of the taxes, particularly property tax and business license tax, are unrestricted. But most of the tax, the other taxes we collect, and most of the revenues we collect in the city are restricted in some way, meaning that they're collected for a specific purpose or with a box around them. Example is gas tax revenues, for example, can only be used for eligible purposes related to transportation. Second category is service charges and fees. And kind of a couple subcategories in here, which we'll see. The biggest being the utility fees water, sewer and stormwater fees versus kind of everything else that we've characterized as a fee. And then the third bucket is grants. Grants are typically on a reimbursement basis, typically have very specific agreements related to the receipt and use of those proceeds. And also just flag that as as everyone here knows, we do now have a monthly reporting in the city administrator city administrator's report specific to receipt and use of grants revenue. Next slide. We also will just wanted to preview that kind of underlying all of this is kind of a very large, I don't know, a couple hundred line item spreadsheet that lists out literally every revenue that we collect. And this is just another example of the complexity. This is just a snapshot. I won't won't show at all. But but again, just wanted to sort of acknowledge that, that that deeper dive detail exists. Be happy to share that more. And I believe this is the.
77 I want to just interrupt real quick. Yeah. Using just this spreadsheet as as an example, there's been some discussion at times about when the city receives revenue, when we know it's coming and when it's in the account, so to speak. If I take a look at this, any one of these lines, I see a number associated with it. Are we recording those when we hear we're getting the grant, or do we record it when someone opens the mail and there's a $30 million check?
78 That is a great question. And for almost as many line items as you can see in this spreadsheet, there's as many different answers to that question. Okay. Right. So there are moments in time for accounting purposes. You know, we tend to sort of navigate around end of year for most things. And sometimes end of year might mean three months after the end of the year. To collect that, I know I'll hand to peter, and I don't know if you're going to maybe talk about some of this, but it's a great question, and I think that's part of the.
79 But not a straightforward answer. Yeah, it's. It's part of the answer.
80 Yeah. It's part of the dynamic I think today is, you know, where are the things that are of high value to council, to the public to see that we have some, you know, more regimented ability to do reporting on versus things that we just collect in every day. And maybe sometimes it's a wire transfer and sometimes it's a check and it takes time. So again, this is where I think it's helpful to have this discussion and identify what really is of highest value and how can we navigate a path to provide that information without overburdening the staff who do that work?
81 Thanks. Keep going.
82 Use that as an opportunity to hand off to.
83 For councilor. Do you have a question related directly to that? I do.
84 Yeah, yeah. Thank you. And it's just a quick brief technical. So I really appreciate the screenshot of the revenue spreadsheet. I understand that quite well. I see that there's a sort of like year to date actuals type of data that's collected. Peter.
85 Yeah.
86 Let me do you mind if I just jump in and we're like going half and half on the slide? Yeah. For the record, peter holtzman's the economist so first of all, for the spreadsheet, it is it's budget level data. It's year end actuals. And so this is the full year. It's unaudited at this point for fiscal year 2425. But it does not change too much I will say on top of that we you'll see at the bottom we have a revenue dashboard. That is the year end amounts over the last five years we are working on. And we'll have a monthly tracker. This won't be automatically updated. It's something we have to manually do, but that should be live very soon. That has that exact question of like how much is coming in per month? This is primarily for the taxes. It doesn't make as much sense for the services and fees. It's especially not the grants. To get back to the original question, since grants are on a reimbursement basis, we collect it. Once we the revenue is counted in the spreadsheet once the spending has occurred. And so that's a little bit different than and we forecast it differently and things along those lines just because of that one difference. So I would just add that clarifying point. The other thing I would mention about the spreadsheet is it's budget data. How the budget is grouped together is different for different things, specifically service fees and charges. There's hundreds throughout the city, and so you'll have a line item, parks or something that will be this is what we collected for service charges and fees. For a lot of the cases that might not be as granular as counsel would like. And so I pulled out specific ones, that of interest like tnc fees or sdcs for this spreadsheet, which again, we will share with you if there are any other questions, if there's something notable that you're like, I want to dig in more on on this, please feel free to ask the budget office because we'll we'll figure it out. And now, did that answer your question?
87 It did. And I really appreciate you anticipating the nuance there, because you knew I was interested in within your actuals, understanding that this is not like instantaneous, that you have to do some manual scrubbing and processing. So and I also like the tableau dashboard, I think it's really well presented. So thank you for that. Thank you.
88 We can go next slide. And so this is data that is built off of that that spreadsheet. And this is taxes. And you'll see there's some pretty big buckets. And we have slides at the back end that we won't present. That breaks down property taxes in business or in the business taxes. This is on statutory incidents. It's not necessarily who pays the tax from an economic standpoint. It's who the city collects it from. And so business taxes includes transient lodging taxes for example, the gas and heavy vehicle is a subset. And then property taxes, which is our biggest not only includes the permanent general fund, but also fpd and our children's levy and parks levy, as well as any general obligation bond levies. And then quick note the other tax. I should have just renamed that the arts tax, because that's the only other tax. And this is the only slide with unrestricted revenues or revenues that the city considers unrestricted. And those are marked with an asterisk. Just for the record. Next slide. This is the service charges and fees. We split it out because utility rates took up so much. That made it a little hard to read. And that kind of gives you a good idea of how much we collect and utility rates versus other charges and fees. Even the graph of other charges and fees is notable ones. There are plenty of others that are not included there. So if there's any questions about ones that are not on there or you want to break down, please feel free to ask. We also included some information on how different buckets are forecasted, like when is the council decision making process like implemented? Normally it's around either the forecast or year end fund actuals, which we'll talk about towards the end. And then next slide. And then this is the grants. Again to reemphasize the point grant revenue actuals are not the same as allocations or awards. I know there's been some things that council has seen recently where the numbers don't exactly line up, because this is based on the spending of grants, and which only counts once, or if the revenues only count once the spending occurs, and I will. Yeah.
89 So just using broad brush here federal grant on this says $46 million. Yes. We may have gotten a federal grant for 50, but we only spent 46. So that's what we're reimbursed. And that's what we would see here. Is that a way of saying that?
90 Yes. And or we might have gotten a grant for 150 million. And in that fiscal year, we spent 46 million.
91 Got it. And we might see that spending all the way through the through the years or whatever it is. Okay. Thanks for that. Keep going.
92 And then next slide.
93 Great. So I'm taking this last slide before we turn to questions. So this is trying to give you a general idea of what the process is for actually budgeting our revenue forecasting and budgeting our revenue. The asterisk again here is that this isn't true for grants. So it's a different process for the grants fund than for everything else. And the other kind of caveat here is that each fund operates a little bit differently depending on the types of revenue that they receive. But as a general matter, we forecast all of our revenues, all of our revenues in December and January, and that sort of sets the base budget. So for the general fund, there's the December forecast that comes out, and that's a five year forecast. But the base budget is based on the first year of that forecast. And we literally load that into our budget system in December. And that becomes the starting point for the budget on the revenue side. And this is true for the other funds in in the city as well. And then the forecast. And so all of this is in in budget development. So looking forward to the next year. The forecast is updated and has been updated historically in April ahead of the mayor's proposed development also obviously coincides with tax day. So there's other logic for why it's updated in April as well. And then and then when we sort of flip to the other side of the coin and we think about budget monitoring, we're in a world where we have forecast. And so like right now we have forecast revenues for the current fiscal year. And we're tracking, we're collecting, we're getting checks in the mail. And those checks you know, are stacking up. And the cumulative revenue is coming in sort of above or below forecast. That gets to the dashboard peter was talking about when you can sort of see month to month, we can say like where would we expect to be in October of a fiscal year? The only time council typically adjusts sort of for prior year actuals is in the fall bump. What will be the fall tor? And the reason for that is ending fund balance is at the end of the fiscal year. It's sort of the bucket that catches essentially the differences. Right. So both on the expenditure side and the revenue side, that all sort of ends up in the ending fund balance bucket that actually has to be appropriated by council. So when we come to you in the fall tor, you will be appropriating that as beginning fund balance, which is a revenue for the fiscal year that we are currently in. So it's a little confusing, but in essence, we will be telling you, hey, peter will come in a couple of weeks and tell you, hey, here's how our revenues for 2425 ended up compared to what we expected. And then you will actually make a budget change to adjust for that fact. What that means, in essence, I mean, in general with especially with tax revenues, really what matters is how they are coming into compared to forecast. And so the whole process of a check arriving in the mail, it gets deposited at the bank, it ends up, you know, being added to the correct accounts. All that process that happens in the background ends with, you know, an actual for ap two. And throughout the process of the fiscal year, we're just kind of saying where is where are actuals compared to what we expected them to be at this time of the year. And when that matters for council, is either is really for the next fiscal year or in the case of the fall tor the prior fiscal year. That's a little confusing, but just trying to give you a sense of for most of our revenues, it's this comparison to the forecast that matters, which is, I think, why the like a check came in the mail today can be misleading or not helpful necessarily, which is part of the reason we created the dashboard to try to help show you. Here we are. So I'll stop there. We'll turn to questions.
94 Okay. With that, I know councilor Green is already in the queue, so you're up.
95 Thank you. Just quick question on the revenue forecasting timeline that you showed. I know there's been some discussion on potentially moving the budget process up in the calendar a little bit to give council a little more time on the back end. I'm just curious from like sort of a technical or even a policy choice driven perspective, are there any constraints on forecasting that might affect that timeline?
96 Yeah, I'll turn to peter. I mean, yes, we can. I can talk more generally. Why don't you talk about the forecasting timeline for general fund.
97 Yeah. For general fund I there's it's it lines up with the budget to a degree. It's also driven by when we receive revenues and kind of my internal tracking of how we're doing compared to expectations for the current year impacts the forecast going forward as well. But also it also impacts the budget in development. And so. The forecast comes out in December and then business license taxes, the bulk of them, over half are typically paid in April. And so if those aren't coming in as expected or they come in well above expectation, I will adjust the forecast up or down. During COVID, it came in significantly above expectation. Fiscal year 2324. There was no adjustment. And then this past year, if you remember, there was also no adjustment. And but it does provide an opportunity for if there are excess funds or if the city needs to react in the other direction to not do that. Again, it is a choice. I would also say accuracy. The longer I have to forecast, the more accurate it is, and there has been a natural push to do it earlier. It makes total sense. It adds a certain degree. There is there is an optimal point at which this can be done. I don't know what that is. And maybe if councilor If I can, I'll just flag and I know just a preview. I think there will be a discussion at a work session finance committee in the next couple months about budget process. So this will come up, I'm sure, in that moment. Again, that is what what peter just described, and I think you're highlighting is one of the challenges. It's just a trade off of having sort of that earlier budget discussion is that that discussion begins without some of the certainty that, at least historically, we've been used to. Right, that that conversation starts in kind of April and in may, when we have the benefit of knowing a little bit more clarity about the forecast, that timing won't change. We'll still have that that moment in kind of late April and may, if we pull the conversation forward, which we can for good reason. It just means there's a little bit less certainty in that. And that's okay. It's just one of the trade offs that we have to acknowledge that the forecast could be adjustable up or down. As the conversation continues into into early may.
98 Yeah. And I can I can appreciate that trade off. And we wouldn't be alone in making that trade off. All forecasting entities would do that right. I'm looking forward to that. Thank you. The other question I had was actually it looks like in the backup slides or slide ten where you've got a pie chart of the property tax breakout. Could you just give us a quick rundown of the order of compression priority. Like what gets compressed first.
99 Yeah. Local options get compressed first. Bonds don't get compressed at all. So the children's levy and the parks levy get compressed proportionally until they're down to nothing for an individual property. And then the permanent levies, which is fbar, and the general fund permanent levy would then get compressed down. There is a little bit technical because it doesn't really get compressed. They it's like it's almost like a bond. They have to have the that amount. That is. So it's more adds compression to the general fund technically. But yes, if that helps.
100 That does help. Thank you.
101 Vice chair.
102 Thank you chair. Before I ask the question I had gotten in the queue to ask, I want to follow up on a question from councilor Green around the forecasts and what that means for the budget timeline. You said the forecasts were December and then April, and I know there have been some conversations with councilors about backing up the process a little bit, and some conversations about backing up the process a lot. If we assume that backing up the process at all means that council takes on the risks of April, essentially, that the trade off there is there's less certainty in the mayor's proposed, and we may need to make up for that up or down, depending on the April forecast. Presumably, we want to make sure that the mayor has the December forecast numbers, though, when he starts doing his work or he or she in the future, start doing their work. Do you have a sense, given when those numbers come out, how long it takes to process those, how long it takes internally to really understand what that means for bureau services? When we talk about backing up, the mayor's proposed a little bit versus a lot. What a reasonable time frame is that council should be thinking about asking for. And maybe on the flip side, what an unreasonable time frame is.
103 I can take a first pass at this. So yeah. So I do the revenue forecasting is one piece of the picture. Right. And it is an important piece. And as peter I think mentioned, you know we get property taxes in October. A lot of blt refunds in November. So we really the general fund revenue forecast really is a December product for that reason. There's stuff on the other side of the equation too, right? Like our personnel data. The reason part of the reason when we come to council in the fall, tao, is that's kind of the last point in, in November, essentially, where any adjustments that council makes could be reflected in the base budget, the starting point for the budget. So that also is a factor to consider right on that end. So in essence, kind of December ends up being the early early December ish ends up being the earliest time that we can realistically load the base budget. And that is the starting point for all, you know, any changes from there forward. And then and then there's a question of just sort of like. A, you know, allowing for enough time for proper decision making to happen in order to meet whatever, whether it's a gap or a surplus between kind of the where we start in December and where we need to end in order to have a balanced budget. That's one piece of the picture. But there's also just kind of understanding. There's a lot of, you know, the things like, you know, what are our spending, what our actuals looking like in the current fiscal year. Right. Like it's really hard to do any year end projections right now. It gets a lot easier once you get in, you know, three, four months into the fiscal year. So that's kind of another variable is like how do you know how much it's going to cost to run this service next year? Well, it would be very helpful to have enough data in the current fiscal year to be able to say that with some level of certainty. So, you know, I think that pushes you into January, no matter how you cut it, to get a reasonable first pass from sort of service area, kind of whatever, whatever it ought to be called. Kind of the former requested budget, time, time frame. I think it could be a few weeks earlier than it used to be in late January, but I think it really would really struggle to go before that.
104 January to have full information and then time for bureaus and your team to help process that information, and then time for the mayor to make decisions. Essentially, what we're thinking about when we think about how far could it back up or not.
105 Yeah. Yeah. I mean, the certainly for the mayor to make that January is just sort of that what used to be the requested budget. Certainly then the mayor would need to have some time to make decisions from there.
106 Absolutely.
107 Yeah.
108 I want to understand a little bit more about how the forecasting and actuals work moves into fall town, because I've never experienced before this year a government where you're making those decisions later, as opposed to cramming to get your ending fund projections in time, to have beginning fund to do your work for the next year's budget. So when do we actually have that information together? When do we have those actuals? From the end of the year. And as that comes to council in the technical adjustment process in the fall, help me understand how much that process is really about internal adjustments to ensure that our actuals line up with what we budgeted. And do we need to move things around in accounts because money came in in different places, and how much historically and in our budget policies has that been about? Second bite at the apple doing things differently?
109 Yeah. So let me let me try to take a pass at this. So first of all so basically we get our ending fund balance in. We start to get numbers that are reliable like the end of August and so or in August. And the main action that that I mean aside from technical moving things here and there, the main action is for each fund to take that ending fund balance, which is a combination of revenues that came in above or below forecast and expenditures that came in under, because they couldn't have gone over. And so you add those two things together, and that is the amount that that fell to balance in the prior fiscal year. We then have to adjust for, you know, we essentially we we've already budgeted some beginning fund balance. Council already appropriated that. And so we have to subtract that out of the ending fund balance. And then, you know, because we budget conservatively typically historically there has been both some revenue that came in above forecast and some sort of what I would call true underspending like, you know, we carried over this amount, we returned this amount to the general fund, and still there's some change left because because we couldn't have gone over. Right. That that is the that's probably the combination of those two things are, I think what lead to the second bite at the apple. Sort of belief, I guess. And it has been true in many fiscal years. And but the. Yeah, but you know we'll talk more about I think why it's probably less true this fiscal year. But that's kind of the core action that happens in the fall is that just like let's we kind of pick up what was left over from last year and put it into the budget for this year so that it can be used as a resource for other governments. I will say punt all of that. Don't use any of it. Like the county doesn't use any of it until the next fiscal year. So you're always kind of looking backwards rather than trying to project it out.
110 So when you say when we call it a technical adjustment, what we have to be doing really is very technical. It's moving money in the accounts that came in differently. Yeah. Some councils have taken the opportunity to spend that, but we also there are many governments that choose not to. I assume when we get into talking more about the technical adjustment, we'll talk about the policies there. But I'll just note that I'd love to know what policies we have on the books that we may or may not have followed as it relates to that being a more technical or more substantive action.
111 Sure. Yeah.
112 Thank you. I can just add a little context. As the economist, I will also say the post COVID years were a bit extraordinary in the sense that there was a lot of one time available during the fall, fall bump. And that led to, I think, more of a that view of a second bite at the apple than previously existed. And so I don't know if that was always true, and I suspect not, because there just simply was not very much funding available. And then we had a couple of years with plus 60 million, and then it kind of changed. And also, you know, a kind of extraordinary circumstance. So it kind of changed the recent history and the view of that.
113 Chair, if I may, I'll, I'll just show my cards to say, I think not just at the dais, but amongst our bureaus. There is a sense that that is the culture now and that concerns me. So one of the reasons that I'm interested in seeing as we get more into the fall tor process, what the policies are that are on the books that we may or may not have followed, is that I hope that we can treat that as a technical action as much as possible.
114 This is a great part of the discussion, and I'm happy it's gone that direction. I have some pretty strong feelings as well when it comes to the idea that a fall bump or a technical adjustment is a second bite at the apple, I think I'm quite on the record both in my work history, but also on this dais of government has to be flexible and in the emergency. But that emergency is over. And so as somebody who benefited from putting programs on the ground in the for this city, and with the fall bump, that was a different time and different type of money. And I do think it is time to break that culture. I think that I think that that that practice has to be available, and it should be known that it's not an optimal practice. And I don't think anybody at gfoa would ever tell us that we were operating in the best practices realm. I'm always going to bring it back to that. I've been to one gfoa conference. It was the worst conference I've ever been to because I knew nothing that they spoke of, but they were great people. But I just I think that the fall and spring adjustments are interesting in that sense of like how how much of an impact it has then on our beginning fund balance when we start the next year's budget. And I appreciate the, the comparison to the, to the county and how they do it, I want to adjust a little bit and go toward grants, bringing back up the county. They have a practice there where a department will seek approval for a grant application, and then maybe six months later or longer, sometimes they will come back then to realize that that revenue as a budget adjustment. And so the governing body gets two bites of the apple, so to speak, to keep the same metaphor going. But getting to the reporting discussion, and when we recognize revenue and what is real, what is not, when council has decisions, I think about that practice. And as a person who has sat through so many times where I'm thinking to myself, boy, I have already gotten this briefing about the, you know, anti smoking campaign that the Multnomah county health department is going to unveil because they're applying for a $15 million grant from the Oregon health authority with matching funds from a federal grant. And I feel like six months later I have that same conversation. But it did serve an important role in that the council, by taking a vote and by by indicating an action, they have an idea for the number of fte that will be that will be hired to. If we are successful in getting a grant, they have an idea whether it's an advertising campaign or a nonprofit provider kind of money out into the public campaign, there is a sense of ownership on the dais for the direction that grant efforts are going, and then it's not a surprise when we receive a grant award to say we were successful. We were successful at more than what we asked for or less than we asked for. But generally we came to you and said, we think it's a five person program for the next three years, and we got enough money to fund a four person program. That seems like a very easy conversation that I've noticed the county commission be able to have, that I'm not sensing that we have here and in this time where we're considering the role of the executive branch and the role of the legislative branch, I wonder if that practice couldn't be something we consider to be transparent about what we're pursuing with other agencies and bring counsel into the. Yes, if you you know, basically it's a way of saying, yes, mr. Mayor and mr. City administrator, if your staff is successful in this grant, we will as the budget authority, we will allocate those funds. But right now there's this it seems to be a bit of a disconnect. And I think it's a growing pain more than anything else. I think it's just a growing pain of the system. But I would encourage us to kind of look at that. If that isn't something we're familiar with, to see if there's some possibilities there in the future. And I don't know if we have a history having done that and moved away from it, but I don't remember one yet that we've said, hey, we're going to bring this grant application to the council. We've brought grant awards back and said, look, we have this money now.
115 Yes, it's a great observation. It ties a couple of threads, I think, together that are marinating out there that we don't quite have answers to. So I appreciate the suggestion. Certainly look into it. Including I'll just flag there have been some early stage conversation kind of the start of last budget cycle about having more regular grant actions, coming to council, maybe sort of a monthly or regular periodic action. And so that thread ties together. Look forward to the challenge of getting onto agendas instead of one. But but no, seriously, I think that that that's a great suggestion. Certainly there's some procedural and process improvements that we need to continue making on the grant side, and so we'll carry that forward and look forward to coming back.
116 Yeah. You know, it's signaled I think. Again, this comes back to what we've gone through the last five years with with recovery money. There were unspecified grants. Right. It was here. Government a, b and c do what you think is most appropriate within this very large umbrella, which meant this body had some decision making to do. But in most of my career, when my staff has applied for a grant, there's not a lot of decision making because you applied with a 45 page application that says, we intend to put a program out for safe routes to school in this neighborhood that is underserved. And here's how we want to do it. So by getting that grant, it's not a point where then the council is going to debate how to use it. We've already described it. In fact, if we don't use it the way we described it, we're going to lose it. There's something there. In terms of practice over the last five years and the normal course of action for all of our federal grants and how we how we do that, that I think spending a little bit of time would, would, I think, ease some of this tension between is that an executive or executive decision moving forward, a plan that hasn't been brought in by council? Or are we bound to it? Because that's what we got granted for, and now we're just asking council to rubber stamp. And I think we can probably achieve both without being disrespectful to the different branches of this government. With that councilor Green.
117 Thank you. I appreciated the discussion. The laying of cards on the table, as it were, of preferences for how we treat the fall technical adjustment ordinances. I'll just add my voice to that. I think that as a general practice, I kind of agree with that should not become another mini budget cycle. I think we need to stick to our priorities. And again, I'll reiterate the recommendation to adopt a priority based budgeting process that helps us stay on track and help this enterprise become what it's designed to become. Right? But I will say that I know that there is forecast uncertainty and world happens. History happens, and we're we're left with it. And so if there are periods of a windfall, I'm hoping that we have that instead of the shortfall. But if there are periods where we realize a windfall, those are always one time funds in my in my view. And so we want to we want to resist the urge to open up that for, for council's perspective as another budget process, because I'm afraid that councilors might say, well, this is this is a new ongoing money which, which it is not unless you're forecasting changes which it may not. And so if we're going to I don't know if we have policies in place or if we need to develop them to say, look, if we get accumulation of one time funds, here are a priority for those uses. Like we have a maintenance backlog, you know, if we if we could prioritize those for capital maintenance projects, that's great because those are one time funds building up our reserves fund or doing something like capitalizing revolving loan fund for broad purposes. So those are just some ideas. But I just wanted to lay my preferences on the table as well.
118 Thanks, council. We go to councilor Novick.
119 I just had to note in response to that that we do have a policy that 50% of one time funds goes to capital maintenance, which council has ignored. But you probably but we just recommitted ourselves to following in the context of the parks levy.
120 There we go, vice chair.
121 Thank you, chair and councilor. I just want to note my agreement on all of those counts. I don't think that the funds need to necessarily sit there, but to allocate them to those those one time fiscal responsibility measures that can help us, frankly, get ahead in the future so that we can do more in out years, I think is a very smart thing to do.
122 Okay, I'm going to offer up any closing comments that you'd like to make. There are no more questions from this body.
123 So if I may, just one thing and councilor Green, you just mentioned this as well. Just a reminder for maybe for folks watching that as we experience this last budget cycle, I'll take this opportunity to use my favorite quote, which is all predictions guaranteed wrong in forecasting. We want to be as close as possible, but it's almost impossible to be right. And it's constantly evolving. So just recognizing that that whether we're talking about this moment in time, December forecast, February midpoint adjustment, April end of year are always going to be different numbers because the world evolves. So I just want to take this moment to also just acknowledge that.
124 Great. Thank you. Appreciate it. I know that revenue reporting has become a hot topic at times. And as this government grows into its sea legs, I think we've got some spots where we can make it, make it work for everybody and some ideas out there. So appreciate this dive into where we're getting our revenue from. It gives a good perspective for the balance between property taxes and fees and just utility rates. And if you add it all up, it doesn't equal 8.6 billion. And so that's the magic question for everybody who doesn't necessarily understand municipal budgeting, how that is. We're not going to answer that today. And if they get that maybe they can have a job here. But with that I think I'm going to thank you and ask for the next item be read.
125 Item five assess property for system development. Charge contracts, private plumbing loan contracts and safety net loan deferral contracts.
126 Thanks. It's just the same group of faces. That last comment that I made was not a dig at you, jonas. It was more of a it is complicated, and I know that your team knows. We all know how 8.6 billion comes out of what was about two and a half. So it was more of an offer to the public of it's got layers and layers. So anyway, with this item great.
127 Appreciate that. We'll take all the good help we can need. Our standards are slightly higher but but that's a good starting point. Good afternoon once again. For the record, my name is jonas berry, the city's chief financial officer. From time to time, typically once a year, the city processes low cost loans to private parties to assist with payment of costs related to certain infrastructure improvements for which those private parties are responsible. This proposed ordinance will authorize the current package of loans for private parties that are identified in exhibits a through d. If you care to see all those gory details. And once again, slide holt is here from revenue division to provide additional information.
128 Thank you. Join us and on.
129 To holt for the record. And I'm the interim audit and accounting manager at revenue division. And I do have online on zoom. We have sherry mathias who's prepared a lot of the information that we will talk about as long as well as she's our our one of our leads experts. So the city code, city code allows property owners to finance system development charges and sewer improvement fees through the city. Property owners arrange financing for these charges and fees. They enter into contracts with the appropriate bureau, such as the bureau of environmental services, parks bureau, Portland bureau of transportation, and the water bureau. The revenue division assesses property owners for system development charges, also known as cdc contracts, and deferrals based on those contracts. This ordinance includes 279 liens assessing. $3,545,395.04 for system development charge fees. These one time fees are based on proposed new use and increase in use of the property. The fees apply to both new construction and residential project projects, which increase impact to city infrastructure. So thank you for your time. We do have, as I mentioned previously, we have three available for questions if you have any online. And then I of course am here to answer any questions you may have.
130 All right.
131 Now I'm going to ask you to say it in a more generalized public normal way. What is the action today? What where's this program come from? It was very technical. Let's get an idea for like what a property finds itself in this situation. What what exactly we're talking about okay.
132 And that would be something. Shari, if you're comfortable speaking, can you talk a little bit more about how you would go about assessing these fees?
133 Yes, absolutely. For some reason my camera is not working. But yes, I can answer those questions. So for the record, I'm sherry mathias, I'm with the revenue division. So basically what happens is a property owner will request financing with the sdc bureaus, and then the sdc bureaus will submit a contract to them for the financing. The property owner will sign the contract and then send it into revenue. And then we essentially we process fees on behalf of the sdc bureaus for our financing that we currently provide to these customers, and then we assess the charges on their behalf.
134 Thank you. Any questions? Or amongst the group here I see vice chair.
135 So I understand the financing is what is the document before us that we're being asked to approve the contracts for financing, or is the document before us? Going after funds that were financed and not paid? Because I'm seeing here a lean accounting system is this that these are unpaid charges, or is this the actual contracts to finance these themselves?
136 Right. Yes. So they are the finance contracts for the finance. They are the fees for the financing.
137 Okay. So this is allowing the financing and in. In cfo barry's introduction, we were told that this is often for lower income property owners I believe. But I'm seeing a lot of things here where the mailing address is different from the full address and where it looks like perhaps these are developers who are making these upgrades to properties. So help me understand who we approve these loans for and who qualifies.
138 Yes, absolutely. So yes, most of them are developers who are creating low income housing for these. And there are some, I believe, just property owners who are making updates to their property. And these fees are part of those as well. But mainly it's property developers who are requesting these fees.
139 So it's to it's for property developers who are building housing that will be available at a subsidized rate to income qualified portlanders, correct?
140 Yes.
141 Okay. And for the individuals who are making upgrades to their own properties, what are the qualifications there? I'm sorry, chair, I just this is a new program for us. That is actually a question I'll have to get back to you on, because I don't have the full answer for that. I'll have to ask the fcc bureaus about that question.
142 And are these. It would be great to get that answer back when you have it. Are these no interest loans, low interest loans? What's the benefit to the developer of financing with the city?
143 Yeah. So a lot of these are 20 month deferrals which are no interest, which was passed by city council a couple years ago. And so those are no interest. A lot of the other ones are at the city's interim rate. So at the current 6.2 or a previous 5.2% rate. And so yeah, they either fall under the 5.2, 6.2 or 0% interest. And some of the private plumbing loans have a lower interest rate as well.
144 Okay. Can I keep going with 1 or 2 more chairs with the low interest? Not the no interest. Where does that revenue that we gain from the interest rates go within our budget?
145 That is more of a budget related question, I don't know. Are you able to answer my question?
146 You know, I'm pretty new to this program myself, so I do not know the answer. But we will definitely get back to you on that.
147 Okay. Thank you. Final question. Have we ever had significant challenges in the past with developers not paying back these loans, or is this a pretty low, low drama, low concern program? Historically.
148 I believe there have been some developers who have defaulted and not paid them immediately, but they are able to set up payment plans if they do default and not pay within the time frame. And that is something that our our financing program does allow them to, to do as well.
149 Thank you. These are great questions, and we'll make sure this is coming back to council for final approval. So we'll make sure we have answers before that at that moment okay.
150 Thank you. And it sounds like we have had some defaults in the past. Are there developers who have applied who are on this list that we have concerns about receiving payment on based on past performance? Or do we generally not reapprove loans when somebody has struggled to pay, I assume is prioritization. If you're a developer, that it's not that you're not able to, but it's that you are not prioritizing paying this back, which is why I'd ask.
151 I believe I don't know for sure if there are past developers that have defaulted on this list before you, but that is a question I will find out as well.
152 Perfect. Thank you so much. Thank you, chair, for letting me continue there.
153 Oh, it was great. You know, I forgot to warn you all. You were about to become the board of trustees for the bank of Portland today, so I should have done that. And I actually think it's kind of an interesting program. But at the end of the day, if somebody does default to those questions that are important, it puts us in a lead position. And that's where our position along amongst others and collected in property taxes are collected at sale of property, I think is probably more secure than when we take waiver actions, so to speak, because we can see those projects never come to fruition. So I appreciate it. And if you think about the nature of yes, there are a lot of developers, but there's also the just the nature of aging in your home and life happens. And sometimes because we're a city of codes, you have to upgrade way more than you expected or something comes along. I think that this program offers some some interesting options that make it more accessible to improving a place so that you can stay in that place or use our infill programs. Et cetera. Et cetera. So it's interesting. It's a first for most of us learning about it here. And we do have a little mini bank of Portland. So there you go. Councilor Green.
154 Now that I'm a trustee of the board of the bank of Portland.
155 There you go.
156 I do ask, I first of all, I think this is actually pretty good to have as a tool, especially if we're going to lean on the private sector to finance infrastructure through local improvement districts, sdc and the like. And not everyone's got the liquidity to do that up front. So it means you don't get much infrastructure, right. So county counterparty risk notwithstanding, it'd be interesting to see if there's a mechanism to have a joint contract among a number of people within one lid to have this loan go go forward. Because, I mean, I know that there's like whole streets that would maybe prefer in my neighborhood in particular, would prefer to because I saw some west Portland park properties on here. And I think there are people who would like to have those streets paved and have sidewalks put in. But there's a coordination problem. So there might be an opportunity for the city to be flexible, provide loan loans in that regard. But we would want to charge a market based interest rate to reflect that opportunity cost.
157 Yeah. And just so couple of things for clarification. One is we're not the bank of Portland cfo. I'm obligated to state that, although I understand the analogy. Second thing is there is councilor. Obviously these are sort of separate from the typical lid contract process. So that local improvement district lid, you know, extended contract for groups of properties does still exist as sort of a separate tool. And this is a tool to address this specific bucket of sdc and other charges that are not within an existing local improvement district. But yeah, I understand the suggestion and yeah, obviously open to looking at any opportunities to help our folks get their needs met.
158 Curtis just doesn't want to file an sec filing, doesn't want to have to take on that official stuff. So we'll argue over the bank of Portland.
159 This was actually just a big test to see if he's the right cfo and he's passed the test.
160 There you go. There are folks with some strong.
161 Opinions about public banks in our community.
162 That's great. I have strong opinions about all sorts of things. Okay. Any other comments from the dais? This has been a meaty meeting. There's a lot of like those background topics. And so and this is this is one of our actual we need to take an action on. So make sure I get that right. I think we are taking this action. We don't have any public comment that has signed up, but we will refer this to the full council. And so I would certainly entertain a motion.
163 I'd move that. We refer this to council with a due pass recommendation.
164 Second.
165 Okay. Vice chair moved and seconded by councilor Novick. Any further discussion? Okay. Clerk call the roll please.
166 Pirtle-guiney I.
167 Novick I.
168 Green I.
169 Avalos I.
170 Zimmerman I.
171 With five ayes. Motion to send the ordinance to the full council with the recommendation that it be passed is approved.
172 Thank you. Appreciate it. Appreciate the everything from the finance team today and the budget team. So thanks very much. Okay colleagues, our next meeting is scheduled for September 8th. And again, some more topics that I'll put in the category of. Some property surplus items, some some fee discussions. But the summer I discussed with a few of you before the summer was going to be kind of the time for those those policy debates or those kind of reporting structures to be fleshed out. And the finance team, revenue team and the budget team have been working hard. So this was the first preview of, I think, a few of those kinds of discussions, and I appreciate everybody's participation in that. I know our colleagues have been wanting sometimes for some direction in terms of what are the city's policies on x, y, and z, and I think we're the first hit for that. So with that, we'll see you on September 8th, and I'll call this meeting adjourned at 148.