The record · Transcript
Council Session — 2026-01-22
Transcript from the session's official auto-captions (27,702 words), shown in readable case and split into speaker turns. Speakers are not yet identified (colors just separate consecutive turns). Auto-captions can contain errors — check the recording for anything that matters.
Session summaryEditor-reviewed
The Portland City Council convened a work session on 2026-01-22 to review the city's financial condition, focused on the General Fund and longer-term budget stability. Presenters outlined a revenue gap for the current fiscal year, described as $13.6 million on top of an earlier addressed $11.4 million shortfall, feeding into a total deficit figure reported as $66.9 million in the December forecast, with figures around impacts of federal tax law changes stated inconsistently across speakers. Discussion covered volatility in business license tax revenue, property tax dynamics tied to tax increment financing returns, declines in transient lodging and state shared revenues, and options for closing the current-year gap ranging from reserve draws to potential service reductions, with an enterprise efficiency savings target described as unlikely to be fully achieved this year. A proposed multi-year phased stabilization and recovery plan, including formation of a work group, was previewed. Council members raised questions and comments on encumbrance carryover practices, equity considerations, debt service scheduling, tourism and economic development, potential furloughs, reserve fund policies, and requests for additional data and monthly updates. Votes, where they occurred, are recorded in the vote ledger. The session adjourned after multiple rounds of council questions due to time constraints.
AI-drafted from the session's auto-captions, reviewed by an editor — describes the discussion only; recorded votes live in the vote ledger. Captions contain errors.
0 Good morning everybody. Nice to see everybody in the sunlight. Now calling this work session to order. Sorry. Let me read my notes real fast. Yeah. This morning we're going to be having a a work session to discuss the the city's financial condition and some forward looking planning about how to respond to the real challenges in our our local economy and our tax collection. There is a lot of work ahead, friends, and we don't have all the information we're going to need at this moment, but we're going to start working on this together, and it's going to be for the long term as a team between the legislative and executive. Before I turn it over to cfo barry, to lead today's presentation, I, I'm going to I also will turn it over to city administrator lee. But I first wanted to turn it over to councilor Zimmerman, chair of the finance committee, to give some opening remarks. And then we'll go to city administrator lee.
1 Thank you, mr. President. So I appreciate this. And I think this is such an apt work session for this time frame, as the administration over the last few weeks has made us aware of not just upcoming structural and revenue concerns. This is one of those years where we even have year of concerns. And I think it's important that as we listen to our cfo and our and our team today, that we keep that in mind, that part of this conversation, and not often are we in conversations about the current year. We're often talking about the next year's budget, but there will be a little bit of of both, I think for all of us in the back of our heads. A few weeks ago at finance, I, I mentioned the chairs working group on finance, and mr. Barry is essentially the leader of that with us and has put together some really great, I think, initial ideas in our conversations on the directions to go. And you're going to see some of that today. And so very grateful to the cfo's team, because that type of. Thinking takes time and effort and deliberate and being deliberate on all of those efforts. So much appreciation. I do think that if council, the best way for council to receive this brief today is, is just mindful of what we're being told. And this is not this is not your typical hey, we have city budget constraints. We're in a kind of a different conversation. So I would encourage people to really tune into that and the themes and trends that you're going to hear from the team. And since my colleague just walked in, that working group that I mentioned is, is I've asked councilor Greene, who also sits finance with me, to to participate. And so between everybody that that jonas is working with, I am very hopeful for where we'll go with that and also what we're going to hear today. So thank you, mr. President, for those couple of minutes.
2 Thank you, councilor Zimmerman, city administrator.
3 Thank you, council president. You know, over the last several years, we've been knowing and aware of some of the tight financial conditions that we were going to be in as a city. We have been diligent in working through a lot of different scenarios to try to address some of those budget constraints on a year to year basis. I want to keep in mind, as we receive this information today, that we think about the long term ramifications for the decisions that we're making and what those impacts will be as city staff, we will continue to monitor the economic condition. We'll continue to bring forth ideas and potential policy decisions that will help us navigate the economic conditions that we're seeing right now that are having the impacts on our budget process. Our cfo, along with our budget and bureau director of budget, will also talk about the challenges that we see and the information that we have to address some of those challenges. Challenges as of we know today. But this will be a continued conversation. Everything won't be resolved in this meeting today. There will be several conversations. This is just really setting the table for the future conversations that we'll be having to address. Not only this current year's budget constraints that we have, but the structural budget issues we have as a city moving forward in the long term, remedies that we want to develop to address those financial constraints that we have as a city and the structural issues we have as a city. At this point in time. I'll turn it over to the brains of this operation as it relates to the financial arm of our organization to walk council through a presentation. I will chime in as well on a couple slides on here to address, but we'll walk through and have any questions or answer any questions that council may have. Jonas. Thank you.
4 Great. Thank you, city manager lee, appreciate that. Thank you. Council president and councilors for the record, jonas berry, the city's chief financial officer. Also, councilor Zimmerman, thank you for that introduction and I look forward to working with you and counselor greene as we drive some of this work forward. And we're going to talk a little bit about that here today. Primary goal today is to provide additional clarity about the current state of the city's financial condition and the budget, and a plan and plans to move to rapid action. As kelly mentioned, we're committed to sharing timely information, being transparent. I do want to note that one trade off of being timely is that the details can be less specific as we're developing those in real time. Indeed, some of the information today will be incomplete. It's not yet available. Learning in real time, including I think we may have some updates for information we literally just received 30 minutes ago. I will probably receive more during this meeting. That's the real time nature of this work, but we'll absolutely look for forums and formats to to share those additional details as information becomes available. The agenda I'm going to provide kind of some big picture context setting, including talking about kind of a plan to get to a long term stabilization recovery point. City economist peter holtzman will provide an update on the revenue picture and what's evolved since the prior 2025 forecast. And then, very importantly, cbo director ruth levine will discuss the expenditure side of that equation and present some options for addressing a one time gap in the current year. And I do want to emphasize that is a really critical part of this conversation. So I want to make sure that we leave space, ample space to talk with you about those potential solutions. Next slide please. Ruth, I think we might be skipping a couple ahead here. I don't know, sally. Were you going to. Yeah. Sorry. Apologies. I think she is going to talk about priorities.
5 I want to pause for a second just to ground us in today's conversation and the priorities and values that will help guide how we approach the work, and how staff brings recommendations to you as it relates to the budget. First is people first. That means protecting the essential services while supporting the workforce that delivers to the to our community. Reliable service depends on people who are supported, clear about expectations and able to sustain the work in overtime. Second, organizational health. One of the reasons we are here today is that the city has been operating under a prolonged strain of unhealthiness as it relates to our financial arm, clear roles, healthy systems and realistic workloads are essential if we want to be consistent and have consistent results that stabilize our organization. Third, being a high performing organization, we cannot solve a recurring fiscal problem with one time fixes alone. We need clear goals, measurable outcomes, and discipline so we can stop moving from one annual budget crisis to the next. Fourth, community experience. Every decision we discuss today has a real impact on portlanders on service, reliability, response times, and trust in city government. Those impacts must be explicit and the choices we make moving forward. Fifth is transparency. I want to be clear with council and the public about what the numbers are telling us, what our options are that exist and the trade offs associated with each. There are no easy choices and I do not believe in obscuring the reality which we are faced with today. The last is responsiveness. This moment requires timely action, close monitoring, and willingness to adjust as conditions change. Today is not just a single decision point, and this is just the beginning of discipline multi-year efforts. These priorities guide how staff evaluates options and brings them forward. Policy direction and fiscal decisions remain with this council, and our role is to support you with clear analysis and realistic choices. All these priorities rest on one operating principle fiscal sustainability. If we do not align ongoing revenues, service levels, and workforce capacity, none of these values are achievable. With that framing, I want to turn to current financial reality facing the city. Over to jonas.
6 Great. Thank you again, kelly. And I'm going to I'm going to spend 5 or 10 minutes describing that financial reality and pass on to the city budget office. I do want to call out that the next five minutes of of talking I'm going to do is crucially important. I can't see if there's other counselors online, but we're just encourage you to nudge your peers to to take a look and view this information. If they're not here in the room or in the meeting.
7 I'll just note the entire finance committee is signed in and here.
8 All right. Thank you. Thank you, counselor.
9 Only entire committee. But this.
10 Will be critical context to understand as we enter both the immediate decision making and this upcoming budget cycle. While much of the focus today is on the general fund, the financial challenge that we face is not just a general fund problem. The delta between available transportation funding and basic infrastructure and maintenance needs is currently projected at around 25 million for fiscal 2627 areas of the city, like Portland, permitting and development, still has a revenue challenge given the continued lag in major development activity. Water and sewer utilities are likely looking at significant rate increases for multiple years, given significant operations and major critical infrastructure projects that are underway. We'll share more details shortly. But we do anticipate, as we know, a large general fund gap remaining this fiscal year. We expect a large budgetary gap next fiscal year, and there's low confidence in the likelihood of a broad revenue recovery in the near term. All that to say that I expect the city to be in a financial crisis for the next 18 to 36 months, and it's really hard to call that out. It's unpleasant to call that out, but I think it's critically important to be transparent and clear eyed about the reality that we face for the coming couple of fiscal years. One of my recommendations is that we treat this moment like a crisis response. We focus on problem solving. The immediate focus right now is on the remaining remaining and budgetary balance for this fiscal year, and we're going to talk about that in a minute. But we also need to begin looking at longer term solutions that will that will impact multiple fiscal years and budget cycles consistent with city administrator lee's introductory comments. I recommend that we stop the habit and legacy practice of moving from crisis to budget crisis to budget crisis to budget crisis, and we stop only solving for the current year's gap or the current year's problem. I recommend that we develop a real, tangible strategy to get through this crisis response moment and move to a place of stability and eventually recovery. Next slide please to help guide that move towards long term stability. I propose assembling a work team of which we have the bones of, as councilor Zimmerman mentioned, to prepare a financial stabilization and recovery plan. I'll preview with preview this with you briefly today so we can very quickly move and urgently move to action on the screen. Here is a visual concept to show how we might think about the next few years, showing what I've called phase one, which is the current crisis response moment, which I expect will last through, as I said, at least kind of 18, potentially 36 month window, then pivoting to what we hope will be a period of stabilization, moving into kind of a transition and assessment, by which I mean, let's confirm we actually are stabilized before we start making new expenditure decisions and then eventually moving towards recovery and growth. You'll note that this is roughly aligned to budget cycles, which is a key decision point in in implementation of the plan, though in reality we will constantly be reassessing and adjusting these timelines in real time. The conceptual guideposts of these phases will not be perfectly aligned and will be interactive. For example, we will need to begin putting recovery strategies in motion, even while we're still focusing on crisis response and stabilization, so that those recovery strategies can be available to us when when that time comes. I wanted to preview this today so that we can provide a wider lens on the recommended approach. The bigger picture, outside of just this current year or next, next year's budget development, and discuss how all of these will thread together over multiple budget cycles. Next slide please. I did want to zoom in a little bit on phase one, which is where we are right now, and I've further broken these down into kind of sub phases. First being phase one a, which is the actions that we're taking right now. We're going to talk about the rapid response, how we're responding to the current year budget challenge. And so I'm going to kind of hold that for a moment. And ruth will come back to that in a few moments simultaneously. Kind of the second part of phase one a is development of that proposed financial stabilization and recovery plan, conceptualizing that now, one of the key elements that I think is critical is that we will develop a 12 to 15 ish person work group, manageable size work group that will include multiple perspectives, both internal and external, to the city, expecting, hoping that we can identify time to meet regularly weekly, perhaps, I hope, throughout March and April to really accelerate that work simultaneously. Similarly, looking to have a broader circle kind of an advisory group concept that will have large, potentially large number of people 15 to to a couple dozen, again, internal and external perspectives. So we can add a couple of participatory touch points to receive feedback as that work progresses. My objective is to have that very intense work period for March and April, with a target to produce something, a real plan that we can bring back to council in may or as early as possible to help inform 2627 budget deliberations. That may be an impossible and unrealistic timeline, but I believe it's imperative that we do our best to prioritize the time and energy to avoid delay. Get the plan in place so that we can inform the budget conversation and move towards progress as rapidly as possible. Next slide please. What I've called phase one b, which is still in the crisis response mode, but kind of the next temporarily is fiscal 2627 budget development, which is I mentioned hopefully will align with the outputs of that stability and recovery plan. I know there's also additional simultaneous strategic planning efforts going on at council, so hopefully that work will fold and into that. And then we know that the kind of standard budget conversations that we're going to have coming up in 26, 27, I'll note I have this targeted as April to June. That work is actually beginning right now, that that budget development is happening within the organization to prepare information to be released both in advance of of April, which is the mayor's proposed budget. And then those deliberations will continue. But focusing that timeline on kind of a phase 11b here and just noting we did have some conversation about budget development. I believe it was last week when council adopted the budget calendar, and then the last piece of the crisis response that I've called phase one c, is actually implementing those service reductions or or budgetary decisions that are made during 26, 27. And I've noted a few likely suggestions here. I do want to note that I would emphasize the need to carefully monitor monthly spending to monitor the outcomes that we're getting in the context of what's in the developed stability plan, and be ready to to adjust further as we're going off, off, maybe go off or aligned with that track. And note that I expect that that kind of crisis response may still continue into 26, 2018 to 2728 budget development. In the absence of having some some beneficial revenue, wind in our sails, that's maybe beyond what's expected. Lastly, while this news is sobering and very difficult, I do share this information with a strong measure of optimism as we're one year through this transition to a fundamentally different form of government, we're experiencing opportunities to shift legacy habits and practices and find new ways of doing things. Indeed, I believe that one of the that that is one of the expectations of voters in directing this change, as I've been discussing this plan with colleagues and employees in advance of today's work session, I've been comforted by a sense of almost relief in acknowledging the reality and in the shared recognition that we have a pathway before us to strategically shift the organization from a place of constant crisis to a place of stability and growth. I'm also grateful for the leadership and advice of kalee, and for his willingness to step into this challenge literally on day one. I look forward to the support and leadership of this council as we come across the many, many difficult decisions that will be before us in the coming months. I thank you in advance and we will manage through this crisis together, for the good of the city and for all portlanders. Thank you. And with that, I'll shift to peter to update us on the revenue picture.
11 First of all, for the record, peter holtzman, city economist. And then you can go to the next slide. As a reminder, today we're primarily talking about the general fund and the five main revenue sources for the general fund are listed below. And their relative size and importance. Before we get into it, I just want to call out that a lot of the big picture of what determines if you know the budget picture is determined by property taxes and business license taxes. Property taxes, by their nature, are slow changing, even with what is going on in the downtown. It's not like we're seeing a big reduction in tax revenue there. But on the flip side, we're not likely to see significant growth or growth above 3% for years. And that is really constraining when our expenses are going higher than 4%, the only revenue source that is projected or has really feasible for it's feasible for it to grow more than 4% is business license taxes. And so a lot of that's why a lot of the time I'm up here and I'm talking to you, it's about business license taxes because it's the most volatile. And it's 30%. We're not the only government that's facing a budget crisis. The thing I will add to that is what is unique about us is we are the most our general fund is the most dependent on corporate business taxes. And so we are the most what happens with business license taxes tends to drive everything, even if it's, you know, doesn't always show up in the details. And so with that, let me go to the next slide and then just take a zoom out to, to go over what we're talking about. So if you see the table with fiscal year 20, 2526, it shows the revenue gap in fall was 11.4 million. That was addressed with compensation set aside the current year gap that was identified in the December forecast is an additional 13.6 million. And so that is revenues that were built into the budget are have been reduced by 13.6 million. The one piece of I don't want to call it good news, but I think that it should be identified, is that that 13.6 million is included in the 66.9 million total budget deficit that was identified in the December forecast. And so once this is addressed, the one time deficit becomes 36.4 million for fiscal year 2627. And then I will add the caveat that everything I am talking about here is relative to the current appropriation level, not relative to the current service level. So it does not include any one time funding things that council has not approved as ongoing. So that number is likely much larger. Next slide. So even though current year for business license taxes is projected to come in at 220 million and that is the budget. It is the thing that, as I mentioned, that is driving a lot of this, even though if it's last year or next year. And so I kind of wanted to start with that first, even though it's not our biggest revenue source. And so this this was published in the December forecast. And it shows the changes in business license taxes from the April 2025 forecast, which is built the budget for this year to what is currently expected and anticipated. And so you'll see the there's a reduction in underlying liability that is basically a lot of the economic risks have essentially forced me to reduce the anticipated revenue from businesses at a baseline. So that that is that would have happened regardless of any federal tax policy one way or another, though, it is partially influenced by tariffs. The next line is, I think, probably the most impactful thing, and it's house resolution one, which was passed in July. And in this we're corporate tax cuts. These corporate tax cuts is largely related to making permanent what's called the bonus depreciation deduction. And I'm not an accountant, but I will try to explain this as best as I can. And it's probably best that I'm not an accountant. What that means is when a firm makes a large, qualified investment, they get to fully deduct that from their their net income on federal tax forms in year one. Previously it was spread across five years. And so you'll see that the the impact of house resolution one goes down to zero as time goes on. The largest impact is anticipated in this first year. And so what happens when they do it on the federal tax form that the state has what operates under what's called a rolling reconnect policy. They in turn, will have reduced their forecast substantially as a result of this. And the legislative revenue office did estimates. And it's basically a 13% reduction in year one on corporate income taxes. And so I took the legislative revenue office's estimates of and pared that down to. This is what it would look like in Portland. And so combined those two are a substantial reduction in the baseline expectation of business license taxes. What is making up for that in the current year. And I talked about this a bit in the fall. Tao, is that we have received a large amount of prior year taxes. It's and again, this is not unique to Portland. Multnomah county, metro and the state have all received this large amount of prior year taxes. And so we're on pace again for 220 million, even though the baseline is significantly reduced as a result of both h.r. One and the reduction underlying liability. What all. And I think one takeaway from this is, again, if h.r. One hadn't passed based on legislative revenue office estimates and then paring down to Portland, we probably wouldn't be having this conversation because we would be expected to have $240 million plus. Again, based on those estimates. The other thing I want to flag about the business license tax forecast is I started doing scenario forecasts of, you know, what if it comes, if things are looking better, what if things are looking worse? And I've done this for all my forecasts. The one scenario that I want to play out for you is what if ai is a bubble and you can. There's different likelihoods of that, and it probably won't happen the exact same way as the.com bubble. But if you look back on what happened to business license tax revenue during the.com bubble, there were two consecutive years of more than 10% declines. So if that were to happen, that would probably become the new baseline expectation. And that would be an additional 60 million per year. And so I if it was likely if I thought it was likely, it would be the baseline forecast. I'm just putting this out there as a risk and a notable risk at that. Next slide please. I just again to to hit on the point of why I still expect $220 million this year. You can see how we have collected compared to to prior years. And we're substantially above if you take out those prior year taxes, those excessive or not excessive, but excess prior year taxes above what's normally expected. We are basically tracking exactly with last year. And so I expect that the rest of this year will look a lot like last year. We just have, you know, roughly $27 million more in that we collected in the fall. I'll also point out that this is the only current year tracking that I'll go through, but all the rest, for all the other revenue sources, are published at the end of the the slide deck in the appendix. So you can see how we're collecting compared to expectation for all of those as well. Next slide please. Again. So the property tax forecast this is our largest revenue source I one thing that I think that people if they just looked at how much we collected year over year, they would think things are largely fine. It's hard. And a lot of that has to do with the fact that we're getting a lot of returning tax increment financing revenue that we expected already. And so if you look at that, that dashed orangish line that shows what we would be collecting if we were having a normal assessed value growth and normal delinquency rates and normal compression. And by the end of the five years, it's over $40 million different that we would be collecting annually. And that is the impact of largely what's happening in downtown office space and other commercial values. The the two updates that have impacted the current year is the delinquency discount rate came in higher last year. And so I have continued with that assumption for this year and next year. Then was previously forecast. And then compression this year was slightly higher than forecast as well. Next slide please. This is utility license franchise fees. This is the 5% tax on gross revenue I like to break it down by major category. So you can see largely what's going on. I think the most notable I for most of the categories gas, electricity, telephone, cable, it's very predictable. We have a very good idea about what's coming next. The one line item that I would flag is that other that other includes over 150 small, you know, telecom related users of the right of way. Their payments are a lot less predictable. There's no auditing back payments, things along those lines. And so you'll see that I'm anticipating that we're going to collect about roughly $2 million less than we did last year. That is really the the thing that I'm trying to to figure out. And that is because I think last year we collected a lot of back payments. And so it was artificially high. Next slide. Transient lodging taxes. I even though on a just size basis this is not the most impactful, it has fallen short of expectations in the forecast has been reduced for multiple years now. And so this going into this year, I expected an uptick in occupancy rates of about 3% and an uptick in prices in line with inflation. So 2%. And that would have been an additional $3 million in revenue. Unfortunately, we are tracking exactly, almost exactly where we were last year. And there are a few explanations for this one. There's the whole discussion of economic growth where, you know, the top tier is doing relatively well and there's a lot of luxury travel as a result. But non-luxury tourism is not doing exceptionally well. And we see this in Oregon where, you know, wine country, the coast, wherever is doing fine. And we're getting more passengers deplaned they're just not staying in Portland. And we have relatively few luxury hotels or luxury travel destinations. Additionally, two other components or there are some new hotels built outside city limits which are new competition. And so hotels lower their prices to try to draw people in and then reduce travel from canada. There's a, you know, a lot of reasons for that, but that is impacting revenues as well. And so I've not only reduced the anticipated revenue for this year based on current year tracking, but I've also reduced it going forward just because it's it's been two consecutive years of I keep expecting some sort of growth and it still hasn't happened. I will say we have seen I've seen data with an increase in foot traffic in downtown. It just has not translated to revenue yet. And then last slide, this is state shared revenue. And this is a pretty stark decline that you'll see. This is largely government governed by state policies. And so there's been a few state policies that have reduced our distributions over the last few years. One measure 110, basically capped the cannabis amount distributed to the states at about 1.4 million, is what we expect to get this year. It would have been over 3 million if it wasn't for that one reduction. And then even more impactful, there were a22 pieces of legislation passed in 2021, one that is, they're building a new liquor warehouse in canby, and the bonds are being paid for out of liquor revenues. And so that's reducing the amount that's being distributed to cities. And then two, they're they're paying liquor agents more. And so again, that is also reducing the amount that is being distributed to cities. And so we've we were collecting about 25 million in fiscal year 23. And we didn't break 20 million last year. And so this is again there's no real path to growth outside of changes in state policy. And that's not something that you forecast. And with that I will turn it over to ruth.
12 All right. So I'm going to talk a little bit about the other side of the ledger, which is the expense side. So just before I jump in, as john mentioned at the beginning of the presentation, we had hoped to have some updated figures about the sort of expenditure forecasts, and we don't have that entirely today. We've collected expenditure forecasts from all the bureaus in the general fund, but we're still trying to vet the data and do a little bit more detailed analysis on some aspects of it to make sure that we're using as accurate of a forecast as possible. So just to set the stage a little bit, I was expecting overspending in the general fund for two main reasons. One is in the fall. As you recall, we absorbed essentially the revenue under collection from 2425 in our current year compensate in part in our current year compensation set aside contingency, which is there to absorb compensation related costs such as health benefits, cola, and and merit based increases. And and then so that's one main reason I would expect overspending. The other main reason is we have the 10% enterprise efficiency target that was budgeted in the current fiscal year. That hasn't been fully realized yet. So there's a 3.7%, $3.7 million plug, essentially placeholder in the budget, some of which has been realized and but not all of it at this point. On the plus side, based on the data we've received so far, I think we're going to overspend by less than I had initially forecast. And I think in part that's due to underspending on the ems side on the materials and services side. But that's kind of why we still need to vet this data in more detail, because we really need to go through the line by line exercise of all that contract underspending and see what's driving it. What would happen if it was reduced? Because with that, it's just it's a lot harder to, you know, they don't come in in in neat monthly increments, right? They, they a lot of bills get paid in the last month of the fiscal year and the like. So we just I really want to vet that data to make sure what we're seeing is accurate before I report that out. So potential less bad news. But before I get into the detailed numbers. So but we're not going to have detailed updates on those numbers today unfortunately. But essentially what will happen is the 13.6 million that's that's reduced on the revenue side will be added to any forecasted overexpenditure. And that would be the total gap for this fiscal year. So we still have to address the 13.6 million and any overexpenditure that we're anticipating. Which means the options to solve the current fiscal year gap are still, you know, the conversation is still relevant. It's just a question of exactly what size that gap is. So transitioning to that. This slide shows kind of the different buckets and sort of visual for how to think about some of those options. I do want to be very clear that almost all of these options would require council action to make a budget adjustment. You know, most likely the underspending would happen in places that doesn't fully align with where the overspending is expected. And so at the very least, there would need to be some sort of adjustment to move budget essentially from one bureau to another in order to avoid overspending in any individual bureau. Again, we're controlled at the fund bureau combination level, so we can't overextend within a bureau. So. The so looking at this slide try to bucket it kind of into the lower impact options. You know aligning with what city administrator lee said at the at the outset of trying to kind of minimize impacts on on services and on the workforce. The Green rows would do that because they either represent, you know, sort of true underspending in that, like there are things that aren't happening because they got delayed or because something's changed or something was budgeted, you know, slightly inaccurately. That always, essentially always happens in a budget. There are some excess reserves and contingencies. And I'll talk about this in a little bit more detail in a minute, where we think there's essentially more money in contingency or reserves than we need to keep there. And then the third is kind of targeted cost reductions of kind of more discretionary type spending. So it's not no impact, but, you know, more minimal impact on things like travel training, p card purchases and the like that could result in some savings. And then in the higher impact options section, there are the reserves and contingencies that need to be refilled. And then the general reserve draw. The reason I indicated things that need to be refilled in two plus years is that the general reserve policy, the administrative rule governing the general reserve, has a policy that if if council, if the conditions are met, which peter can talk more about and council draws it, there needs to be a plan to refill it within 24 months. And so if you're looking at, you know, other reserves, essentially it ought to be better than 24 months, ideally, if you're going to take that before you take the general reserve. But I do think there are likely places that have some revenue that we could legally repurpose from a reserve or contingency citywide that could be, you know, refilled over that longer time horizon. And then the two red options are more kind of last resort type options. So the interfund loan and then personnel or service reductions. So I mean part of this is intended to indicate, you know, we're not just jumping down to the bottom of the list, trying to step through somewhat of an organized process to figure out how much is in each of those Green ones and how much is in the yellow, the reserves and contingencies. Before we get down that list. So so on that note, I'm going to try to change my sharing for a second. Sorry. No okay. That's what we're going to get. All right. So. I just want to again reiterate this is not a and this is neither an exhaustive list nor a final list. So the things on here are still changing. And and there we go. And then so the numbers will change. And we may add things to this list. Sorry. So. Okay sorry. So the the top section there is kind of reiterating the gap conversation and and the the expense expense line that needs to be updated. After that we're looking at available excess reserves. At this point we've identified and again there may be others some technology replacement reserves for laptops, that portion of which can be pulled back to the general fund. We think this may be as high as 2.2 million right now. So that's that's kind of the first on the list there. The second is the unrestricted contingency. That's $3 million that's left in general fund contingency. And you know, I think that's typically we leave that until the end of the fiscal year in case there are sort of unknown issues. But obviously, I think, you know, I would expect it to be it could be used this year. We're still refining estimates around the kind of targeted cost reductions from things like travel freeze, p card purchases and sort of cost savings there. Those are a little bit harder to estimate just because of the nature of them. They're not, you know, necessarily taken at the same rate every year. A third kind of category, there are some targeted overtime reductions, and we need to do additional. We're still doing additional analysis here on what that would look like. That's tricky because obviously if you go, you know, far down that road and you have significant overtime reductions, for example, in fire, they wouldn't be able to meet those unless they temporarily closed a station, for example. So that would jump you down into that red bucket of the programmatic impacts. But there may be some smaller types of targets that could be met without significant impacts to programs. So again, there's there's some additional analysis that would need to be done there. And then under the yellow is the higher impact solutions. Councilor Smith brought up the citywide obligations reserve fund during the fall town. That's on the list. That would likely need to be replenished, but I think it probably could be replenished in the two plus year time frame. There are other potentially available reserves and contingencies, but those are still kind of we're still doing diligence on those. And then you kind of get down into the some of the more. Significant impacts. So a furlough obviously would both require negotiation if it were applied to everybody and to or to represent employees. And then we're also looking at, you know, what purchase orders or contracts could be stopped or canceled that would, you know, depending. Again, that's sort of excluding the amount that's true under spending that's not expected to be spent this year. That's on top of that. And then likewise on general fund, you know, pausing general fund grants that would likely have an impact. The last one, equipment replacement, sort of feeds into the reserve conversation because there are equipment replacement reserves around the city. And so again, obviously drawing from in some cases, if they're excess, then we can take them. But if they're not excess then drawing from them would mean having a longer lifespan of the assets and potentially introduce risk. So all of these are you know, I've tried to bucket them. They're all complex and require analysis and conversation. But again, trying to put them all before you today to just have it on the table. So I think we can move to questions.
13 Well, jonas, peter, ruth, on behalf of city council, every city employee and every person in the city of Portland, I think I collectively say. Councilor Green.
14 Thank you. Thanks for getting the fluff out of the way for me. Just I want to start first off, you know, thank you for naming that this is a crisis. I know that's a difficult thing to say for a lot of different, complicated reasons, but we have to be honest about what we're facing here. So I appreciate that. I think, you know, we need in that vein, we do need to approach this as a crisis. And we had had some conversations over the summer through the finance committee. And then later during the fall tao conversation, where it's imperative that we end the practice of relying upon encumbrance carryovers that allow for enable the execution of a current year budget. So this is kind of this is what we have done here. And I know it's it's difficult to change a big ship in the ocean on a dime. But we must do this. So in the next budget setting process, we absolutely cannot approve a budget that relies upon carryover to execute, which is what we had to do in the fall. Tao, I also have to say that my colleagues may not have liked what councilor Morillo and I wanted to do on the impact reduction side of the fall tao amendment that we sponsored. But the other part of it was to not carry over the policy the incumbent set asides to avoid drawing down the compensation set aside, and I raised it because I was worried about us entering this situation. Right now that we're in, we're in it now. Let's look forward. Let's move forward. But I just I have to I have to say that for the record, I do have some questions, though, not just proselytizing. I I'm curious, peter, first of all, you're a good economist, so you know that good economists never try to time a bubble. So I appreciate your nuance there. But I'm curious. So from the slide, I think what I'm seeing is that the, the impacts of the big, beautiful, terrible bill are generating a $21 million gap in the current year budget. Is that correct?
15 Yes.
16 Okay. So just to restate that tax cuts for the very large firms are driving our current year deficit as a pass through.
17 I largely I will I want to spell out the the 21.4 million because. So a component of that is large corporations. It is a tax cut for all businesses. And the at the at the state level, it was a 13% reduction in corporate excise taxes and a 13% reduction in partnerships. S corp smaller businesses that are more, you know, local. I given the local economic situation and the I would say probable lack of qualified investment compared to the rest of the state, I dampened that reduction to about half. And so, yes, it is largely large corporations. It is also small businesses in Portland that are receiving a portion of that estimated $21 million relief.
18 Thank you. Yeah, it's it's it's distributed across the income distribution, but it's targeted at the top in terms of magnitude. So. Thanks for making us aware and really continuing to reinforce that the blt is our biggest driver of volatility. Property tax are low but they're not volatile in some sense. So can you give us a sense of where the volatility lies inside the blt distribution to the sense that you can I know you can't get down to very specific firm level, but you can probably give us a high level breakout.
19 Yeah. So I can I'll split it up into like the 40% that is the smaller probably more local s core partnerships, that sort of thing. We've seen very little growth in that revenue. We saw a huge spike actually in the early pandemic, largely in real estate and finance related firms. And so there's volatility there. There hasn't been as much recently. And I guess for the when you say volatility it's upside and downside. We've had kind of a lack of the upside on that 40% on the 60% one tax policy has had a dramatic impact, not just the recent tax policy. But an example would be the prior tax cuts and jobs act actually benefited local. Business taxes because it lowered the federal rate and did nothing to and encourage repatriation of like profits from across seas. And so we got the benefit of a larger base, and we didn't do anything with our tax rate as a result. So that was a positive volatility. And then I would say there's plenty of downside in terms of like a large corporation has a lot of their profits tied to artificial intelligence data, whereas if those profits don't come in or continue to come in at the expected rate, they will be paying a lot less in federal taxes, state taxes and local taxes as a result. And so you can it is generally more tied to large corporations, but there are instances where it is also very local and especially in related to real estate and finance.
20 Thank you. That's quite helpful. I want to switch briefly to the utility franchise fee. You've given us your forecast. One of these slides here. And I actually there's a slide towards the end that I do think it's a graph a time series graph that shows like almost a step function type of shape. With the current year tracking. I assume that's utility license fee. So. Yeah, that's that one. So when it jumps discretely into a new year, so is the utility license fee a function of the rate?
21 It's this is because it's quarterly payments okay. And so we'll get it. Yeah. It'll just that's the timing of when we receive the quarterly. We do receive some monthly from again that's that other category from the smaller ones.
22 That accrual over time. And then you receive a lump accrual. And then that's what.
23 They basically project what they they and they have to pay quarterly. And it's similar for the business license tax. The the rate increases in kind of to answer the other slice of your question, those are absorbed over years and for a number of reasons. One, because they normally happen at the beginning of a fiscal or a beginning of a calendar year, which, you know, then it's like it's split between two fiscal years and things along those lines. And so it takes a couple years for a rate increase to actually make its way through to a payers what they're actually paying in. Ulf.
24 Thank you. That's helpful. I don't know if you're prepared to do this now, but I'd be interested in a follow up on just historically. Like how often do we adjust our utility franchise fees?
25 It's 5%.
26 It's just 5%.
27 It's been 5% for as long as I can, as long as I have history of.
28 Okay, so it's just 5%. And that's just been that way for.
29 And and also we charge private and public. So bts and water also pay 5% of their gross revenues okay.
30 That's helpful. And then finally you mentioned that part of the property tax revenue baseline is an expectation of returning tif. So perhaps if the tif didn't return it would be lower than the projection. Is that what I'm understanding.
31 Yeah. And so compared to five years ago we're collecting about 30 million plus per year in what has been returned in tax increment finance revenue.
32 And we don't have a practice to just assume that we roll those returning tif back into prosper portland's budget, do we?
33 No we don't. We did have a budget note for a chunk of it that did put some portion of it once. Like the big like most of it came back a portion of that through one council action and budget note. But there's no financial policy or law or anything.
34 That was around 22, 23 when they were doing the advanced Portland stuff and trying to figure out how to keep it going in between tif districts. Right? Yep.
35 Yeah. It was sorry, 2223. It came back in 2425. But the budget note had passed prior to that. And it was split between prosper housing and the Portland harbor reserve.
36 Got it. Okay. I think that's enough for me at this time. Thanks for the conversation. This is important work and we got to do it. Thanks.
37 Thank you, doctor Green. Councilor Smith.
38 Thank you, council president Dunphy. Good morning. Thank you. Thank you for bringing this slide. This would have been so helpful if we would have had this before the tao. I have a couple of questions. Why didn't we use the 27 million in the business licensing tax money to pay for the tao, instead of putting it forward to the 2627.
39 Because that we collected it this year. And so the budget for this year was based on whatever we collect in business license taxes for this year. And so even though it is what that's reason one, reason two being that the fact that it's excess 27 million wasn't identified as it being excess until basically the last month or two. Because.
40 So shouldn't we be looking at that because it was still received in 25?
41 No, this oh yeah, it was received 25, but it was received in the current fiscal year. And so the current fiscal year's budget is based on.
42 But you knew it was coming, right? We had talked about it. You said that there's more in the blt than we had expected that's coming in. And I know I paid my last quarter taxes. At the end of the year, and they should have been in before 25 before the end of 25.
43 Again, we collected that 27 million in September.
44 Okay.
45 The budget for the current fiscal year is based on whatever we collect, and even including that 27 million, we're still going to be below what's in the current year budget, right?
46 I understand that, but we did not identify that money as something that we could use, that could have been used for the tao, and we should have identified that 27 million.
47 So I think there's a couple of things going on here. One, I think there's a timing issue, which is that we weren't sure. You know, peter goes through the whole forecast process and the forecast doesn't come out until December. And so he was still in the midst of going through the data that.
48 Was before.
49 So that's one issue. The other issue is, again, as you can see here, the 27 million sort of made up for the fact that we under collected in 24, 25. And so it's helping us to get back to 220 for this current fiscal year for blt. And so as of the tao, peter said, you know, I think we're on track for 220. I think what has what changed between whenever that was September.
50 September and December.
51 And December is looking at the full general fund forecast for 2526 and seeing adjustments in all five of these revenue sources that.
52 Need some more folks.
53 That I think, you know, and again, I think peter, peter hit on this. We are not the only jurisdiction that is experiencing it. All of our peer jurisdictions also experienced both the excess blt taxes and the reduction due to h.r. One. And so it's it's a process for all of them, and it's all unfolding on similar time frames. I think we are just in the situation, you know, one of the things we've talked about this, but the county, for example, has the bite reserve that, you know, in a similar way to the fact that we have compensation set aside in contingency. They have that it's just specifically called out as a reserve. So there's a couple of different pieces there. But I think I think the, you know, it's it took most of that three month period between September and December to kind of put all these pieces together.
54 And I might add to councilor to zoom out a little bit. I wonder if it's helpful. Is that at the time of the tao, we did not know that that 27 million would be excess. We also did not know that those negative numbers on this slide, the 21.4 and the -5.6 would exist. We're lucky and fortunate that by a quirk of coincidence that matches that we if we would have experienced those reductions, the 27 million in reductions, without that increase, we would be in a different situation. So I want to just acknowledge both sides of that equation. We didn't.
55 So the answer is we didn't know about it, but we did have it in because you didn't have because the tao was before the December forecast.
56 I guess I lean on folks to talk about the technical reality that I guess the seat I sit in. We anticipated 220 total business license taxes.
57 We got two.
58 For the tao. We today, with a benefit of an update, anticipate that same amount. The reason for that? Some things went down, some things went up. The net result is the same 220 total blt expected as of the tao, 220 total anticipated as of today, and the technicians can update anything else.
59 The only thing thing I would clarify is if we received 27 million over what we had budgeted for. Total revenue doesn't really matter where it comes from. If we had received 27 million above this, wouldn't we wouldn't be talking about a $13.6 million deficit in the current year of revenue. We'd be talking about $27 million surplus, and then we wouldn't we? You're 100% right.
60 To put it over.
61 To it. We would have fixed everything in the tao. We wouldn't be having any problems. But the reality is, despite that $27 million in excess prior year payments, we're still 13.6 million to the red.
62 I get it because I want to be clear, and I brought this up in the tao, and people on your side of the table tried to talk me down. And I said, peter has already told me that we have more money in the blt than we expected. And you guys know we don't know what you're talking about. No, we don't know what you're talking about. Okay, so. Peter was correct, and I was too. I just want to check the record because I was telling you all that. And I was saying, if we have more money, why can't we take it from the blt? And then you all said, oh, but we're down on property taxes. We're not down on property taxes. We got more property taxes in this year than we did the previous year. So I want to make sure that we're clear, because when you all say things, I hold you to what you say when you say we're down business taxes and and all of this, I'm looking at the the one year over and over, the 24, 25 and then 20, 20, 25, 26. So I look at that and I look at how much is brought in. And so clearly we brought in more money from the blt this year than we did the previous year. When I was saying that during the tao and I was saying we could have taken that money that we got from the blt over and paid for it with the tao. So I'm finished with that piece. Secondly, I have a question. Ruth, did you say that right now we're in a 10% restraint for all bureaus?
63 No, I was referring to the what's called the enterprise efficiency. It's aligned with the sort of the realignment project for the kind of enterprise business functions, the target that was set last year was for a 20% overall reduction, and the budget has a 10% target for the current fiscal year just for those specific functions. So hr, it, procurement, communications, equity engagement and budget and finance that target that was estimated was plugged into the current year kind of as a placeholder, because we knew it was going to take additional time to actually figure out what the reductions look like. At this point, the placeholder is in the budget. The communications reductions have been implemented, but the others have not yet. And so I'm that's functionally just a liability in the budget at this point.
64 Okay. So I can mark that off. There's one thing that I would like to be added to this presentation. And we used to do it at Multnomah county. I would like to see a slide that shows me ten years of debt service drop off. I want you to do 2026 through 2036. Tell me where all the debt service drops off in the next 10 to 15 years. I need that in this report because what is happening? We're having debt service break off and then that debt service money that we're freeing up is being put into the general fund when if we're already paying it in debt service, then we can use those dollars for infrastructure, debt service. And I want to be able to see when debt service is dropping off so that as we're creating policies that I know, like, for example, and I'm not going to stop talking about it, cip sidewalk improvement and paving project I am trying to find that will help me to be able to inform my colleagues when we have debt service dropping off, so that we can identify a place where other debt service can, can, can match up. So that's the other thing. And in my labor and workforce committee, we had to move it last week, Thursday, from Thursday to Friday. And it was 9 to 11 on Friday. And the human resources gave me an overview and presentation of all the ftes in the in the city and what was going on. And one of the very interesting things that I found out, council president Dunphy, you weren't there, but they told us that in the presentation that there were 450 employees that were eligible for retirement, full retirement December 31st, 2025. And as you all are identifying ways in which to to create a budget for next year, I don't know how that comes into play. One of the questions that I asked was, were these like hard to fill positions? And I imagine, yeah, a lot of them were hard to fill positions and people are just not retiring. So there there are some there are some savings that could be made in that number. I don't know how we do it. I don't know what the what the criterion is, but there's some there there. That's 450 employees. I saw that the superintendent of Portland public schools is trying to eliminate 290 employees, and she said that that would give her a $50 million, that would close a $50 million gap. I know that we have a gap that we need to close. The other piece is that. Councilor Green. I want to go back to what you said. You said that businesses are the reason why we're not, why we don't have as much in in the blt to be able to pay for our programs. I would put something else on top of that. The reason why we can't meet our budget obligations, because we are using ARPA money to pay for ongoing services. Let's let's be clear about that. We have one time money going into ongoing programs that is causing us to have a gap. So I would not put that on businesses because of businesses that we have a $27 million over over surplus from the blt. And so the the answer to why we have problems is not because of business. It's that's the answer to everything. But it's not it's not the reason why we're in this in this situation we have to figure out and we have to be strategic. And we have to go through that budget and we have to say what is necessary. What is our book of business? What do we do? What are we going to do in the next ten years? I believe that's the conversation that we're going to have in our strategic planning session. Ca lee and I look forward to having that conversation. But that's not the always the drawback, and that's what I always hear from you all. The belt was down, the belt was down, blah blah blah blah blah. No no no no. Our expenses are exploding. Our benefits are not sustainable at the current rate that we're doing. And when we are paying double digit benefits year over year, if it wasn't for councilor Candace Avalos putting that in the budget last year to add the $15 million, we would be even more in a budget quandary. So I want you all to look at that. 450 employees. I also I'm asking this question and I'm going to I'm going to end with this. If I was a city administrator of this organization, I would ask for an entire audit of our finances of every single bureau. Council has the ability to have oversight. We found $21 million in the Portland housing bureau that we didn't know was there. And I imagine in the $8.6 billion budget, if we found $21 million that we didn't know was there, I bet you there's another 21 million. So if I was the city administrator, I would ask for an audit, because I would not want to be a part of something that could possibly put us in further debt, or that there's money out there that we don't know about that we could actually close gaps with. So I'm going to ask you this question. Do you think that we should have an audit of all bureaus to make sure we don't have any more lost revenue like we had in Portland housing bureau? Do you think we should do that or call for that? And I'm talking to those folks over there.
65 I'll chime in on that.
66 Okay. First.
67 I think we need to do an analysis on a lot of aspects of our different funds as an organization. As we go through this five year analysis of looking how we're going to pull out of this situation, that has to be a component of it. If it's an audit.
68 Or later.
69 Has to, I think, and it's sooner than later. So we can have a better understanding where we are financially as an organization. And we'll be having these conversations with council as we continue to kind of review these type of things, and we want to make sure that we're actually putting funds within our budget to be able to do these type of analysis as well. So we ensure that the information that we're moving forward with is good data that we have as an organization.
70 Thank you. So that's what I want you all to think about. And and while the mayor is here to good to see you, mayor. If you all need let me let me back up just a second. Cfo barry. What I also found in that, in that labor and workforce committee hearing, it said you had 280 people under your purview in the finance. And I was just saying, no, he needs more people. He needs more people. So we asked the question. We said, is that presentation correct? And I said, well, where are they? Are they in treasury? Are you including the cbo? They said it was 280 people. And I was like, oh my god.
71 It's revenue. Revenue.
72 Yeah. Councilor the that that number may be accurate. It feels a little high to me. But most of those staff are the folks who work in the revenue division, who have very specific jobs around revenue collection for the city and are under contract to do that revenue collection function for for the county and metro. I think if you carve that division out. So it's like a couple of dozen, and I would just say directly underneath me, like the folks who are in my office, not the bureau of the office, that includes those functions. I have one and a half.
73 Okay. Thank you. Because it had 280. I said, well, he didn't tell me the truth. But anyway, I saw that. And and, you know, I pay attention to things that stick out like that. But if you all need some software program while the mayor is here, if y'all need some software, can you I mean, some systems because we lost that money to prosper, we didn't pay it. And there was a reason because in our system, it didn't catch it before. So if you need some infrastructure like I am down for it, I really am, because I need us to be as strong and we're only going to be as strong as our systems are.
74 Councilor I'll just say absolutely appreciate that. We we will need that. You know, I think the front end of this, you know, my comment around developing a kind of five year action plan. Yes, those kinds of recommendations are absolutely the types of things that I anticipate should be reflected in there. So we can have that intentional roadmap. You know, a lot of the we've we've discussed in this room before that a lot of the challenges are and as you've highlighted as well, the kind of legacy challenges and how information is shared and assembled and gathered and documented or not within this organization, I will say that this exercise that has taken place over the last month to get us this far, and that ruth mentioned is continuing, is largely very similar to the audit that you're requesting, where we're working very diligently. Mostly, I give credit to the city budget, office and financial staff who are doing that work to look under the hood and communicate with directors, managers, bureau finance leaders, that that is the expectation that we're gathering that information and assembling it to be able to report to you and make sure that we're not missing any more of those anomalies. Hopefully they're anomalies because it does take work to do that. And so I just wanted to acknowledge that. Yeah. Hear you. And also, you know, the spirit of the exercise that's going on right now is exactly being responsive to that, intended to be responsive to that. So we can gather that and communicate that information back to you.
75 And I just want to end with I appreciate the work that you all do, I really do. I ask just kind of when I'm thinking about common sense things, I think about these things at night. Why didn't we do this? Why didn't we do that? So I really appreciate the work, and I respect the work that needs to be done in the future and to be able to not just kind of, you know, give you rapid fire questions on this or that, but I am willing to be able to put my political credit card up there and say, I support you getting the infrastructure that you need to be able to do the job so that we can be good. Thank you.
76 Thank you. Councilor Smith.
77 Councilor Kanal thanks. You said one and a half. Shout out to the half whoever, whatever they're doing. Thank you for all this information. Really big picture. I just want to say I'm really grateful for the recognition and the public statement that this is a crisis. Can't address things until we if we name that. And I think we can also address that without creating an austerity budget that will only cause a spiral. I believe that public investment is vital to getting out of a crisis. If it's done correctly. As we approach the the reduction of spending over time, which I do think is an important part of this, my guiding principles is going to be there are five of them. Reducing management bloat. We talked about the budget that I proposed that passed last year to examine deputy director positions. I'm not sure what the status of that review is, but I do hope that management broadly and span of control is thoroughly reviewed before we look at rank and file reduction, reduction of contracts, specifically the contracts that that are for people that pay, that we pay to think for us, we should examine and cut every one of those contracts before we start talking about personnel reductions, reduction of planning. We have plans that we need to implement before we start building another plan that's going to sit on a shelf and collect dust. I want to talk about the the exemptions for public safety, and I support them broadly, but it should be for all public safety and not just 24 over seven. This relates to the earlier slides proposing cuts to non-critical expenditures. I want to propose a different way to draw that line. Emergency management Portland street response violence prevention programs are critical pieces of our public safety system, and I don't want to see any cuts, furloughs and freezes on those programs, similar to how we treat boec fire and police, where I also do not want to see furloughs or freezes. And I guess I have a question to clarify on this one. Do 24 over seven public safety exemptions apply to the whole bureau, inclusive of, for example, non-sworn staff at police and fire and non 24 seven programs within those bureaus like chat or is the way that you're drawing it when you put on these slides 2024 seven, are you referring only to the first responders that are in 24 seven programing?
78 Sorry, I'm, I'm trying to find the slide you're looking at. But if you're referring to the hiring freeze that's in place that is essentially not does not apply to the kind of non-sworn folks. There's a list of classifications we can get you, but that.
79 It's also where you talk about furloughs in the spreadsheet.
80 Oh.
81 I just I mean, I think the general. Yeah, the, the general sort of thinking around that has been that for folks for whom if they are furloughed or the position is held vacant, whatever the action is, it would require backfill overtime that costs more to leave the position vacant or to to to have them not work a day than it does to have them work. That's been the main distinction that we're making there. It's not like a values based distinction.
82 Yeah. And I think that that definitely applies to fire. I will point out that we found $560,000 a month in overtime savings at a single building. If you look at from June to July to November is average based on the budget note canal ten that passed in terms of response to protests at the macadam facility. So there are places to look there as well. A couple specific questions. I'll start with slide 12. The business license tax forecast. The red line bottoms out for two years before coming back. I think this is probably for peter. Is that related to what you were talking about with the bubble, or is there another reason that it bottoms out that way?
83 It it's all the bubble. It's basically the growth path of what a bubble would look like in 26, 27. And it's I took what happened in 2000, 2000, 2004 and basically said, if that if this bubble were to happen the exact same way that bubble happened, this is what it would the impact on business license taxes be. I don't expect it to be exactly the same. It's just to give some sort of context.
84 Yeah. And I think your response to councilor Green's question there makes sense as well. On slide 15, the utility license and franchise fees. Can you talk about the railroad franchise agreements and where those are at? Is that part of the other as well? You said most of the other is telecom related.
85 I would it mostly is. I would have to confirm if that is, if the railroad comes into this or not. It's not a substantial portion of the other. But I'm not 100% certain if it is. Again, there's over 180. It includes a lot of things. I think there's a still a payphone in Portland somewhere that's paying this, but I know of the big pieces. It's not one of them, to my knowledge. But I'll confirm with bts and the program managers there to make 100% sure.
86 Okay. Thank you. Slide 16 I don't think we're going to have a lot of time on it today, and that's okay. But it's something I'd like to spend a lot of time on as a city mayor. I'm really glad that you're here. I want to ask for your leadership and your partnership with at least council president Dunphy and myself and anyone else who's interested in attracting more tourism to the city. This isn't just attracting events. It's not just reputational work. It's investing in the area around the convention center so that we can attract events. It's on prosper not to move lloyd center businesses out of district two, but instead help them get to those areas around the convention center. It's about supporting our festivals and major events cathedral park, jazz festival, rose festival, everything so that people are coming into town for that and staying here and getting the transient lodging taxes up. But it's also investing in transit so that people want to stay at local hotels. And parking doesn't become a barrier in any way. I understand that that this particular revenue stream is not going to exceed the business license taxes. It's not going to replace that or property taxes. But I do think it can be a part of the solution. And I guess my broad question here is, is there a plan to grow this revenue stream yet? And or can we develop one collectively? I'm not sure who that's directed at in these five folks who are here, but I'd love to know if there are.
87 This is my segue to let everybody know we have an upcoming staycation event downtown, and the winter lights festival is in the next couple weeks, so.
88 We didn't coordinate that.
89 Activating our city is about events and about us coming together. That's the more sort of micro what's going on right now. But the macro event is, is donnie and I were just in our excuse me, dca oliveira and I were just talking yesterday about a new strategy on economic development that we're going to be talking with each one of you. And you and I talked just last week about how do we activate storefronts in the convention center area. There's also councilor Ryan with the saint john's downtown town center, councilor, Avalos, Smith and Dunphy. We are talking often about gateway. We need to talk in terms of the blt tax. What are we going to do to stabilize businesses to stay? But we also have to talk about with what funding we have working with cfo berry, what are we going to do to activate storefronts. And so we're going to be having that in the upcoming couple of months. But it's a very meaningful discussion that we are all going to have together, and it will be manifested in the budget.
90 Thanks. Yeah, I we didn't coordinate on the the shout out to the staycation, but thank you for for mentioning that in the winter lights festival. And I do want to again note that I would love to see prosper working, not to move things out of that area around the convention center and the sort of broader area that includes the lloyd center, but instead help support those businesses staying in that area, in particular the businesses that serve the clientele that's already been mostly dispossessed and relocated out of that area. But those that are still there. I also just wanted to kind of ask for a couple confirmations to make sure I understood a couple things correctly here with relation to the realignment project. I think you're saying that we didn't reduce by the 9.5%. We didn't actualize that yet for this fiscal year, but we're going to actualize by some smaller amount, which means that there will be less savings than initially anticipated. And we're going to be asked as council to fill in that gap instead of just making that work in the next five months. Is that accurate?
91 I mean, I can't speak to and maybe I don't know if dc warren wants to come up to speak to the overall project. I think the what I know at this point is that the ones that have been actualized are the communications realignment. And so there are some positions that are essentially now vacant or, or were not filled that were part of that. I think there are other sort of vacancy savings where the direction I mean, there's an overall hiring freeze and specifically for positions that are part of the realignment project, the direction has been do not fill those because, you know, because things are are going to be changing. So there are some vacancies, savings as a result, as a result of that project. And that partially fills the kind of placeholder that was budgeted. Of the 3.7 million in the general fund, I, I don't know, you know, it's it's hard to predict at this point what the remaining savings would be for the current fiscal year. So I'm all I'm saying, I'm not saying, you know, we're coming to council to to fix it. I'm just saying it's a liability in the budget at this point. I don't know if.
92 Okay. I'm seeing a nod back there. Thanks. I would love to. As someone who was not broadly supportive of the 9.5% reduction for all the areas, I do want to say that council voted to do that, so we should try to achieve that because I would prefer not to have to make a different cut elsewhere to make up for that. The other thing is, and I'm maybe reading between the lines more than, than interpreting, but I think I heard primarily from jonas that the vacancy savings is not going to fully replenish. The compensation set aside is that can can I get a definitive answer on we were we were told in November that that was going to happen. Is it going to happen at this point?
93 Yeah, I guess councilor, thank you for the question. I'll clarify that. I don't think the intent was ever that exclusively vacancy savings would be adequate to, to accommodate that, that there was vacancy savings was a big part of it. I believe the number we I don't remember I won't say the number we indicated, but it was not a number that was the 14.4. And we recognized there was going to need to be additional savings that was generated in order to fill that gap. So I want to just be clear about that. And if that wasn't what was if there was confusion about that, I apologize. But but it was not intended to ever be fully filled with vacancy savings.
94 Yeah. Just to clarify, I'm saying not replenished back to the initial levels, but replenished to the level necessary to pay for this fiscal year's police and fire overtime. And those were the the 7 or 8 million, if I recall correctly, level to make sure that what we already are doing and have committed to doing that there is money for. So I'm just can I clarify that question? Not to the full amount of the 17 or whatever it was originally?
95 Yeah. I'll lean on ruth to dig into the numbers. I don't believe it was ever spoken or suggested that it was tied specifically to to overtime of any kind. That is part of the equation. But I'll look to ruth to maybe put a little detail on the numbers.
96 Yeah. And I mean, I think it's all a bit difficult to disentangle in the data at this point. But the essentially the exercise we're doing is to look at what are what are we projecting to over expend. So basically in a normal year, right, we budget a certain amount for personnel. Obviously people are generating costs for their benefits, their cola, etc. That's all hitting in the actual budgets and compensation set aside normally is sitting there as a okay if you start to if we get towards spring and you're going to, it looks like you're going to need this contingency. We bring it to council normally historically in the spring bump to say, okay, move this from contingency into the bureau's budgets. That is historically how it's been done. The difference this year is that the amount that is remaining in that compensation set aside is lower than it would have been. But for the fall tore. Right. And so we don't have that resource. And so the question that I'm trying to answer with budget staff citywide is what essentially what are we forecasting. Like if all you had is your revised budget as of the fall tore, that does not include compensation set aside. It hasn't historically. What would you be projected to overexpand. Right. Because you don't have that compensation set aside. And so that's the analysis we're doing right now. We're just still waiting through all the data to try to figure it out. So that is the question. And essentially the the sort of counterbalance, right. When you're thinking about, you know, the the two options are either we have vacancies that absorb some of the, the or that, that, that free up some of the budget that that's not driving as much cost or for some reason, people's pay changes. And, you know, it's different than what was originally budgeted when you're just talking about personnel and then and then the third is the overtime. Police and fire do have separate overtime budgets. And so I don't think it's like quite right to put it in the same bucket as the compensation set aside because there's kind of excess overtime. And then there's just like how much compensation would you need, how much compensation set aside, would you need to just pay for staff. And those are kind of two different analyzes. We're trying to do both of them right now. So unfortunately I don't have an answer about essentially do we expect vacancy savings to make up for the fact that we don't have enough, that we don't have the full compensation set aside left in contingency at this point? That's kind of the analysis we're still working on.
97 Okay. Yeah. We didn't bucket that together. That's how the presentation came to us back in November. Just to be clear, and I, I know that we were told we were going to have an answer to that in January. I understand there's moving pieces and we're not at the end of the month. So I'm not trying to criticize. I'm just trying to make sure my underlying value here is I want to make sure that we have the money in that fund to pay for the overtime we committed to, for the bureaus that we need to commit that to, which are primarily police and fire, but not exclusively. And that's, I think, in the seven and $8 million range. Historically, if I recall correctly, 7 to 9 maybe, which is less than the the overall usage of that fund historically in the spring bump. Yeah. The other I'll close by saying I agree with councilor Green on the encumbrance carryover piece and moving away from a structure that relies on that. I think we can budget things in advance and then have that knowledge going in. And the second piece is, I know that he suggested that. I know that councilor Zimmermann has suggested a few other changes to how we do budgeting in terms of program offers and things that I'm broadly supportive of as well. I'd like to add one more piece to the mix on that to look at for maybe not this year's budget for future budgeting processes, which is to not allow for vacancy savings to be reallocated immediately to another purpose, but instead to have those return. And I think that that would be a way to cut down on some of the unexpected expenditure that that happens at the bureau level. So just a thing to explore, and I'd love to talk to you more about that. Thank you, council president.
98 Thank you. Councilor canal councilor Morillo.
99 Thank you, council president. Thank you all so much for being here today to help us wrap our heads around this. And I will certainly be pushing my other colleagues to make sure that they are taking a look at this. I think this is one of the most critical and important things that our city is facing, and it is not going to be a fun year. So I think it's important for us to face that reality. I. I am a little bit frustrated to be here at this point, if I can be frank, because while I don't think that my fault, how amendment would have addressed everything in its entirety, the revenue gap that we're seeing is 13.6 million, and that amendment would have preserved 13.4 million in compensation set aside. And I do want to give kudos to my staffer, kristen johnson, who's a financial analyst who flagged that for us at the time. And I told my colleagues that we may end up in a position where our spring decisions are worse if we don't take action. Back then and now we are seeing that come to fruition. So I really hope that we will be very careful stewards of the dollars that we have moving forward. During the fall, we were asked to use that compensation set aside to buy time to deal with the shortfall. And other than the hiring freeze, I don't think I've really heard about the other tangible steps that we've taken to reduce our expenses. So can you outline for me what other steps we have taken to reduce those expenses, or is it more that you're just expecting council to come up with a package of options that we're going to decide?
100 Councilor, thank you for the question, and thank you for your comments as well about the importance of this conversation. I appreciate that. So the hiring freeze was identified as one strategy. And so that's been underway and is having results. Also I think just recognition of the depth of the problem. Many, maybe all dcas have sent communications to their managers and folks to prioritize underspending. I have spoken in many rooms with leadership around the city that if there's any penny that anyone of any authority is spending at this city, we should be thinking very cautiously about whether that's a penny that we need to spend critically in this moment. And so I think some of what we're seeing, and as ruth mentioned at the top of the meeting, maybe seeing some underspending that's a little more than, you know, in a little better position, I think, I hope, is an outcome of providing that that direction and leadership throughout the organization. I'm trying to recall if there's other very specific actions. I know, for example, one of the communications has been if there are if there's contract work that is not essential to do in this moment, to pause that. And so I think some of what we're seeing in to ruth's point, you know, that that is a herculean lift to go through every line item of every piece of ems to, to identify that. I think what we're seeing is the outcome of some of that elevated direction to to carefully monitor and control spending.
101 And then just quickly to clarify one other thing there, sorry, is just the on the administrative side, you know, the the administration can control expenses. As I mentioned on this slide earlier, it would still it would still likely require council action to reallocate under spending into places where there would otherwise be overspending because the because it's unlikely to match up perfectly. So I think it's it's got to be a partnership.
102 Absolutely. I know ultimately that decision lands with us. But so when you're saying that there are communications going out telling bureaus to examine their spending, what are we talking about here? Like apart from the hiring freeze, is it you can't have a pizza party anymore? Like what exactly is the detailed outline of what that means?
103 Yeah, I can't say specifically for the dcas. I think I've been copied on those, but I can't speak for the details. Again, just reiterate the feedback that I have given as cfo, including to my own team and recommendations to others, which is anything. I mean, I love a pizza party. I haven't thrown one or been invited to one in the 20 months I've been at the city, so I think there are. And I don't mean to be facetious, but there are things we do and there's value to having those for other reasons. But you know, we are in a crisis mode and there are small things we do that add up. What's really important is there may be very big things we do. And I think a lot of those probably come in those ems and contract moments where if we can capture a couple hundred thousand dollars in a contract that can be delayed, you know, I think those are where we're going to find the higher value. And again, you know, share the frustration of not having eyes on that data to be able to confirm and state that and again, appreciate the work that cbo is doing so that we can have better eyes and lens on on where those activities are actually occurring and showing the results that we're looking for.
104 Can I just highlight one other thing real quick? I think part of the, you know, the folks are very interested in folks being sort of budget staff citywide are very interested in understanding kind of what is the target. And I think one of the things we're trying to do is approach this from sort of a fund level perspective, instead of just from a bureau level perspective. And part of the purpose of that is to be able to step through in, in a way that in a way that's kind of shown on this slide, which is if you just told me, hey, ruth, here's your target, you've got to reduce half $1 million, I would do something that might be, you know, jump down to, to the red where there are impacts to, to the services. And what if there was a solution that was up in the Green or the yellow that we didn't, that we didn't take because we hadn't gone through the process to do the fund level analysis? And so I think we're trying it's it's, you know, it's a learning experience and it's a bit painful, but we are trying to actually go through at the fund level in a way that honestly, we have not done in the past. And that's part of why this is taking a little longer. It's not anyone's fault. It's just it's it's building a structure, a system that we haven't had before to kind of go through, to go through that analysis and say, okay, here are the here's the true underspending once you account for like things that are just not happening or that are costing less than we thought, now here's what's resulting. And so we're just we're just taking the time to try to do that so we don't jump to something that might be a worse outcome for the public than it needs to be.
105 Yeah, I certainly appreciate the difficult position we're in. And I will just say that the day that the tao passed, we need your part of the organization to be looking into how to fill the gap, because we knew that this gap was coming because of the decisions that were made during that time. I, I also have a strange experience at the city where we'll have millions of dollars missing from a bureau, and we, as councilors are told that it's like, oh, it's not that big a deal. It's, you know, sometimes that kind of stuff happens. And then now we're being told that people in bureaus and offices are pinching pennies and that every dollar counts. So we can't have it both ways. We either have to have meticulous tracking of dollars, especially at a time where we are, you know, the difference between 7 million or $9 million that's missing could be an entire department or a few critical staff versus not having them. So I'm just noting that there it is frustrating to to hear some of that. And I think that it sounds like we're I would like some follow up on, on more of the details of what bureaus are being asked. It sounds like one of the main answers to this problem is going to be furloughing people. And I think that if that if it comes to that, then it needs to be done as equitably as possible, making sure that certain people who make below a certain amount of money don't get furloughed. People who make more took more, take more days. So I hope that in that discussion moving forward, we also talk about a practical and equitable application of it. It sounds like we maybe you don't have this information from what you've stated earlier, but I would also like to hear later on about how much bureaus are projecting they will need in the spring from compensation set aside in order to prevent overspending. If we can get that information later. And then my final question is just that half of the 20% enterprise efficiency cut was taken in this current fiscal year, but we really haven't seen a lot of savings materialize from that. So do we still believe that the reorganization effort is going to achieve the cost savings that were demanded of it, or do we need to readjust our expectations on that plan for different outcomes?
106 Great. Thank you, counselor. I'll take an attempt at responding to those. And please, if I don't get it, get it all answered, please come back. Before I start. I want to sort of maybe add a couple of clarifications for the public record. I just from the seat I sit in, it makes me nervous at this suggestion that the situation with $20 million that that was suggested, that it's no big deal from the seat I sit in, that's a very big deal and was not okay. And I was equally as surprised and frustrated. So I just it would be remiss if I didn't call out that that is a big deal. And for folks watching at home, I don't want to give a false impression, at least about the perspective from the seat that I sit in. I also just wanted to note that I don't think from the at least what's presented and what's discussed, that furloughs are sort of a likely option. We know that certainly an immediate implementation of those would be probably literally impossible, and the opportunity to get any savings out of that kind of an exercise this fiscal year is negligible, if any. So, again, I want to be clear that while that's an option that is on the table, it is not likely anywhere close to a top option that would be pursued. And I appreciate your comments that if that does become something that's explored, absolutely. We'll need to look at those considerations. The I'm happy to send you. Gather, have somebody work on gathering the information that was sent to by dcas so you can see what those specific asks were we can gather that for you. I think ruth can work on the what are the bureau's expectations? To the extent we have them, we'll certainly be learning those. And then I did want to come back. There was some conversation earlier about the 10% cut, the enterprise efficiency cut. And where we stand in that, I, I think it is true and fair to say that we likely won't get to that 10% this fiscal year. That was a finger in the air attempt and an ambitious target. I believe that former city administrator had even called that out, that that was a guess and an ambitious target. And we do our best to get there. And we have been driving to get there. That is very hard work to figure out how to identify where those efficiencies might come from. In some cases, that does mean stopping doing work. It has human impacts, and many of those functions are functions that have high consequence if if they're not performed. And so it has taken a lot more effort to identify optimal solutions. And because that has taken more effort than anticipated, we're not clicking that button reducing that expenditure on January 1st. We're now later in the fiscal year, where it's harder now to capture the 10% was based upon 20% annual, essentially making it effective for half of the fiscal year. So I just want to call out that it's I'll put it in my words. It has been a lot more challenging to do that identification and come up with recommendations and solutions that don't harm this organization than it was anticipated they would when when that was suggested in the in the budget process. So I hope I haven't I hope I answered your questions maybe hopefully not gone too far afield, but happy to follow up again if if not.
107 Yeah, that's that's all very helpful and I wouldn't say that. Just to clarify, I wouldn't say that I've heard directly from you that millions of dollars missing is not a big deal. I will say that there was kind of a pushback on us trying to investigate that further and figure out how the heck we got there, because I think as a council, we were deeply and profoundly disturbed when we found that out, as I'm sure your organization was as well. And I, I would say that I'm not trying to rush to rush you in trying to figure out the 20, the 10% enterprise efficiencies. But I think that we need to recognize that, that 10%, if it's not realistic, then we don't have the cost savings from it and we need to plan for a different outcome. And I think I'm asking what our options are outside of that in that case. And I don't need an answer right now because it sounds like we need more time to dig into that. But that's where I've landed and things that I need to hear.
108 Great. Thank you counselor.
109 Thank you, counselor Morillo colleagues, it is 1150. We are almost two hours into our three hour work session. I would like to take a ten minute bio break for our staff and come back here at 12:00. We still have seven counselors in the queue, so don't go too far. But everybody get comfy. We'll be back here at 12:00. I am now reconvening our work session. I don't know if I have to gavel this, but I'm going to do it anyway because it's fun. Yeah, and I'm next in the queue anyway, so this works out, even though some of my colleagues don't get to hear all my thoughtful questions. Ruth, you said some sort of scary things, and specifically you had said that if we have to do some of these, if we if we make draws from certain accounts, we must refill it in a set period of time. What happens if we don't? And what happens if things get worse?
110 Yeah, I'll take a first pass and then pass it to jonas to. So the I think the main one I was referring to was the general reserve fund that has a policy that's an administrative rule that governs when it should be drawn. That's based on economic factors. So it's supposed to it's not supposed to just be, you know, we we budgeted poorly. It's supposed to be. And so there's that. And then it's supposed to have a plan to refill it within 24 months. I think, you know, there are multiple reasons why that's important. One is, you know, it's a one time resource. So from a fiscal sustainability point, it needs to be refilled. Another is it's something that our that, you know, the ratings agencies look at and and it's a sort of measure of resiliency, fiscal resiliency for the city. So I think it is important I think what happens if things get worse, what happens if we don't do it? I can turn to jonas. I will I will just say, I mean, I think that is the what happens if things get worse. And peter's sort of blt scenario is just it is something to keep in mind when thinking about this, because things could definitely get worse. And so obviously that's the reason that option is a ways down the list. We want to minimize that. The use of that as much as possible. And so I think and then in terms of the other, I talked about other reserves and contingencies needing to be refilled. Those would just be more case specific about kind of what, you know, why is the money in contingency in the first place, or what is the reserve for? And then doing an analysis of kind of what are the risks that are posed based on that specific reserve?
111 Yeah. And I might just add and maybe picking up your initial comment, council president, that there's some scary things being said. What if things get worse is among the scariest thoughts that I have and is what's driving my recommendation to fundamentally shift the way we think about this. It's been really tempting over the last many, many years and budget cycles within this organization to think of. We're just solving for this budget moment and avoid that harder conversation and developing a tangible plan so that we ensure that it doesn't get worse. And so that's not easy. Those are words. The work that's going to be behind those words is going to be really important. But but that's that's my answer to your question on what if.
112 Well, building on that, you know, you've talked about this this work group coming together to build this sustainable five year plan to try and dig ourselves out of this. Do you anticipate that policy recommendations will also be a part of that work group in order to help us define those next budget cycles? And. How do we how do we keep future city councils from disregarding that? I mean.
113 Right, yeah. Great. Great question. I don't know if I can answer the second part, but but to the first part, yes, I do anticipate I mean, let me back up. I am trying to balance sort of respecting the conversation and respecting the process and not preceding what I think needs to to happen and what the recommendations need to be. So I want to call that out, that I'm not. I have thoughts many other people who are participate in this conversation will also have thoughts. That being said, I do think policy recommendations will be an important part of it. Practice recommendations will be an important part of it. Other long term strategies and tactic recommendations will be part of it. You know, things like what do we do? Setting some standards. And maybe this gets a little bit to the part of your question, but some standards and expectations about what do we do when we start to get to stabilization. Do we immediately spend that money on shiny things, on new programs, maybe, as we have in the past, without recognizing the instability of those on a long term basis? So I think some of those are policies or other recommendations that that really set a much different tone for how we operate, you know, within the five year period and hopefully beyond that five year period.
114 Great. Thank you. I have. Those are all my questions because a lot of the questions got asked already. But I have three sort of comments, observations, hopes for what happens next. The first jonas. And we talked about this a little bit yesterday. And you talked about it a little bit this morning actually that we are we are, we have as a city, we have bounded from crisis to crisis, from budget to budget, as though we found ourselves afresh at the the door of the new budget. Every time there are systemic problems in how we run this city. We talked about realignment. We've talked about some of the bigger fundamental challenges of our revenue. There are fundamental challenges to our the way we do budgeting. And I it is my hope that we take this crisis as an opportunity, and we fix some of those things for the next 100 years, or just to be able to get ourselves into a system that is modern and responsive in a way that we know our system is not. City administrator, you had the first box on your display there, said people. First, I want to be very explicit to every city employee. I am so grateful for public servants right now, and we need to lean in to protect as many of those jobs as possible. We need to protect public servants because it is an impossible time to be in public service right now, and everything is making it harder. But I want to pivot and also say there are other people that we also need to make sure we are centering. We need to identify that if we have the opportunity to save seven planners and protect those jobs by cutting one person in another department, I think we also need to look at the fact is, what is that one other person do and who are they actively serving? Because I would hate to see us preserve back back line staff and people who are really thinking about, I mean, planners or future thinking or some redundancies versus the staff at mount scott community center who are serving hundreds of high risk, low income kids. Who are we serving really matters right now. And we've said this many colleagues have said this a couple of times, but we need we do too many things. We have to do things great. And right now we don't do that many things great. So we need to double down on those great things. And the last thing I will say is building off councilor Kanal comments around tourism and events and activation. This has been, I mean, to anybody who has been listening to me at any point in the last year, my reason for being in this body, the number one tourism attraction right now, is music based tourism, and the average person is spending in excess of $700 when they fly to a city and stay in a hotel and go to restaurants and go see live music. In Portland is the fourth largest music city in America. Our friends at prosper Portland referred to events and activation as light economic development. It is way easier to build a festival than it is to build a building. My office is really excited about this, and we have a lot of deep in the weeds work about how we can very quickly turn this system to facilitate events, tourism, arts and culture, and museums, all with the goal of getting towards economic development, getting butts in seats, heads in beds, getting people coming to our city and spending money. So I look forward to working with you all on this. And I apologize in advance for the amount of details that we've already got in place. So those are my comments. Thank you very much. Councilor Novick.
115 Thank you, mr. President. I apologize for coming back late. Did you already ask about the Portland harbor item? Okay, so one of the things on this list is up to 7 million of general fund can be pulled back from the Portland harbor reserve and replenished over the next several years. I'd like to hear some elaboration on that. How much general fund have we put into Portland harbor? How has that distinguished from bts money? What's, you know, what's going on? And what would be the risks associated with doing that?
116 Yeah. Thank you councilor, and I'll start. And then again, as usual, ruth can fill in some some details. But my understanding is that is a resource that has been on a discretionary basis every year for the last few years, had an amount put in kind of reserves set aside, so to speak, but put into reserve from the general fund in anticipation of eventual citywide expectation of of some type of work and and expense related to that very, very large project. And ruth or peter may be able to talk about the specifics of how that general fund amount was, was identified and allocated. The and I would just reiterate, we did have a reminder that this resource came up in the in the fall town conversation as a potential option. So we've shared some of the this as well at that time. But the the risk of using that is then when that let's say bill comes due, we don't have that funding set aside. So this is an example I think ruth mentioned. It's different types of reserves might have different expectations around replenishment. We would likely want to start replenishing that when we're able to so that when that bill comes due so to speak, we have that resource available to spend. I think there is some. I'll say, begrudging comfort, at least from my seat, that we can probably hold off a couple of years. So, for example, using that now won't have an immediate impact by the loss of that revenue, but we might need it in 2 or 3 years. So we'd have to think about as we do that longer term planning, how do we start to build that back? So it is available. Almost any reserve we use is going to have a similar trade off. You know, it's there for a reason. Very rare that we have reserves that are superfluous. But but so I don't want to get too far afield of your question, councilor. But I do want to use the moment to call out that reality is true of almost any reserve that would be in the mix to put a period on it. You know, it came up in the in the fall tao and sort of the recommendation for me was, was, you know, not not yet. Let's hold and see if we can manage through this situation without tapping that reserve. We're now kind of coming back and saying, yeah, it's probably time that that is back on the table to consider recognizing that that trade off in in needing to replenish it over time.
117 And just maybe there's nobody here who's intimately familiar with it, but my assumption would be that, you know, we are a potentially responsible party. And part of that is based on the sewers. And maybe part of it is based on arguments about stuff our general fund bureaus do. And we don't concede any liability. But because of the intel intel liabilities negotiated and resolved, we need to, you know, take into account the possibility we'll be on the hook for some sort of general fund bureau contribution.
118 Councilor. I would obviously defer to city attorney, who I don't think we have in the room, but I think that's a that's a fair assumption that it would be a mixed responsibility for payment of any eventual obligation.
119 Okay. Next question is I assume there's not a happy answer to this, but in the legislature, there was some talk about disconnecting from the federal tax code. And I was wondering, mr. Holtzman, is what is it simply impossible for us to disconnect from the pieces of the federal tax code that are screwing us over?
120 No, the it is impossible to disconnect for the current tax year so that the 21 million. But I believe our I suspect that this will be taken up as an item in the upcoming legislative session. Just timing wise. It would need to. It would have needed to have been done last year for it to impact the current fiscal year. So again, the 11 million and so forth is likely or could very well be taken up in the short session.
121 Is it something we could just do ourselves? We disconnect.
122 Can you speak a little closer into the.
123 Yes. Sorry, I would need confirmation from revenue division, but I, I believe we can we just generally the juice may not be worth the squeeze in terms of how much like the difficulty in we we just went through an effort to conform to state policy and then to undo pieces of that. I would defer to the revenue division in terms of difficulties that may arise from that, that I'm not anticipating.
124 Okay. Mr. Berry, I wanted to daylight some conversations you and I have had about raising revenue and borrowing against potential future revenue. Last year, I floated the idea of increasing the ceo pay ratio tax surcharge in a way that would raise about $25 million. It's now practically too late to do that and raise money in the current fiscal year. We had talked about, well, what if we pass that for future years and then using that as sort of collateral, borrow against existing funds? And you said that you didn't think that it was reliable enough source of revenue to justify borrowing against. So just wanted to, you know, daylight that conversation. See, have anything to add. But also I was curious some years ago ted wheeler, as I understood it, borrowed a current year budget with a spontaneous increase in the business license tax. And I think that they relied on that in that current year budget. And I was just wondering, am I wrong about that? Was that for future budgets? And were there, you know, was it considered less dangerous to simply raise the tax and use it for current revenue than to raise it in the future and borrow against it today?
125 I can say the business license tax was raised to 2.6%, I think in 2018 or 19. I don't know if they borrowed against that, but it was raised. That would be, from my perspective, more stable to just raise the the general rate than the ceo. Just because the ceo is a subset of the businesses and. It's just even the payments that we get from that subset is more volatile, really.
126 Thomas lannom, I think said the opposite to me a couple of weeks ago.
127 Well, we and so our collections and that we have confirmed over the last five years have fluctuated between 3 and 7 million. It may depend on the exact nature of the increase. And if you're expanding. So just increasing the who we're currently the rate that they're paying again they've paid 3,000,001 year, 7 million next 5 million in between. That's a pretty large fluctuation. If you were to expand the like, who is paying not just the amount that they're paying, it will probably get closer to matching the actual business license tax amount.
128 But if you actually looked at the proposal to expand who is paying by affecting businesses between like 50 and 100 times, the typical worker, and that actually wouldn't have raised very much money.
129 Yeah, but and so I again it's I would need to see the proposal specifically. But from the I guess the extrapolation I'm making is that the ceo surcharge, the the last five years of data has fluctuated 50% plus or minus each year.
130 Okay.
131 And. Business license taxes, as volatile as it's been, has largely been in the realm of between 0 and 10% one way or another. And that is the whole the whole basis of why I would say that it is more volatile and I would I would recommend, you know, I'd recommend leaning towards the lower amount if you're going to rely on an estimate.
132 But actually, I'd love to see those numbers over the last several, several years. But I mean, you could obviously do that. You could say, okay, assuming that it goes back and forth in this way, assume that the increase would go back and forth in the same way. So just budget based on that.
133 Yes.
134 And councilor, I might just add to your comment about using that revenue stream to issue debt. And, you know, again, apologies if this wasn't clear. I think we can issue debt against that type of revenue stream. Once we know it's administrable, it's consistent, it's stable and exists for the long term. So I think it would not be wise to bond against that in year one. We would probably want to wait till year two or even year three to make sure that we're not missing something and putting something else at risk by bonding against that revenue stream. And then for reasons, as peter mentioned, or others finding out in year 2 or 3 that that whoops, we actually didn't collect that amount. And then we have a different problem. So I just want to be clear, I do think that's a revenue stream that is viable to use as as support for a bond issue. We just need some lead in time to, to establish that as a as a constant.
135 But couldn't you bond against some of it just unless you're assuming that all the ceos of America will suddenly start making 20 times what their workers did.
136 I think we could if mathematically, if we had perfect confidence that there would be no risk of litigation or other disruption and happy to continue exploring that, I don't know the answer to what the legal risk might be to to something like that, but we could certainly continue that conversation.
137 Yeah. The chamber has said that they'll sue us if we do anything with the business license tax at all. But okay, the other question I had is that the there's a 3.7 million item listed from the housing investment fund. My understanding is that actually, legally, we could use 4.1 4.14 million from the housing investment fund to direct that to the general fund. Is that right?
138 This is a great question. Yeah. And I think that was populated. If I think if I recall, it's on that that list of the the chart that was provided and I just didn't know that was provided on that chart because there was an ordinance that had passed finance committee that reflected that. I know there's been evolved conversation about that since that number was driven by, I believe, a recommendation by, by hb that that was an administrative fee that was collectible under, I don't know if it's code or resolution, and I would just defer to city attorney about any legal strings or ramifications of using that.
139 Okay. And I just wanted to take this opportunity to say we've had some discussion about what is the city's book of business, which councilor Smith raises regularly. And to me, the city's book of business is basically water, sewer, streets, police, fire and parks. And rent assistance is not really historically part of the city's book of business. It's become a significant part of the county's book of business recently, but not ours. And that's why I think that in order to avoid more cuts than necessary to police, fire and parks, we really should take advantage of the opportunity to direct that 4.14 million to the general fund. That that is the trade off we're talking about. Thank you.
140 Thank you. Councilor Novick councilor Pirtle-guiney colleagues before council, before you start, we have 35 minutes left. We have a hard out at 1:00 and I see five more hands in the queue. Do with that what you will councilor Pirtle-guiney. Take it away.
141 Thank you, council president. I will try to be short. Jonas. Ruth, thank you for the clear information. I just want to say out loud, I would rather have partial information or information which could change rather than wait to have you be fully confident in what you're sharing with us. So I really appreciate you bringing all of this forward today. I know that we have a lot of headwinds right now, and I want to acknowledge that if you took the advice from all of us individually, we would never be able to make the cuts. We need to pass a balanced budget. Some of my colleagues have mentioned some important services, and I just want to put out there in the the conversation also that we recently asked voters to pass a parks levy, where we were very clear that it would maintain our investments in our parks. So as we are looking at how we close these budget gaps, I take that commitment that we made very seriously. I don't want to go deep today. I know we don't have a lot of time. I will just thank councilor Novick for asking questions about the disconnect. I had a number of questions there too, and I would really appreciate seeing some numbers. Even if there's a wide difference between the potential low end and high end of the impact around what would happen if we did a city level disconnect over the next 2 to 5 years, and what would happen if the state ended up passing a disconnect over the next 2 to 5 years? I understand there wouldn't be an impact for this fiscal year, so that we can understand as a body, if that's something that we'd like to ask our government relations team to lobby for at the state or something that we need to consider doing. I know that councilor Morillo was asking about the realignment projects and the 10% savings for this year, and we don't have the answers to that yet. But my first question is, is your prediction at this point that we won't hit our cost savings at all? And that 10% is not actually achievable, and we need to be looking at the cost savings that were built into next year's budget as not being achievable. Also, or has it just been a slower start this year? And we do expect to realize those changes next year.
142 On that one, I would say I think mostly it has been a slower process. We started, we just haven't finished and that we I think we still expect to see something in the neighborhood of the 20% target, although obviously that's contingent on decisions by council. So but, but in terms of what we're putting forward, it would be in that neighborhood. I think there are questions around the impacts on different funds across the city. So the 20% is a citywide target. It was intentionally done as a citywide exercise, not general fund only. And we are still working out the math on how everything impacts like, you know, it's it's just a complicated exercise of, you know, moving this from here to there and, and you're paying for it this way. And so we have to finish all the math on how that is going to impact. So I don't know specifically within the general fund if that target will be fully met just because of the way the looking. But it may. So we'll we'll come back on that. But yeah, I think it's.
143 You that we might not be able to expect 20% in the general fund. Savings in other funds either means that rate increases aren't as high, or we can do more to provide services for portlanders. So I am I am willing to be content either way that falls. But as you have more information, I think the sooner the better. So we can understand what we're looking at for next year would be great. I also am wondering about the list of ideas that you put up for cutting costs for this year, and when you first put that slide up, you said many of these will require council actions. You're not asking us right now to take any actions. So I just want to return to that statement for a moment and get some clarity. Are we in a place of just over halfway through the fiscal year, where you still believe we should wait and see if enough cost savings can be realized through administrative actions? In which case, mr. City administrator, what is changing to give us confidence that we can afford to wait? And if not, when and where are we going to have the conversation? Because it certainly isn't happening in the next 32 minutes about what cuts we need to be looking at so that we're not waiting until may. With two months left in the fiscal year, to realize the cost savings that we need to to end the year in balance.
144 So yeah, I'm from my seat. I can take the kind of where are we on the estimates piece, and then I'll pass it to the city administrator. So in terms of the estimates, I think we we need to finalize that sort of baseline over expenditure estimate. Said another way. We need to figure out how much of the compensation set aside would be needed to end the year in balance, and then talk about timing of what that would look like, because, you know, depending on the magnitude, it's more or less likely that we would be able to sort of meet that. What I was getting at with the council action is, you know, so we normally would hear the spring tore at the beginning of April, even if we were saying, hey, we can find the savings, but we need to move it from here to here. That would still need to come to council in the spring, tao in April. So I think your question is really, is there anything sort of legislatively that needs to be done kind of before that point in time in order to ensure that come June, everything is, you know, we have enough money left. Whatever is left in contingency could be allocated through the overexpenditure ordinance in June. So I think that's that's kind of the timeline in my mind. And then in terms of follow up, I'll pass to city administrator.
145 I truly believe we can do monthly check ins with council on this topic to give updates on where we are and actually have it in a kind of a work session format to brief council on updated information as we have it, but we won't wait until we distribute information to the city council. As we get information, you'll get emails from me as it relates to what updated information we have, but we'll set something standing on the council calendar monthly for a work session just to keep the council in the public apprized of this conversation and ongoing changes and developments as it relates to the current year budget, but also as we start getting to the conversations with the next fiscal year budget. And keep in mind, the mayor and I will be making our rounds with council as well as it relates to the mayor's proposed budget and kind of talk through what are we buying as an organization and what we may be having at the standpoint of impacts to any potential cuts that we'll be making before council adopts approved budget for the city.
146 And if I if I may also add and ruth, I think just pulled up this slide is we looked at options for this year. I just want to hone in a little bit on the cuts conversation. You know, you can interpret cuts a couple of ways. If we're talking about reducing current year expenditures, not spending dollars on things that are budgeted, that feels like a cut. It's stopping doing something that was budgeted versus actually literally taking something out of the budget, and particularly on the kind of personnel or direct service side. So I want to sort of reemphasize that the the intent and hope in this categorization of, of options is that things that are real capital c cuts are last on the list. I do think that the, the math of the the size of the gap, I can't remember the number, ruth, that you had up on the initial slide, but 15 to 15 million to 20 something million, you know, between sort of catching that underspending and some of the reserve options that have been identified gets us pretty darn close, just based upon what our kind of best guess estimates right now, to being able to fill the gap without having to take those more draconian approaches this fiscal year, that doesn't mean we are excused from those approaches in next budget year, but I just wanted to be clear that I don't I don't have any intent and a strong optimism that we will not, despite the circumstances, need to come back and have a cut discussion this fiscal year and that we're identifying solutions that specifically avoid that.
147 Okay, final thing, just a statement. I don't need an answer to keep it quick, but I heard somebody say furloughs. And I want to make sure that if we are actually in a place where anybody is saying the word furloughs, we are having conversations with our employees and union leaders about what that looks like, how we do that in a way that is least impactful for our employees, who are the the least well paid, and that we're really doing that in partnership with our unionized staff. I'll leave it at that. Thank you, council president.
148 Thank you, councilor Pirtle-guiney council. We'll come back to you for a second round. Counselor. Ryan.
149 Thank you so much. Council president. Good to see you, ruth. Good to see you, peter and jonas. I'm sorry I was late. I had a medical appointment that was there before this was plopped in. Very important information. Thank you. I tend to focus on revenue because in my opinion, that's where we should be focusing, since that's what we're in as a revenue crisis. And I'll get a little more into that. Right now. I enjoy the dialog between councilor Kanal and the mayor, the mayor, the mayor. He was there a minute ago or last session, and it was about some of the blight that we have in district two, especially in the la area and around the convention center. So remember, all of it was unanimous. It was shocking to me, even that we passed the storefront legislation. And we have an amazing group that's working on that. In fact, today they're having an advisory meeting. I'm getting text messages from the advisory team that are storefront owners that want to continue to be listened to and will advise what that program looks like. So it actually gives them success and what we kept learning. As you go out and talk to people on the streets that run storefronts, is that they're having a hard time, and they have been for some time. And the and the business tax revenue suggests that I know it's 40%, but it's not a number that we're used to in Portland. Portland used to have very successful small business storefronts that constantly brought in revenue. And so I just hope that two things here, one is that we fully support what this storefront program is going to look like, because we're never going to get out of this budget crisis without seeing those revenues go back up. The bread and butter of our revenue streams is the the business license taxes and the property taxes. And so when those two bread and butters are not keeping pace, then we're in trouble. So my question is this. You don't have to answer today, but I think we all will need this. And that is with fixed costs escalating. And they are how much year to year growth will we need in our general fund revenue with our main sources business license tax and property tax for us to keep pace? I and I know that the economists must be thinking about this. So go.
150 Peter, I can give you answers. I tend to focus on the personnel side, which is 70% of general fund because those are the most.
151 I can't.
152 Oh sorry.
153 There you go.
154 Closer. I tend to focus on the personnel side, which is 70% of general fund expenses. And those are the most, you know, what you're going to be paying. We roughly need exactly.
155 That's our fixed cost.
156 Yeah.
157 We roughly need 20 million each year in new revenue.
158 New revenue 20 million.
159 Above the prior year, give or take. And it all depends on, you know, what actual health benefits come in at, what cola comes in at, and pers rates increases. Those are the three factors that increase personnel costs. But 20 million most of that is going to come from property taxes and business license taxes. And I, I if you get 3% growth on property taxes, which we haven't on the baseline, we have because of returning tax increment finance revenue. But just if you ignore that which we won't have after next fiscal year is returning tax revenue. We need about 12 million from property taxes. And or let's call it ten and 8 or 10 and ten between those two. So it's roughly split half and half. The other ones.
160 Change these next time we talk. It's okay.
161 Yeah.
162 Right now you're saying it's.
163 About.
164 Yeah I, I'm going to say roughly because business license tax grow faster there a smaller amount. It's about half and half. We need about 10 million in each. Yeah.
165 Yeah. Is there.
166 A graph that we have in here that I can't see that would give us? I think this is very simple and important to really track that differential. And so I think that this council would need those type of updates to see the trends in the big picture. Bread and butter revenue compared to our escalating fixed cost. That gets to the heart of the matter why we're here.
167 I think buried in the fall presentation was the 20 million and the how much we need from the other revenues. But it was.
168 That up. Yes.
169 We can send that.
170 But thank you. I think it's good for me to hear the way that you broke that down. And I think that we should be making decisions that try to get us to those numbers. So we're talking about goals up here. So let's get that 10 million increase, that 10 million increase in property taxes. What can we do as a council that would provide that revenue stream to grow and storefront support program is one of those because we have to stop those exits, which unfortunately are still higher than the new ones. I have just a couple more questions and thank you for that. I want to say this. The affordability crisis is hitting everyone. It's really hitting middle class, working class homeowners a lot. They can't take much more over inflation, increases in fees over inflation and taxes. And we're seeing those exits as well. Hence the property tax challenge that's hitting us right now. And I know there's all these uncertainties. Let me just pause for a moment and say we're all dealing with a lot of uncertainty from Washington dc. And I know this has probably been said earlier and that's really hard to manage. So I'm trying to stay focused on what we might have control over in our jobs. And so my question I just want to put out to everybody that if we have increases in fees and increases in taxes that go beyond those 2.7 to 3% inflationary, I don't know how your average family of four that's struggling to make ends meet in this town that got a budget note maybe in 2018. I don't know how we're going to keep them. So I just want to put that out because then we'll start to see less revenue come in. So I think it's this, you know, chicken egg. What do you do in the short term what's good for the long term. So I appreciate that. And on that note so we have to do some creative trimming. I think some of us were disappointed. I was disappointed that we didn't do more of that last year. And no one wants to do that. But it's important that as we consolidate so much of our enterprise, it was difficult to see where that consolidation showed up as some efficiencies in our staffing. And I've been involved in such exercises before, and it's been disappointing to like, see where that's going from. I'm not a big believer in across the board. I'm not a big believer in forcing people out of retirement. Maybe that's because of my age, but I think that it's really important to look more at skills. And so when it's been discussed, I know councilor Kanal and I have had this conversation many times, and if you want to disengage from being connected to it, you'll get to say that after this. But we have employees who are on our payroll that make good, that have decent salaries, that have been working, perhaps on some plans for something that we have no revenue for today. We have no forecast in the future for that revenue to come in. So I think that we have to remember that we have brass tacks of people, that we have to keep on the on the employees, and we have some that right now we don't have the luxury of having on our payroll. And I know that's hard to say, but it's easy to say at the same time. And when we do surveys of portlanders, I remember the PBOT one about four years ago. It was so interesting what the public said they wanted from PBOT and what our internal advisory board said were wildly different. And so I think sometimes as as a council, we have to take a pause and listen to the bigger room called Portland. What do portlanders want? And so I hope that we take some pause and look at those kind of big picture surveys like they did in PBOT about three years ago. I don't know what we did with that. And finally, I'll just say this I enjoyed councilor President Dunphy, talking about your passion for travel. I share that, and there's a report that we used to always get on the council every year, and we're not receiving that right now. And that's from travel Portland. So I hope that president Dunphy, you get that back on the calendar for the council, because sometimes we're having this information, say, at the economic development committee, but it's not getting to this level. So I think that we have to plug into that information more, and then they give us the hard truths on why they're still struggling, because we are still struggling in terms of foot traffic. And I know we're we're headed in the right direction, but we have a long way to go. I can feel everybody getting antsy around me because it's towards the end. But I just want to thank you and I'm glad that we're having more time to actually get some basic one on one information about our revenue stream challenge that we're currently having. And I hope this council this year actually prioritizes that. Thanks.
171 Thank you, councilor Ryan. We have two colleagues who have not spoken yet. We have two colleagues in the queue for a second round, and we have 17 minutes. Councilor Avalos.
172 Thank you. All right. So pleasantries. Thank you. You're doing great. You got it. Okay, so this presentation you know, this is about this financial crisis. And I agree that naming it like that is really good. I'm curious if you guys have already. And if not, what is the way you will get to determining the benchmarks that council needs to understand so that we can see what the progress is like, what's what's your vision for how we're measuring our success in climbing out of the financial crisis other than just the numbers?
173 Yeah. Great question councilor. I anticipate that developing those touch points and metrics is, I hope, is part of that five year stability and recovery plan. So we can identify both, you know, what are the metrics that that we would use to identify that we're getting to stabilization and then build that into the recovery conversation as well.
174 Thank you. Yeah, I just wanted to name that, as you know, to make sure that that's at the top of our list of priorities once we start this work group, that we need to clearly define that. And because I think we all might measure success differently. So that's the work that we need to do for us to get on the same page so that you guys have clear direction from us. Can you talk to me about I've asked this in a couple of different ways over the last few months. How are you all going to be able to distinguish clearly for us which options are technical, which are managerial, which are policy decisions that require explicit council direction? Can you talk me through what that looks like?
175 Yeah, I can talk about it a little bit. I mean, I think there's no like one right answer. Unfortunately, I think the essentially any reserve or contingency draw is kind of by definition a council action and will, you know, have to be reviewed and decided by council as a part of legislation. I think the ones that are more clearly on the administrative side are, you know, holding back on some spending that is more discretionary where it hasn't been, you know, it's very clear in the budget council approves, you know, a specific program to operate. If we cut that program that that would be clearly a policy decision. So I think that's where it gets into the gray area. But like the flip side of that, things that are in our budgets that, you know, that aren't going to have that significant programmatic impact are probably more within the kind of administrative bucket. And they maybe, you know, things like the targeted cost reductions I listed on this slide, that just increases the likelihood that any given bureau will come closer to balanced by the end of the year. And so that kind of thing is probably more on the kind of administrative cost reduction side. And then I think there's kind of a host of things that are that are kind of in the middle in between those extremes. And I don't know if if city administrator wants to weigh in on that. I mean, from my perspective, like I said on the slide, aside from those things that are like, okay, I can squeeze down a little bit and make it more likely that my budget will end in balance. Everything else is going to require council action to move money around from place to place, or to pull money out of contingency. So I think that's all within sort of council's purview.
176 If you like. What we can create for council is kind of a fact sheet, the kind of breaks down the dichotomy of what is policy decisions that will have to be made as a part of this, what may be potentially administrative and what may be options from an executive standpoint, that kind of help clearly define what that means in writing for council. And that's something we can produce. And what kind of falls within those themes.
177 Thank you. I definitely believe that that is going to be critical, as we are still learning how to operate as a legislative and financial authority body. And, you know, and this is also politics, right? So I'm just naming that that is the tension that I feel like you all have seen from us throughout this year, and it's going to continue to be a tension until we can find some kind of resolution so that we all feel confident in where our authority is and what decisions we need to be working on creating our vision on. Right. Council president started to talk about this. I'm curious how our equity impacts going to be assessed across these proposed solutions, particularly for bureaus that serve historically underfunded communities.
178 Yeah. So a couple couple of thoughts. And I think there's two categories. One is the budget work for sort of next year. So the 2627 actions, which I know the city budget office is working very closely with office of equity and human rights and equity practitioners. And really from again, my kind of lens, but really, instead of having that assessment be an after the fact, as it often has been in the past, bureaus and folks assemble their ideas and then we do an equity review and say, hey, good, bad, indifferent. But really embedding that expertise and participation upfront in the process. It's a little harder to envision that. I mean, certainly we have the city administrator's leadership team, which incorporates the interim equity director in that conversation. You know, and so support whatever we can do to pull that in. I do anticipate that the work team that will be developing the strategy will also have as active and robust equity related participation that we can get on that work team as well. So we make sure as we develop those long term solutions that it's not being done in a bubble. And exclusive of that feedback.
179 And there was actually a question actually came up in our leadership meeting, how will equity play a role in this? And we want to make sure that we're looking at this through an equity lens, as we are making some strategic decisions regarding structurally what will be moving forward for this organization in a proposed budget, but also what are the impacts to some of the decisions that we know we're going to have to make as it relates to structurally setting us up for long term success? As we look at this five year outlook, it's two different things that are happening. One thing from the standpoint of looking at how we're addressing the shortfall in this year and what does that mean? And that may not we're trying to stay out of the red area. This chart that you see on your screen. But the long term sustainability and resiliency plan that we're looking at, that five year plan, you have to have an equity lens to look through that. We don't want to create long term gaps in how we provide services for the community with making decisions that we feel will solve the issue for today, but creates a bigger impact for our organization in the future. So no doubt that will be a constant conversation and something that really, while I have the equity person sitting at our decision making table, so they're weighing in on those type of decisions that may have that type of impact to an underserved population within our community, or a portion of our community that is not spoken for. A lot of times in these type of decisions.
180 Thank you. And, you know, I raised this as some as a representative of the district, the community that has long been underfunded. They are first on the chopping block. And also the not only are they first on the chopping block, usually the chopping block is full of multiple versions of that same community. And so we are constantly pitting communities that need resources against each other. Meanwhile, other areas of the city just get the Green check right away. So I'm just again, making that public and also looking to my colleagues that like this, this is really serious. You know, I have immigrant families who aren't leaving their house because they're afraid of of ice, right? They are not able to get groceries. Right? I have community members who are ending their lives because they are concerned about ice. That's very serious. And so I just want to make sure that the gravity of that is known and understood, that when we're making these decisions, these communities that are already at the on the chopping block federally, that we need to invest more deeply on the city level as much as possible. Lastly, I'm curious, you know, this is not the first budget crisis. It won't be the last. What approaches have been proven to be effective? Right. What have you learned in the past when we're dealing with these kind of budget crises that, you know, what are approaches that maybe cause more, longer term harm? What are the lessons that are being reflected in the proposed stabilization and recovery plan?
181 Councilor, that's a great question, and I want to be mindful of sort of the time, you know, I'll answer a couple of ways. I think we we know we've witnessed and we've experienced that taking a short term lens, just solving for the moment is not making progress. We are constantly coming back and doing that over and over and over again. It's very tempting to think, well, we just have to solve this moment and then we'll be fine. I will say I have learned both participating and watching, participating in and watching that happen at the city for the last multiple years. We have to stop. We have to stop doing that and take a long term approach. The other thing I'll answer is, you know, somewhat curiously, I was quite surprised when when the sort of concept was materializing, trying to do some research and say, let's see, let's, let's learn from how other governments have approached this very difficult to find. I was surprised at how thin the body of information was around folks taking this approach, and really taking a multiyear reset and developing that strategy. That's work I will continue to do, and hope that the team will help me continue to do over the next few months, so that we can use those best practice lessons to inform our work going forward.
182 Thank you. I'm really looking forward to being a partner with that. I would love to see ways that we can really incorporate the voices of these communities that we represent in this process. What I don't want is for us to do all this back end work and then say, community. What do you think? No, they need to be at the table at the beginning. So I'll keep harping on that. But I want to just name the importance given the gravity of what we're experiencing, especially in d1. And again, a call to my colleagues to consider that, you know, regardless of the anti dei country that we live in, regardless of the mayor's executive order, we cannot back down on the the racial equity lens that we have to apply to these hard budget decisions. Thank you.
183 Thank you. Councilor Avalos. We have six minutes left, councilor Zimmerman.
184 All right. Thanks. I think ultimately, in some form or fashion, the question has been asked to you, mr. Lee, when are we going to expect your recommendations? And and the bullet point to that is then what's council action versus what's council inform? I underline that because frankly it is the can that got kicked by your predecessor. And so it's really time to of us to go ahead and have a real conversation and dig in. The 10% reduction for realignment was about the easiest target we could have hit, and we are going to miss it. And so some hard decisions didn't get made. And so I'm placing that right on your table month one. And I the reason I think that's important is that you can do it from a nuanced perspective. And we can do it from a sledgehammer perspective. So it really has to come from you. And I don't think we'll make it through this budget without a sledgehammer. So we need you. We need that recommendation to come forward. I'll say the things that your dca's can't say to you. So there you go. We missed the boat on that last year. I also think that you offer a an interesting and an important core services perspective that we're going to need to use. I seem to agree a lot with, with counselors who talk about those things, because those core services to me is where I'm going to go. And I and I. When I think about applying it from an equity lens, I have to remind myself our job is not to keep all workforces of the city of Portland employed all the time. It is to deliver those core services equitably across this community, for different partners and different community members. That's going to require some tough conversations. Councilor Ryan brings up some really interesting points about folks we have on doing projects we know we're never going to fund. That should be alarming. I also, I have a core belief in this and I bring it up during budget cuts. Seasons is I actually don't believe that service and government has to be an exercise in. I don't know what the right word would be, but the point being is that if you are in servicing government, what I would rather is that we shrunk our footprint so that it is a thriving workforce who does work for us, that they are treated well, that they have good benefits package. Instead of having it be such a thin margin across the way. And I, I know that we weren't being super serious about cutting a pizza parties earlier, but the point stands as an analogy about it's not austerity that is going to get us through this. It is structural change that gets us through this. And so I just want to encourage you for that, because for those who stay on our workforce, I still want us to be an employer of choice. That's really important to me. As you go through this. There are some things that I think we are desperately looking for that I don't think are going to come bubbling up. They're going to have to be coming top down. It's things like, are we or are we not actually doing a hiring freeze? Are we or are we not going to look at silly contracts with bloated prices? I'll use our furniture contract, for god's sake. It is a known problem in the organization, and yet we just kind of keep it going along and every bureau is paying for that. Are we going to stop certain fleet and facility purchases? So those are the things that I think we just need some immediate tactical tactical issues. And then these longer topics when we get into the development of the budget. So I offer that and then to ourselves as the council, I guess it's one of those of who has the intestinal fortitude to hold ourselves accountable to this next budget. It's going to be very hard. What are we willing to give up? The thing that we all love in order to not spend more? And I'll remind you, before all of us got here, the city council, the previous form of government, basically increased our services by about $100 million, and we didn't cut anything. So we have a budget hole because we expanded services and didn't say who was on and off the island. And somebody is going to have to be off the island. And that's okay, because that's what government has done for 150 years. We have transitioned to what is our core book of business. It's why we have different partnerships. I'll remind you, in 1986, when we split what the city and county services were, those things happen. It's just it's our time to do that. And we had $100 million growth before all of us were here that we really have not addressed. We have just buckled it in somewhere to be part of the ongoing. And I'm not saying that those new $100 million services are wrong. I think they're probably right. There's some older stuff they're probably going to have to get after. So we're going to need your help on that, raymond, and I'm looking forward to that conversation. Thanks, mr. President.
185 Colleagues, looks like everyone has gotten through first questions and we are at time. But I'm going to try and get councilors to have one minute apiece. Councilor Green.
186 Very briefly. Well, the mayor is here. I put myself back in the queue because he started talking about economic development. The mayor's no longer here. If he has a plan for an active package that's going to inform the next budget, he needs to come to the arts and economy committee before that. So that way we can approve a policy set of ordinances of an economic development nature before we head into that budget. And we we're going to create space for that. Councilor Ryan and I have already talked about holding space for pre-budget related items. It's very important to me looking for that discussion. And then the other thing I'll say is, you know, councilor Smith had suggested that I was blaming businesses for a shortfall. That's not what I was doing. I was asking questions, and any economist would ask about the nature of our business license tax revenues. I did start my speech by talking about how we spent our kitty down in the fall, and now we're in this hole. Thanks.
187 Thank you, councilor Green. Councilor Smith.
188 Thank you, thank.
189 You, council president. Thank you, councilor Green. I do agree with you, councilor Zimmerman. We're going to have to make some some very tough decisions. An easy decision is last money in is the first money out. So we got here the year before that we put $130 million in a new homeless and housing. Bureau. We're still in an iga where we're not supposed to be doing housing services. And until we have that conversation not just about housing, but are we going to do this? Are we going to be the partner that we're supposed to be for the next two years? Because we're on contract with Multnomah county, and so are we going to do that in addition to doing our own homeless bureau that we have over here at the city of Portland? And we need to start there. That's I mean, I'm not saying that we need to cut this, but like councilor Zimmerman said, if we're going to cut some other stuff, we need to do that. If we're going to keep what we have going right now. So I don't think that this problem is hard. I think it's very I think it's a political problem. And we have to make a decision if we're going to break our iga and not send the $30 million over to the city of Portland. But I will remind you, I was there when we created this, and we sent our employees over to Multnomah county, and we were expected to continue to pay for those employees that we sent over there. So that being said, that's where I would start. City administrator, thank you.
190 Thank you, councilor Smith. Councilor Kanal. Last word.
191 Thanks. First I want to say I do not disengage with what councilor Ryan said. I think planners are really important, but I want to make sure that we're doing it. If there's hope for the plan to actually be implemented. Second, I just wanted to flag for this relates to something councilor Novick said. But I wanted to expand it a little bit. There are things that maybe aren't in our quote unquote book of business, but where we created a revenue stream specifically for it. And I think this is captures not only the the housing conversation, but also things like PCEF, right, where voters created it in that particular case. And I just want to add to and not in a contradictory way, but to say, in addition to whatever we view and the conversations we have about general fund and our quote unquote core book of business, we should be talking about ensuring fidelity to what the what the plan was when we created or more importantly, when voters created streams of revenue. And so I'm very interested in that, as well as councilor Novick surcharge conversation. And I'll leave it there. Thank you all.
192 Jonas. Peter, ruth, thank you for everything, raymond. Thank you for everything today, colleagues. With that, we are adjourned.