Portland: Open for Business

Randy Leonard

Open
Is Portland anti Business?

To hear some tell it, one would certainly think so.

To name just a couple of examples, Portland critics cite the interest by me and others on the city council to acquire PGE, including my position that we should condemn PGE if necessary, as being “unfriendly to business”. Another recent charge of Portland’s hostility to business is the city council’s refusal to grant a property tax abatement for a high rise apartment complex in the new south waterfront development, especially given the fact that the developers met all the necessary criteria.

To be fair, I do think that in the past some within Portland city government have been less than “customer friendly’ when interacting with businesses on a variety of issues. But, as I have said many times, at least the bureaucracy was fair…they treated everybody, rich or poor, the same way.

I do believe we are in an era of “redefining” how the city conducts its business. For an example, when I first arrived on the city council three years ago, tax abatements for large developments were placed on the “consent agenda”, i.e., they were not even discussed.

Now, not only has the council hotly debated specific tax abatements, we have suspended –and will hopefully eventually kill- the abatement program for market rate rental housing in downtown Portland.

I do not understand how some downtown business advocates can criticize Portland city government on the one hand for not operating like a private business and then turn around and ask the council to eliminate property taxes on their apartment developments that charge over $3,000 per month for some units.

Further, some of us on the city council have been involved in efforts to insulate Portland citizens and businesses from further unfair electric rate hikes due to deception and misrepresentation on the part of PGE/Enron (more on that in another post soon). The council’s current proposal to set the rates for all PGE customers living within Portland is driven in large part over the council’s concern that businesses cannot afford to pay the record high electric rates PGE charges.

Finally, the Bureau of Development Services (BDS) is responsible for issuing building permits for all construction that occurs within Portland. They have evolved into a proactive, problem-solving permitting entity that treats all of its customers as with respect and a helpful attitude. Whether you are remodeling your kitchen or building a high rise building, BDS staff do not create roadblocks, they help you resolve problems so that businesses and individuals can count on city staff as problem solvers- not problem creators.

In fact, the turn around at BDS has been so dramatic, the National Home Builders Association awarded BDS its most improved public permitting agency in the United States less than two years ago.
What Portland could use a little more of, however, is a proactive business community that sets aside its individual interests for the broader interests of the entire city. Saying you are for public schools on the one hand while on the other suing Portland in court (Qwest) because we allow schools in Portland to hook up to our cheaper internet system is not an example of a progressive business community.

I understand that to create jobs and have a sustainable revenue source to fund important city and county programs, we must have a business friendly environment that allows business to grow. However, I am beginning to think that some in the business community use criticism of the city as more of a strategy to improve their businesses bottom line than to improve the quality of life for all Portlanders.

  • Kent (unverified)
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    I do not understand how some downtown business advocates can criticize Portland city government on the one hand for not operating like a private business and then turn around and ask the council to eliminate property taxes on their apartment developments that charge over $3,000 per month for some units.

    Amen Randy.

    So where do I go to get my 10-year rent abatement?

  • Gil Johnson (unverified)
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    As the owner of a small business, I think anything the City can do to take over PGE and provide its customers with a local and accountable electric utility would be good for my business. And I just have a martial arts school that has to deal with air conditioning in the summer. Think about all the manufacturing businesses that really could use a break on their electric bills.

    Keep at it, Randy.

  • Gil Johnson (unverified)
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    As the owner of a small business, I think anything the City can do to take over PGE and provide its customers with a local and accountable electric utility would be good for my business. And I just have a martial arts school that has to deal with air conditioning in the summer. Think about all the manufacturing businesses that really could use a break on their electric bills.

    Keep at it, Randy.

  • Steve (unverified)
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    "But, as I have said many times, at least the bureaucracy was fair…they treated everybody, rich or poor, the same way."

    If I am OHSU or a historic property in the Pearl District vs. being a grandmother on fixed income who owes property taxes, who do you think is more likely to get a tax break?

    "The council’s current proposal to set the rates for all PGE customers living within Portland is driven in large part over the council’s concern that businesses cannot afford to pay the record high electric rates PGE charges."

    Again, why not put more teeth in the PUC to set fair rates for everyone? CoP has demonstrated by charging citizens outside of Portland higher rates for BullRun water than those in Portland, that they have biases. Why wouldn't they do the same thing with PGE power?

  • paul (unverified)
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    Randy,

    When people criticize Portland for being business-unfriendly, I don't think they have in mind the City's position regarding condo developments. The recent decisions regarding abatements, or the abatement policy generally, has not been part of this conversation, although given the public unhappiness with real estate abatements for luxury condos, it's a politically savvy move.

    Don't most of the complaints focus on the complexities of the permitting process or the various extra fees and taxes? Isn't the poster boy that guy who wanted to move his pizzeria across the street and faced some 10,000's of dollars in fees?

    Part of the solution, it seems to me, is to get business and political leaders at the same table, discussing common solutions to the problems of sustainable growth in the City.

  • Randy Leonard (unverified)
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    Actually, your example of the pizza restaurant across the street and the overly complex building regulations makes my point.

    We have created a small business grant program in reaction to the pizzeria debacle that has allowed business to open in Portland, such as Equinox restaurant on N Mississippi and Shaver, that otherwise would not have been able to.

    We have a business advisory council at the Bureau of Development Services that oversee how our regulations are implemented. More than one business person has told me that Portland has gone from one of the worst to one of the best places to get a permit in the last 3 years.

    I and my colleagues are at the table with business leaders and we are coming up with solutions to age old problems every day. Those business leaders are truly interested in the city for everyone...not just themselves.

    However, some of our largest and most influential business leaders, I fear, only want to come to the table when it serves their own interest.

    That, in fact, does need to change.

  • Jason Bligh (unverified)
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    The pizzareia wasn't charged for moving across the street, it was charged for expanding its operations which causes more traffic, which creates a demand for street improvements, that someone has to pay for. Why not the pizza business, who can then pass on those costs to customers who drove there? Why should the rest of us pay more taxes for those customers' street usage?

  • Bailie (unverified)
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    Jason,

    You say, "Why should the rest of us pay more taxes for those customers' street usage?"

    Interesting comment. Would you also suggest, that people who don't have children in school, should not pay for schools?

  • Jason Bligh (unverified)
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    Yeah, right. Um, while some would disagree with me, the right to eat yuppie pizza is not a shared public benefit. Having an educated society is.

    Businesses create costs -- who should pay for those costs is up for debate. I think it's fine to charge the business for the cost of building and maintaining streets that serve the business.

  • Bailie (unverified)
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    You are correct, "Having an educated society is" (important). Having a strong business economy is equally important. Business is the financial driver for an adequate education system. It is the problem Oregon is having at this time. Oregon has one of the worst business climates for working Oregonians. Oregon is 36th in "per capita income" and has led the nation in unemployment for the last five year period.

    You say, "the right to eat yuppie pizza is not a shared public benefit."

    Most purchases by an individual are not "a shared public benefit".

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    "the right to eat yuppie pizza is not a shared public benefit."

    Sure it is. Or, to put a finer point on it, a vibrant, local, small-business community is a shared public benefit.

    I don't remember the particulars of the "It's a Beautiful Pizza" issue - but it seems to me that charging $80,000 to a small business that results in an owner profit/salary of $50,000 is silly. (Est.)

    Randy's on the right track with the smallbiz grant program and permitting changes. It just takes a while for public perception to catch up.

  • Jason Bligh (unverified)
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    This is exactly like the McDonald's third-degree burn from coffee issue. An example is brought up, divorced from facts, and then repeated as a mantra.

    The transportation fee was $27,000, I believe for an expansion of 1,000 square feet. Have you looked at how much it costs to maintain roads these days? The fee was reduced because of the outcry, I believe to $17,000.

    It's a Beautiful Pizza is still in business.

    And the fee wasn't adjusted because it was a local small business. I doubt that would be legal. So whatever expectations we set up for It's a Beautiful we have to apply to Nike.

    So if we adjust the fees down for local (and international) businesses, who's going to pay for the roads? Having low property taxes for poor people and families is also a public benefit. Are we going to give up that benefit? Shouldn't the people causing the impact (those eating the pizza) pay for building the public infrastructure required?

    Greg LeRoy has documented that most business subsidies have no impact on business location.

  • Garlynn Woodsong (unverified)
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    "So if we adjust the fees down for local (and international) businesses, who's going to pay for the roads? Having low property taxes for poor people and families is also a public benefit. Are we going to give up that benefit? Shouldn't the people causing the impact (those eating the pizza) pay for building the public infrastructure required?"

    In most other states, the solution is to levy a sales tax on the business transaction. Part of this tax is to pay for the maintenance and upkeep of the transportation system. In some places, like California, each county has the authority to ask its residents to levy a tax specifically for transportation purposes, which must pass with 2/3 of the vote. Many of these are 1/2 cent sales taxes.

    In Oregon, the suggestion of a sales tax is political suicide. Just ask any politician anywhere in the state who has ever seriously attempted to propose such a thing, except those in the City of Ashland. Ashland has gotten away with having a municipal sales tax (or perhaps it's a luxury tax -- same difference, a sales tax generally only applies to a specific set of goods and services, excluding such things as groceries) for many years, and this is one of the reasons that town is so well-kept and generally nice-looking. Go visit Ashland to see what I'm talking about.

    Is a sales tax the only option for Oregon or communities within this great state who wish to raise additional revenue to maintain the transportation system and other essential public services? No. However, the other options are limited. The property tax is pretty much maxed out in terms of its revenue-generating potential, due to a series of voter-approved limitations on it. The income tax could perhaps be broadened to raise additional revenue, but with a limited in-state tax base, especially of wealthy income-earners, this route is full of peril. Other income possibilities include public-private partnerships and options of limited geographical scope, such as Local Improvement Districts (LIDs).

    The Employer Payroll Tax currently only pays for transit operations. It could perhaps be expanded (that is, increased) to pay for additional transportation services (such as capital improvements to and upkeep of the transportation system). However, this has the potential to make Oregon even less business-friendly.

    The last option for raising revenue is to raise the overall size of the economy in such a way that the tax revenue generated exceeds the cost to the public sector of accommodating the additional burden of the resources required to support such an expanded economy. The best way to do this is probably to follow the path called "Smart Growth," which focuses new growth around existing infrastructure, especially transit, in order to maximize the revenue to government from the public resources that already exist. A good example of Smart Growth is all of the development that is taking place (and has taken place) since the opening of the Westside Light Rail Line in 1998 between Hillsboro and downtown Portland. A good example of the opportunities for further development, expansion of the economy and therefore additional revenue for the public sector lies with the remaining under-developed parcels near transit along the Westside Corridor, near the Portland Airport along the Airport MAX corridor, and in the Interstate MAX light rail corridor in N/NE Portland. Building out these three corridors with small business with a high potential for growth should be a top priority for the entire state. Small business incubators, loans for business start-up and business improvements, bridge financing and construction financing for developments, and other such policies probably represent the best "bang for the buck" for the state to revive and expand its economy over the next half-decade.

    Longer-term, investments in transportation infrastructure to link the disparate sections of the state more closely together will allow for this model of economic expansion to continue in Oregon, as the state slowly climbs out of its economic hole and builds a solid economic foundation upon which to provide employment for its citizens and revenue for the public sector. The next opportunities for such investment could include:

    • A higher-speed rail connection between Astoria and some point to the east, perhaps The Dalles or Pendeleton, via St. Helens, Portland, Troutdale and Hood River. Double-tracked higher-speed passenger and freight rail service in this corridor would allow for more transit-oriented development near stations, goods shipment, and even long-distance commuting. I heard a well-founded report that Google is opening a new campus in The Dalles. If so, those employees would be well-served by a passenger rail connection to downtown Portland, where they could transfer to Westside Light Rail to reach the Silicon Forest. Similarly, a new public university campus in Astoria could spur that city's economy, and with a rail connection into downtown Portland, tie it together with the outside world.

    • A commuter rail link between the communities of the Rogue Valley (Ashland, Medford, Central Point and Grants Pass, with a possible northern spur to Eagle Point and Shady Cove) would allow for non-automotive transportation options, as well as bring about the potential for transit-oriented development. This is another region where another institution of higher education would do worlds of good for the economy.

    • A high-speed rail link between Portland and Bend could help the Central Oregon High Desert communities expand their economies without clogging the state highway system further.

    To fund all of this would require vision and leadership, as well as floating capital bonds to pay for construction. The construction would create jobs, as would the operation. Tax Increment Financing in station area locations could help pay for retiring the debt, as well as potentially help to cover operational costs. An expansion of the Employer Payroll Tax to a statewide basis could also help cover the operational costs.

    There are many opportunities for the State of Oregon to exert leadership to turn its economy around and still provide the services that its citizens expect. The sales tax is not the only answer. However, this discussion needs to take place, and the sales tax needs to be on the table as a discussion option, so that everybody can weigh all options and choose the one that best reflects the spirit and desires of the state as a whole. Ultimately, I would guess that Oregonians would choose to remain a sales-tax-free state, but only if some of the other options that I have laid out here are brought to fruition to help maintain the services provided by the public sector.

  • (Show?)

    The pizza place moved right across the street. While the space was slightly bigger than the space across the street, the seating area was actually smaller-- it seats less people. Apparently it was the behind the counter or cooking areas that was bigger. He ran into problems because the space was over 3,000 feet and he changed the use of the space.

    The transportation fee part of it is intended to help pay for transportation improvements to accommodate growth. However, since the move was right across the street and would serve less customers inside, changes in traffic patterns would be negligible.

    The city council looked at the fee, but stated they could not make retroactive exceptions. As such, they unanimously approved to keep the fee at $27K.

    http://www.regulatoryimprovement.ci.portland.or.us/news/specific/it's%20a%20beautiful%20pizza1.asp

    Shortly after, Commissioner Jim Francesconi found a glitch in the system that would save the pizza parlor owner $10K.

    From the Oregonian:

    "Francesconi's proposal, which goes before the City Council next week, eliminates a glitch that prevented Carl Sandstrom, owner of It's a Beautiful Pizza, from getting a 'transit-oriented' discount on the transportation system development charge."

    http://www.regulatoryimprovement.ci.portland.or.us/news/specific/it's%20a%20beautiful%20pizza2.asp

    Because of that proposal, they were able to lower the cost of his fee.

    According to several stories I found on this, his fees (transportation fee and building permits) originally started at $36K, but through hiring a consulting firm he was able to reduce them.

    http://www.publicbroadcasting.net/opb/news.newsmain?action=article&ARTICLE_ID=398577

  • (Show?)

    Ok, as the guy collecting Carl's money (and an the guy who told him to pull his SDC charge off the consent agenda so he could be heard...)

    Proposed assessment for Transportation System Development Charges: $26,900. This was reduced by $10,328, and then later reduced by an additional $8,316, when the formula for calculating these was changed.

    Carl didn't just move across the street. He'd been leasing...now he'd bought the building, hence the Transportation SDC charge for the change in ownership.

    He has no parking spaces, aside from the public ones on the street. His "traffic impact" was less then the Dry Cleaner that had been in the building before he remodeled it. He did an awesome job remodeling the space. The Transportation SDC charge is hard to justify, in my opinion.

    More to the point...the SDC money does NOT go to improve Belmont. It goes for OTHER "capacity" improvements...like helping to fund streets in new developments, like South Waterfront.

    What Commissioner Leonard has given us --a grant program-- is fine, but limited. We also need to look at how we determine these SDC charges and whether they make sense, and whether they are imposed equitably. I would argue they are not.

  • CTLH (unverified)
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    I wonder if Transportation SDC's are being paid by the SoWa towers going up? Or any of the subsidized SoWa developement?

  • Jason Bligh (unverified)
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    So, the "$80,000" charge Kari mentioned was actually $2000 in the end? For a larger space? (seating area size was presumably his decision, not the city's).

    Given that people driving to the pizza store don't just use Belmont, I think that's a fine charge (actually, I think it's low, but...). Whether or not the dry cleaner had more traffic, the pizza store is causing traffic. And those people creating traffic can be charged. Presume you sell 200 pizzas a day, in just 200 days for five cents a pizza you've got your $2000.

  • (Show?)

    So, the "$80,000" charge Kari mentioned was actually $2000 in the end?....

    Look at your math, Jason. It's more than $8,000.

    For a larger space? (seating area size was presumably his decision, not the city's).

    Moving the pizza place across the street was so he could own his own space, not rent. That's what triggers a System Development Charge.

    Given that people driving to the pizza store don't just use Belmont, I think that's a fine charge (actually, I think it's low, but...)

    The charge is theoretically tied to paying for increases in capacity. The point is a small, local pizza shop generates less traffic then the dry cleaner it replaced.

    Presume you sell 200 pizzas a day, in just 200 days for five cents a pizza you've got your $2000.

    This is not a Dominoes with drive-through sales and a parking lot. The store doesn't have any parking spaces of its own. It is certainly not a 200 pizza a day operation.

    More relevant, though, is that not one dime of the Transportation System Development charge goes to improve the streets and sidewalks of the surrounding neighborhood.

  • km (unverified)
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    To a small business owner, $2000 IS a lot of money. I have friends that would be put out of business for less than that (the artist community that Portland claims to be so proud of).

    What about Climb Max? Once on Division, the owner packed up and left Portland after being nitpicked by our permit system. A small business, an employer who paid living wages, left the city. The Portland Ambassadors tried to convince them to stay but the damage was done.

    I believe that in SOME cases, Portland is just as friendly as any other city but in others, we definitely drop the ball.

    And while big, mean corporations and evil small businesses seem like the enemy to some people, those businesses supply jobs so that people can put food on their table, pay their rent or mortgage, pay the taxes that fund schools and services for those who cannot help themselves and (hopefully) a little left over to contribute to charity. I'm tired of the unemployment & underemployment I see here. I have friends that, instead of utilitizing their skills & degrees from top universities, are waiting tables dreaming about a job that might be able to afford them a home instead of an apartment.

    We need to stop focusing on socializing everything in the city and do more to recruit business to Portland and to Oregon in general. Bring some jobs here; get Oregonians back to work and turn them into taxpayers. Let's start with companies located in Kansas; their school system with "Intelligent Design" as science will be worse than ours even if we do have to cut 50 days from the school year.

  • Randy Leonard (unverified)
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    I have always connected the dots between a healthy business environment and good, family wage jobs.

    I am not sure what you are referring to as "nit picking" by our permit system and I will not attempt to speculate. However, what some consider "nit picking" regulations others call safety and/or neighborhood compatibility standards.

    Any business that needs help I encourage to contact me. My office can often find solutions to permitting problems.

    What I will not do, however, is excuse well thought out zoning and safety regulations that are designed to protect the public.

    Admittedly, it is difficult to balance the needs of maintaining a prosperous business community that is compatible with a safe and attractive place to live and raise a family. However, the point of my post was to point out that some in the business community are not working to find that balance...rather, they are focused only on their balance sheet.

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