Mayor advocates ‘paying down Portland’s credit cards’

See how Portland Mayor Charlie Hales says he’ll keep the City’s credit strong, using ‘found money” in this budget – if he can get City Council to go along …

East Portland Chamber of Commerce Ambassador Deborah Higa greets Portland Mayor Charlie Hales, on his way to the podium.

Story and photos by David F. Ashton
A year ago, to the week, Charlie Hales appeared before the East Portland Chamber of Commerce (EPCC) meeting at Adventist Medical Center (AMC) – as a candidate for Portland Mayor, running against Jefferson Smith.

> To see this September 19 article, “Hales vs. Smith: Mayoral debate targets East Portland’s economic future”: CLICK HERE.

On September 11, now-Mayor Charlie Hales returned to the EPCC’s “Good Morning East Portland” early morning forum, also held at AMC, to present what he called “a kind of financial statement for the City”.

After self-introductions of those present, Community Works Project Business Services Coordinator Deborah Higa introduced Portland’s mayor.

What follows is lightly edited full text of Mayor Hales’ remarks. . .

Portland Mayor Charlie Hales begins by saying he’s pleased by the results of the City’s budget process.

“In my prepared remarks, I’d like to focus on one topic, an important one: Giving you a report about how we are spending your money, a kind of ‘financial statement’,” Hales began.

“Many of you may have followed our budget process this year. We were facing the worst city budget situation in the least 20 years – a $21 million to $25 million shortfall – if we kept doing this year what we were doing last year.

“Ultimately, we got that down to the $21.5 million region. Out of the about $400 million budget, that’s about 5%.  Most of what we spend money on involves people – such as police officers, firefighters, and maintenance workers. We were talking about the prospect of reducing the work force, and thus, reducing the level of services that we provide to you.

“We put in place a form of budgeting called ‘Modified Zero-based Budgeting’. To go all the way to true zero-based budgeting in government is a bit of a fictional exercise.  We will always have a Police Bureau, for example. We told our managers to come in with a budget of ‘90% of what you spent last year’. That is a significant change.

“We told all the Bureaus that they could ‘bid’ to keep part of that 10% reduction; everyone would compete for the dollars that we had available.

“Frankly all of that worked as well as we thought it would. The Bureaus did a pretty good job of prioritizing, and working within that 90%.

-3 Cuts made to emergency responders bureaus still preserve public safety, Mayor Hales says.

Cuts made in Police and Fire Bureaus
“For example the Police Chief did such a good job – he reduced the size of the Portland Police Bureau by 55 positions, without laying off any officers – which is important, because we’ve trained a new class of recruits – some of the most diverse and best-educated recruits that we’ve ever had.  It would have been a tragedy to lay off some of these smart new recruits.

“At Portland Fire & Rescue, they found that more than three quarters of their calls are for medical services – not fires. They respond to most of those medical calls with a four-person engine or truck – as they have, since time immemorial.

“Instead of laying off firefighters, we implemented putting Rapid Response Vehicles, that carry two crewmembers, at many fire stations, responding to low-acuity rescue calls.  Frankly, that was a fight with the Fire Bureau, but change doesn’t come easily.”

Mayor Hales went on to talk about the new Portland Fire & Rescue “Quint” rigs – one of them stationed in outer East Portland at Parkrose Station 2. [See our story about these new fire rigs: CLICK HERE.]

Mayor Hales proposes new taxes to pay for street paving.

Mayor commits to street paving, and taxes
“There are some places in which we should not cut back; one is building inspectors.

“Housing starts and other construction, as you know, are on the way up.  We have increased the number of inspectors by 32 positions.  16 of those, I think, have already been hired.  We are adding people in the permitting and inspection staff to get those inspections done.

“Another place is street paving. Historically we have not been taking care of our city’s largest asset, our city streets. We have thousands of miles of streets in Portland.

“For the last several years we paved an average of 36 lane-miles a year. That’s just 36 miles out of thousands. We vowed to change that. The previous Portland City Council voted not to maintain neighborhood streets, and focus only on arterials and collectors. To me that’s an abrogation of our responsibility.  We own the whole street network, and we are responsible for the whole street network – we need to get on with this.

“We made a commitment to get up to a least 100 lane-miles of street repaving this year with the money we have.  I’m happy to say that we are on track with this; as of this day we’ve already paved 51 lane-miles. We also got some help from the State legislature for some additional sidewalk construction in outer East Portland [Hales points them out in the audience] Representative Shemia Fagan and Representative Jessica Vega Pederson.

“I will be coming to you and saying we need to raise taxes for street paving.  First, we need to show what we are doing with money that we have, and we need to be able to prioritize basic maintenance, and see performance out on our streets, before we start talking about adding new revenues.

“What’s ahead?” the mayor asked rhetorically.

“There was a reduction in materials/services spending which our managers accomplished. This is going to result in an ending-fund balance for last year of between $8 million and $11 million. So we actually have some ‘walking-around-money’, for the first time since I arrived in city government. What are we to do that money?

“There is always the temptation to spend that money on growing the size of the organization.  This is dangerous, because it is ‘one-time money’.  The previous City Council got into a bad habit of funding ongoing city services with so-called ‘one-time money’.”

“It’s like paying off the VISA card,” says Mayor Hales, regarding his proposal to pay off renovation and new build debt – some of it on the books for two decades.

Mayor urges paying down capital bound debt
“My first choice is what you would do in your home or your business budget.  And that is, to retire some debt.

“We have ‘bonded debt’ for the renovation of City Hall from 20 years ago.  If we pay off that debt mortgage with about $4.5 million of the $11 million, we will have another $2.2 million in the budget, every year hereafter. It’s like paying off the VISA card.

“The Bureau of Emergency Communication – our 9-1-1 Call Center, located over here in Powellhurst Gilbert – has about $3.5 million of debt left. If we pay that off, it’ll provide us another $1.17 million per year. If we put about two thirds of this ‘found money’ into pay off these debts, we will have $3.5 million ongoing and general fund money than we can spend on police, and parks, and transportation, and fire – year after year.  That is the case that I will make the rest of the Portland City Council.

“What we’re trying to do in City Hall under my leadership is practice common sense,” Hales concluded.

EPCC members listen while Portland’s mayor talks about the City’s finances.

Questions and Answers

Chamber members wrote questions on index cards before and during the mayor’s address; past EPCC President Rich Sorem of Rose City Associates put these questions to Charlie Hales.

What are you doing about the mental health crisis in Portland?

Hales: “First, we are trying to understand it. I spend a lot of time on the subject of mental health, and what the mental health crisis is doing to our Police Bureau. What I have found is that many of our police calls to have something to do with mental illness; an awful lot of them do.

“At the same time, we’re looking at issues of homelessness and street lawlessness, some of which flows from people who are not able to control themselves. I’ve been out on the street with the Central City Concern folks at six o’clock in the morning, where we’re waking them up in the doorway s along Burnside Street.

“Next, we are about to prepare the City of Portland’s legislative priorities for the next session, where we go to the Oregon Legislature and makes requests. I believe we are going to advocate for additional mental health funding.  So much of what we have to deal with on the street is a result of the failure of the mental health system to deal with people earlier in their lives – or earlier in their illness.

“And, we are training our police officers – partly because the US Department of Justice says we must – on how to deal with people with mental illness. We formed local crisis units that pair of police and a mental health worker in each of our three precincts.

“We promoted Sara Westbrook – she is leading that effort –to be our new Portland Police Bureau East Precinct Commander.

“Then the police offers say two-thirds of the people we deal with – domestic violence, a kid on the street with a pit bull, some guy wandering around downtown kicking in windows – two-thirds of those calls involve mental health issues one way or another.”

Past EPCC President Rich Sorem quizzes Mayor Charlie Hales, with questions submitted by the audience.

How will you loosen up small business fees, specifically in regard to reducing development fees for micro and small businesses?

Hales: “We are starting to look at the fees.  To begin, we want to practice the Hippocratic Oath of ‘First, do no harm’.

“In this year’s budget, we’ve left construction fees unchanged and did not raise any of them.  Well, maybe one or two of them; but we’ve lowered a couple of them too.

“We are saying ‘take a look at Systems Development Charges, because those are very high’; they are what people pay to contribute to the capital system of parks and streets when they build something new.  This is work in progress, will expect to have that done in time for the next budget.

Focusing on outer East Portland, what specifically are you working with to stimulate economic development?

Hales: “One is to continue to work on infrastructure.  When I handed out the Bureau of assignments to the other commissioners, I said in several cases, ‘you are not alone.  I am giving you this Bureau, but expect me to be an active partner as the city’s leader in those issues’.

“So, for example, when I gave the Transportation Bureau to Commissioner Steve Novick, I said we’ve got to find an ongoing source of revenue to put the streets we have in good condition, and build the unbuilt streets which, unfortunately, East Portland is rich in.  It’s good to take 20 years, but we need to find a revenue source, put it in place, and get down to work.

“We’re looking at another Parks bond measure next year.  The Parks bond measure that I put in 1994 that built the East Portland Community Center and several other parks – that measure is going to be paid off in 2014.  If we want to go out for more parks, we can go to the voters next year and say don’t change the rate – we’re not going to raise your taxes or lower them – but, if you pay it forward and authorize another 20-year bond, we’ll do another $80 million worth of work on the park system.  I told Commissioner Amanda Fritz, who has the Parks Bureau – ‘you can count on me to be a political advocate for whatever we send to the voters’.  If she does, she won’t be alone in that.

“In the Portland Development Commission, we’re doing some of the neighborhood economic strategy work – I would like hear from you whether it’s working or not. [The Neighborhood Prosperity Initiative] is an experiment for the PDC to get out of downtown, and focus on some small redevelopment areas.  And Gateway – Gateway is a work in progress, and not enough progress!  We’ve been working with the Gateway district for 10 years, and we have not accomplished what we want to accomplish. Your ideas, strategies, and projects, to get something going in a better economy – I’m all ears.”

Please specifically list your three top objectives for helping small businesses within the next twelve months – these might make up 70% of the jobs in East Portland.

Hales: “One would be, we put a budget note in our budget to make good on the commitment on our Business Income Tax to raise the Owners Compensation Deduction. It’s been stuck at $88,000 for several years now.  In a resolution in the past, the Council said they were committed to getting net $225,000, it looks like we’re now in a better budget climate where we might able to do this as we suggested.  We’ll have maneuvering room to be able to raise that to, maybe, $100,000 this year, as a signal to business owners that we want them to stay in the city, and we understand how costs and salaries have risen over the years.  We have to ask you to pay taxes, but not to be confiscatory about it.

“Secondly is this whole subject of permits and fees. We are adding capability to the Building Bureau; we are computerizing the permitting process so that people can submit plans and documents electronically.  Everything ongoing will be CAD files.  That transition is underway to modernize the permit system.

“Thirdly, with your help, and the Portland Development Commission’s help, we need to figure out how economic incentives that we give to a major business can apply in a reasonable way to focus areas like 122nd and Division, where we want neighborhood-scale growth.  We’re interested in making that work.  I’m not sure that we have it right yet with the Neighborhood Prosperity Initiative areas, but we want to make something that works.”

How do you manage the “tension” between budget realities, and the city employees who say their jobs should be guaranteed?

Hales: “During the last budget process, I think we’ve demonstrated [City workers’] jobs are not guaranteed. We actually cut 150 positions in the last budget. Yes, there is more stability in the public sector than in the private sector; but most jobs are not actually guaranteed. Hopefully this is the only budget that I will have to deal with that, now that the economy is improving – and we’re dealing with the reality that the Multnomah County Library changes the tax formula – we won’t have another year like this one in terms of the budget.  I don’t think those jobs feel very guaranteed right now.

“The size of our workforce is not unreasonable; we don’t have too many police officers or firefighters – although we could probably use some more street pavers. We’re the big blue-collar service organization with very few people on top. One of the other things taken on in this budget is that we have found some money in this budget to fund the Innovation Fund and fund a ‘control study’.

“The Innovation Fund says to a manager: If you have a way to save a half-million dollars in the year, but you need $100,000 to make that happen, you can apply for this funding, in competition against your fellow managers.  If you get that funding, we will hold you accountable for those results.  This is something any business would do and, we’re doing that.

“Secondly, we’re aiming to expand control.  This is about the need to prune the organization.  Some parts of the City government have the wrong ratio of managers to workers.  It should be eight or ten to one; overall we’re about six employees to one manager.  There is n opportunity to change the shape of the organization with fewer managers, and more street-level workers.  Those manager jobs are not guaranteed either, under this Control Study.  Those positions typically are not unionized, and they are easier to eliminate from our budget.”

“We are not on the way to becoming Detroit,” Hales says, in the response to a question.

Is Portland next, when it comes to civic bankruptcies? Also, do other cities that are of similar size and similar structure [to Portland] have successful economic development that we can learn from?

Hales: “A very good question!  One of the things that cities need to do more of, is look around at other cities who are successful.  Yes, we compete a little bit for economic development – but ‘smokestack-chasing’ is a rarity in this country, among the cities. We could spend a lot more time learning from one another more than what we used to.

“Going back to the first point, I complain about Portland’s once-daily newspaper – the reporting is about real or imagined governmental malfeasance.  Their method of operation is to highlight the negative in order to get attention.  Good luck with that; we’ll see how that works out.

“The fact is, the City of Portland is financially quite strong. We made decisions like making tough calls to reduce the workforce, and streamline the budget. As a result, the City of Portland has had a Moody’s Bond AAA rating, the best you can get, for more than 35 years.  They’re very few cities that can say that, and I’m glad to be part of that story.  We pay as we go.

“We had to raise your water rates 3.5%; we wanted to make it zero.  But a change we made in the budget is for not spending Water Bureau money on anything other than water! And Commissioner Nick Fish is selling the ‘Water House’ in outer East Portland that Commissioner Randy Leonard built. We’re selling it at a loss, but that’s the way it goes when you’ve built something is not economically viable.  We’ll put that money back in the water fund after we sell it.  So, make a good offer on it!” Hales quipped.

“We are not on the way to becoming Detroit.

“I don’t spend a lot of time in ‘extracurricular activities’, but I have spent some time at the United States Conference of Mayors.  And the reason is there are some really smart mayors out there around the country.

Hales named off the mayors of several cities, similar to Portland in size, with whom he’s met. “They come here to visit; we go there, and learn a lot,” Hales concluded.

The East Portland Chamber of Commerce meets at various locations every Wednesday morning at 7:30 a.m., and at other times of day for special events. You’ll find them all listed in the East Portland News Community Calendar: CLICK HERE to view it.

© 2013 David F. Ashton ~ East Portland News

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