City leaders have identified preliminary recommendations to help Portland make up a historic shortfall in its roughly $8 billion budget for the upcoming fiscal year, while continuing to address urgent priorities.
City government is facing a gap of $93 million in the general fund, which supports everything from police, firefighters, parks and homeless shelters to core services such as technology and human resources. (This is down from an estimate of $100 million in January.)
The City also faces potential shortfalls outside the general fund, including an estimated $42 million gap for transportation, an estimated $16 million gap for permitting and development, roughly $3 million for water and sewer and $23 million for parks.
The document released today recommends potential solutions of $32.5 million in the general fund, including both spending reductions and revenue sources. It also sets out a menu of high-level options to narrow the remaining gap and balance the budget as required by law.
“This is a first draft,” said City Administrator Michael Jordan. "These ideas are intended to serve as a starting point for further consideration.”
The recommendations were developed by Jordan and a team of City leaders including the chief financial officer, deputy city administrators, budget experts and the Office of Equity and Human Rights.
The document represents a step toward greater transparency in developing the City’s budget under Portland’s new form of government. Jordan released the early recommendations to inform public discussion and solicit community feedback, which Mayor Keith Wilson will consider when he submits a balanced budget proposal to Portland City Council in May.
The council will deliberate, amend and vote on a final budget in June.
Each year, the City of Portland allocates its budget to deliver services, solve problems and improve outcomes for Portlanders. The City’s budget cycle runs from July 1 to June 30.
Unfortunately, several factors have conspired to put pressure on the city’s budget.
First, revenues are down. Portland’s population and employment are trending flat and remain below pre-pandemic heights. Many downtown buildings continue to struggle with high vacancy rates, pushing down their value and the tax revenue they generate. Parking revenues are down. Although tourism is picking up, it has not yet returned to pre-pandemic levels. Business travel remains slow.
Other factors driving down revenues include stalled building permits and shrinking returns from the parks levy due to tax compression caused by depressed real estate value.
In addition, the City was able to use one-time resources over the past five years, which funded everything from homeless shelters to gun violence prevention to ongoing fire operations. Some of those one-time resources came from a temporary influx of federal pandemic spending, and some came from a bump in post-pandemic corporate profits that stoked tax revenue. These funds have now dried up.
Meanwhile, costs are climbing. Inflation has ratcheted up prices for the City, just like it does for consumers. Prices for equipment, materials, services, software, insurance, and maintenance have all increased.
Over the past 10 years, personnel costs have been rising faster than inflation due to salary increases, health care insurance, and retirement benefits.
Other factors driving up expenses include legal obligations such as building curb ramps and support for fortifying the levees on the Columbia River and high overtime costs due to a shortage of police officers and firefighters.
Portland is not alone in this predicament. Multnomah County is facing a $104 million budget crunch. Seattle recently closed a $250 million budget gap and San Francisco is looking at a deficit of $1 billion.
Under its new form of government, the City updated its process for this year’s budget. Jordan’s team looked for ways to squeeze more efficiency out of every system, cut back on consultants and contractors and wring more mileage out of underused assets. They considered the impact on communities that have been traditionally excluded or marginalized. And they focused on areas of urgent priority, such as the crisis of unsheltered homeless people dying on Portland’s streets.
The recommendations include:
- Total General Fund reductions of roughly $17 million across the whole organization except for Fire, Police, 911, elected offices and legal obligations.
- Maintaining alternative shelter sites run by the City and adding 1,500 beds of overnight shelter with day centers. Funding for this is yet to be determined. Mayor Wilson is having active conversations about how best to support this proposal with many partners, including local, county, regional, state and federal agencies, nonprofits, businesses and faith communities. Projected costs will be updated in the Mayor’s proposed budget by May 5.
- Savings of roughly $19 million in FY 2025-26 on accessible curb ramp replacements by borrowing money and spreading out repayments over 15 years.
- Transferring $18.7 million of interest from the Portland Clean Energy and Community Benefits Fund to the general fund. Funded by a tax on large retailers, PCEF invests in community-led projects to reduce carbon emissions, create economic opportunity and help make Portland more resilient as we face a changing climate.
- Cutting $22 million from the Portland Bureau of Transportation by scaling back pothole repair, safety and accessibility improvements and basic upkeep of roads and sidewalks.
- Cutting $23 million from Portland Parks and Recreation by reducing hours at community centers and sports facilities, eliminating summer programs and day camps, closing a community center, cutting employment pathway programs and scaling back daily care and maintenance.
- Backfilling one-time funding in public safety, including Fire, Police, Portland Street Response and the Office of Violence Prevention, as well as an expansion in Portland Street Response.
Taken together, the preliminary recommendations include approximately 275 positions that could be potentially discontinued. The number of position reductions will continue to be refined over the coming months, and the City will look to reduce vacant positions first wherever possible.
Jordan also identified 103 positions that could be extended, retained or added with new funding sources.
“The City is facing some very difficult choices,” Jordan said.
Jordan also outlined other potential ways to narrow the remaining budget gap.
The Mayor or City Council may consider these options in light of their legal obligation to balance the City’s budget. Cutting up to $35.7 million from public safety operations like police, fire and 911, consistent with the level of cuts taken by most other parts of the City.
- Identifying additional possible reductions to enhance organizational efficiency under the new form of government.
- Squeezing $10 million out of unspent funds for the current year’s budget and banking the savings for next year.
- Streamlining technology costs such as software licenses and cellular service.
Jordan noted that some of the proposals don’t have firm cost impacts yet.
Source: City Administrator Michael Jordan