Portland’s Leading Arts Organizations Hate the Arts Tax, Too

Portlanders recently got an annoying reminder in the mail from City Hall—it's almost time to pay their annual $35 arts tax.

It's been said Portland voters never met a tax they didn't like. The arts tax just might be the exception. Citizens hate it so intensely they've started making art to express their irritation.

Last week, Portland computer programmer Craig Giffen launched the satirical website artstax.org, advertising fake merchandise, like a bib stamped with the words "Still not as messy as the Portland Arts Tax," and a T-shirt that reads, "I'm like the Arts Tax, a good idea badly implemented."

Giffen, 46, says he did it after a couple beers too many. But his pique is shared. "Thanks to the Portland Arts Tax," wrote a poster named Grufflesia on Reddit late last year, "I now actively hate the arts."

Eight years after its passage by Portland voters, bashing the arts tax is almost a sport. Portlanders dislike the tax. It requires them to pay $35 a year if they earn more than $1,000 of taxable income and are part of a household in which anyone earns more than the federal poverty level. That's led a lot of them not to pay it. Four years ago, the city unleashed a collection agency on deadbeats, who are numerous enough to fill Moda Center.

But guess who's just as annoyed as taxpayers?

The city's large arts organizations, which lobbied hard for the tax's passage.
For the "big five"—Portland Center Stage, Oregon Ballet Theatre, the Portland Art Museum, Portland Opera and the Oregon Symphony—what was supposed to be a long-sought infusion of cash has turned out to be just a trickle, accompanied by bad PR.

In fact, civic institutions like the art museum and the opera will receive less public funding this year than they did before the arts tax passed in 2012.
Some of the city's top arts leaders are just as irritated as the guy making a joke website.

"I paid my arts tax about a month ago. I've since received two notices that my arts tax is due," says Cynthia Fuhrman, managing director of Portland Center Stage, the city's largest theater company. "It's like c'mon, purge the list. You just spent a couple dollars sending me two notices. I'm just concerned about that kind of overhead cost and efficiency."

Reminders the tax was soon due coincided with a related development: Former Mayor Sam Adams, the father of the arts tax, announced in February he would seek a return to the Portland City Council in the May election.

Even Adams says it's time to take a hard look at his baby. "Eight years is a long time," Adams says. "There are opportunities to make improvements."

The angst of the very groups the tax was supposed to help and Adams' bid to resurrect his once high-flying political career raise the question whether the tax needs to be reimagined or scrapped altogether.

"What I hear repeatedly is that people around this community believe that the arts tax has been a boon to arts organizations when, in fact, it has been the opposite," says Scott Showalter, president of the Oregon Symphony. "It has not lived up to its promise."

Before every symphony performance, Showalter walks onto Arlene Schnitzer Concert Hall's ornately framed stage to introduce the show.

Wearing a suit and tie, the 47-year-old triathlete lists the symphony's recent accomplishments—an upcoming season of classics and world premieres, a new educational program for homeless youth—which speak to the central role the symphony has played in Portland since 1896.

But offstage, on a recent sunny Friday, Showalter sounded much less assured about the symphony' s future. Along with Portland's other largest arts organizations, Showalter's team labors under increasing costs, dwindling public support and, perhaps most painfully, the failed promise of the Portland arts tax.

"We're not getting the support I believe was originally intended and communicated to voters," says Showalter, sounding uncharacteristically frustrated. "It was up and down one year from the next, and we've been told it's only going to go down in the future.

"In fact," he adds, "it made us less stable. We had predictable money before the arts tax."

For the symphony and its peers atop the cultural food chain, the arts tax has been a decidedly mixed blessing. When it passed in 2012, the tax promised the fulfillment of a decadeslong dream for arts groups and their supporters: a permanent funding base beyond the philanthropy, ticket sales and uncertain government support upon which they depend.

But a look at the numbers and interviews with arts leaders reveal that revenue from the tax is far less than they hoped. To compound matters, the way the tax is structured and collected has soured many Portlanders on the concept. Arts groups understand why the city now employs a collection agency but do not relish the public relations problems created by a city chasing down citizens who skip the arts tax.

"It's one of the most frustrating things for all the arts organizations," says Portland Opera's general director, Sue Dixon, "having someone actually go after individuals who didn't pay."

The quest for stable funding for the arts has a long history.

At least as early as 1990, the city's large arts organizations began looking for a permanent source of outside money. One big proponent? The Regional Arts & Culture Council—a $13 million, mostly government-funded nonprofit that channels money to arts groups.

In 1992, the predecessor to RACC produced a 56-page report pointing out that government support for the arts in Portland lags behind that of its peers. "Per capita local government support is one-fourth to one-third that of comparable communities," the report said. "Corporate and individual support is also substantially below national averages."

Despite glossy reports, impassioned op-eds and considerable lobbying by arts organizations, nothing really happened until Adams, the former longtime chief of staff to Mayor Vera Katz, won election to the City Council in 2004.

Jeff Hawthorne worked for RACC from 2002 to this January and spent much of his time working to increase arts funding.

"Until Sam came along, there really wasn't the political will to put something on the ballot," Hawthorne says.

Adams' measure went before voters in November 2012 as arts organizations were struggling. Oregon Ballet Theatre, for instance, nearly failed in 2009 and, as it struggled to stay afloat, skipped $300,000 in rent payments to publicly owned auditoriums in 2012.

Adams proposed a plan that would charge income-earning residents $35 a year to raise an estimated $12 million annually. The money would be used to restore arts teachers in schools and provide general operating support to nonprofits such as the Oregon Symphony and Portland Center Stage.

Originally, arts groups hoped the tax would be bigger—encompassing the metro region, not just Portland. And they wished more of the money would flow to nonprofits that produce art, rather than go to public schools, which have their own sources of funding. But polling showed those hopes were politically unrealistic.

"There had just been all of these cuts for music programs in schools," Hawthorne explains. "That factored in as the most pressing need at the time."

In effect, kids crowded out the traditional nonprofits, such as the symphony, the ballet and the art museum, that had pushed for a tax for decades.

Adams makes no apologies: "That's where voters were at the time."

The arts tax passed handily, 62 to 38 percent. Adams left office two months later.

It's been a rocky ride since then.

Though the tax was intended to be a source of stability for Portland arts, for many organizations it's proven unreliable.

The large cultural institutions that initially backed the tax hoped it would fund 5 percent of each organization's budget.

The Portland Art Museum was one of those organizations. The museum's director, Brian Ferriso, is nothing if not diplomatic when talking about the tax, qualifying each criticism by reiterating how grateful he is for whatever money the institution does receive.

But that makes his willingness to state his dissatisfaction with the arts tax seem all the more stark.

"I would label it as disappointment," says Ferriso.

The art museum, like the rest of the big five, never received the targeted 5 percent support.

That's in part because the tax has never brought in the $12 million a year voters were told to expect. (Revenues were $9.8 million the first year and peaked at $11.46 million in 2016.)

Portlanders have been reluctant to pay it. Although the city's population has risen nearly 12 percent since November 2012 and tax receipts should have increased proportionally, figures show revenues still never reached levels proponents forecasted.

Meanwhile, because so many people owe the tax and so many fail to pay, administrative costs have nearly doubled from the 5 percent proponents promised, averaging about 9.9 percent. (Opponents also challenged the legality of the tax, losing at the Oregon Supreme Court.)

To bring in more money, the City Council voted in 2016 to hire a collection agency. Revenue Bureau director Thomas Lannom says he sends accounts to collection when they exceed $100—i.e., are three years past due.

"If a taxpayer owes more than $100, we can send them a final demand letter informing them they may be referred to a collection agency in 30 days if they do not settle their account," Lannom says. KGW-TV reported in November that the city has sent nearly 15,000 Portlanders' names to its collection agency so far.

Lannom says compliance has risen 10 points, to 77 percent—just 4 points lower than compliance on federal income taxes.

But even at the higher collection rate, revenues for 2018 totaled just $11.1 million. The original idea was that all that money, after covering the costs of collecting it, would go to nonprofit arts organizations that pushed for the tax.

Instead, the lion's share goes to K-5 schools, which got their own new dedicated multibillion-dollar state tax last year (see graph, below).

While arts leaders all favor more Portlanders paying the tax, some worry the city's zeal to collect is counterproductive. "You get pinged with a letter, you get pinged with a postcard, you get an email saying time to pay the arts tax," says Portland Center Stage's Fuhrman. "That's where I think the bad PR comes in."

Andrew Proctor, executive director of Literary Arts, which produces the Portland Book Festival, says the public's ill feeling has a cost. "Even the name 'arts tax' sounds punitive," he says, "and it misleads citizens that in paying the tax they have supported arts institutions. They haven't. It can damage our fundraising efforts and can polarize the conversation."

Paint by Low Numbers

SCHOOLS GET THE LION'S SHARE…
When the arts tax passed in 2012, it appeared arts organizations could get as much as half the revenue. Instead, they've never gotten more than 31 percent. In 2017, the last full year for which data is available, arts groups got 29 percent.  (Correction: this story originally stated arts groups' 2017 share was 23 percent. WW regrets the error.)

…OF A DISAPPOINTING PIE
That split is made more painful by the fact that revenues have never reached the $12 million that proponents projected, and administrative costs have been nearly double the 5 percent promised.

It's easy to understand how Portlanders would think the city's largest arts institutions are doing just fine. They perform in or own big buildings, display millions of dollars' worth of paintings and furnish elaborate sets, and every playbill, program and gallery guide ends with a list of partner foundations and private supporters.

Hawthorne, the former RACC official, says he fears the public may believe the tax works. "Ten to 12 million is a lot of money," Hawthorne says. "People may perceive the arts have had their influx and now it's time to focus on more pressing needs."

But the pillars of the city's arts world now have less public funding than they did in 2012, when the tax passed.

In 2019, RACC announced a major shift in the way it would distribute its funds, which include the proceeds from the arts tax. The shift mirrored national and local trends toward racial and gender equity. "That new policy was well under way before I received the arts portfolio," says City Commissioner Chloe Eudaly, who became arts commissioner in August 2018. "But I'm very supportive of it."

Previously, Portland's big five institutions got nearly 60 percent of the money RACC distributed. But that changed last year. "To address the historic disparity of its existing funding model, and to nurture a more diverse arts ecosystem," the organization announced in February 2019, "RACC will distribute its dollars more equitably."

The redistribution will help many smaller organizations that lack big donors or steady ticket sales, but it leaves the traditional institutions struggling.
Due to the changes in how RACC allocates funds, Ferriso says the council's combined support for the Portland Art Museum next year will drop from $427,000 to $175,000, less than 1 percent of the museum's budget, lower than it was before the arts tax passed.

"The impact is so insignificant of the support we're getting, so we're sort of planning on not having any or little," says Ferriso. "We've gone backwards in some areas because we've lost this critical support."

But even before RACC's shift toward equity, Portland Opera could never count on arts tax funds. Asked if revenue from the tax ever provided baseline stability for the organization, opera director Sue Dixon responds with a flat no. "It's never gotten close to the 5 percent we thought it would," Dixon says.

To make matters worse, many of these arts institutions received a rent hike from their landlord this winter (see "Robbing Peter to Pay Rent," below). Fuhrman, of Portland Center Stage, says the public doesn't see the squeeze.

"I totally understand the perception of, we're in these beautiful buildings that we have control of, you walk in the door and there's a lot of people seeing the show," says Fuhrman. "It feels like, 'They won't miss that money.' No, we do."

Sam Adams predicates his political comeback—his challenge to Eudaly—on his record of getting things done in his tenure at City Hall from 2005 to 2013.
One of his accomplishments, of course, is the arts tax that many of his supporters now say is deeply flawed.

Adams acknowledges he's hearing plenty of grumbling from people in the arts community. He says he remains proud of the tax, but he acknowledges it could function better.

Eudaly says she happily voted for the tax but has joined the ranks of critics. "Sam deserves a significant amount of the credit and the blame," she says. "We were in the midst of a housing crisis when the tax passed, and I can't fathom how anybody thought such a low threshold [the federal poverty level and $1,000 of earned income] was acceptable."

Adams says he passed what voters would support but agrees the tax is unfair to low-income Portlanders and should be tweaked. "It's past time for scrubbing this thing and truing it up," he adds.

He would push to increase the exemptions for low-income Portlanders, he says, and add additional tiers of payment for high-income earners.

Adams thinks adjusting the exemptions to make the tax fairer should reduce the need for a collection agency, which he'd welcome.

He is also proud of the number of arts teachers the tax pays for—91 at last count—but says he would want to make sure the city's school districts aren't using the tax money to backfill other cuts. He's also concerned the big five feel they've been slighted.

"We need to address equity and make sure the big institutions like the symphony and the art museum are stable," Adams says.

The arts tax, he adds, is like any other public policy: It should be re-evaluated regularly.

Portland Center Stage's Fuhrman hopes that will happen.

"Clearly, it was flawed when it came out of the gate," she says, "but it needs work, and opportunity is there to do it."

Robbing Peter to Pay Rent

Not only are the big five arts organizations suffering from the arts tax's meager support and the Regional Arts & Culture Council's new funding formula, three of them are, like many Portlanders, facing sharp rent increases.

Their landlord? The regional government Metro.

The Metropolitan Exposition Recreation Commission, the arm of Metro that operates Portland's large publicly owned performance spaces, including Keller Auditorium and Arlene Schnitzer Concert Hall, announced big rent increases—at least 30 percent for the symphony, ballet and opera.

By the time some of the organizations were notified of the increase, they had already planned their budgets for the year. The increases are based on usage, and will hit the symphony the hardest.

"We are the biggest users of the hall, we have the largest season, and we're in one of the larger venues," says Scott Showalter, president of the Oregon Symphony.
Robyn Williams, who manages the buildings for MERC, says the agency's rents have long been well below market, but increased costs from a new state pay equity law and rising ground leases forced her hand. Williams says she's well aware her tenants are also losing revenue from RACC.

"We hate to do it, but we have to keep the buildings open," Williams says.
Andrew Proctor, executive director of Literary Arts, says paying increased rent to one local government defeats the purpose of receiving funding from another local government.

"The work of the city is uncoordinated between governments—city, county, and Metro—often resulting in them cannibalizing their own funding," he says. "An example: RACC provides Literary Arts with a grant, but then Metro has been steadily raising rents and fees on the Schnitz for years, so we effectively receive money from the city and turn around and hand it back to the city. This isn't helping us serve the community. It's also crazily inefficient." SHANNON GORMLEY.