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Three city councilors are mulling a proposal to increase Portland’s controversial climate tax on large retailers, in hopes of using the additional revenue to plug the city’s looming budget hole of around $60 million.
Councilors Steve Novick, Angelita Morillo and Jamie Dunphy are behind the plan. Novick tells WW that increasing the Portland Clean Energy Fund tax on large retailers from 1% to 1.33% could help solve the city’s looming budget crisis. The tax applies to businesses that earn at least $500,000 locally and $1 billion nationally.
The increase would bring in an additional $66 million a year that could go directly into the city’s general fund, Novick says.
The City Council could pass the tax increase with a simple majority vote, Novick says. (Some have disagreed, saying it would need to go back to the voters.)
“I decided it would be reasonable to propose a revenue option as part of the conversation,” says Novick, who spearheaded the idea.
In tandem with raising the PCEF tax, the three councilors would also seek to raise the threshold on the city’s small business tax so that only businesses making revenues of $100,000 or more annually would have to pay it. Currently, businesses with revenues of $50,000 or more must pay the tax.
The proposal comes in the weeks following city administrator Mike Jordan’s dismal budget forecast, in which he reported a general fund deficit of $93 million. (That figure includes an aspirational $28 million proposal by Mayor Keith Wilson to open nighttime shelter beds, which would inflate the city’s actual deficit.)
In a subsequent document, Jordan laid out what amounted to about $32 million in tentative cuts to city services like Portland Parks & Recreation, an idea that rankled Portlanders. Since then, the city has held a number of community listening sessions in which most attendees begged the city not to cut parks, pools or recreational sports.
The four city services that get most of the general fund are the Portland Police Bureau, Portland Fire & Rescue, Parks & Recreation, and homeless services.
The proposed PCEF tax increase is all but certain to inflame business leaders across the city, who have asked that local leaders impose no new taxes until the city has stabilized economically. (Portland businesses have suffered since the pandemic and the racial justice protests of 2020.) In late 2023, Gov. Tina Kotek asked local leaders not to impose new taxes or tax increases for three years.
The former City Council also mined PCEF’s unanticipated revenues last year to fill budget holes by backfilling climate-adjacent projects across city bureaus. Novick in particular has been vocal since he took office this year that he did not want to mine the existing PCEF tax again, saying it should be preserved for what voters intended when they passed it.
Mayor Wilson is expected to release his proposed budget in May. The City Council approves the final budget in June.