Comments On "Our Streets" Workgroup Recommendations

1
Commenls on
Reorl of Workgrou Recommendalions for
Our Slreels Transorlalion Iunding

Iric Iruils, Ih.D.
Selember 30, 2014

Ixeculive summary ..................................................................................................................... 2
1 ackground ............................................................................................................................. 4
2 MisIaced budgel riorilies ................................................................................................. 4
2.1 IDC's share: Urban renevaI lhrough lransorlalion imrovemenl ...................... 5
3 The disaearing concel of everyone ays, everyone benefils ................................ 6
4 A faiIure of rocess ................................................................................................................ 7
5 ResidenliaI: A beyond rogressive income lax ........................................................... 10
5.1 eyond rogressive: Hov much is loo much` ......................................................... 11
5.2 The IIRS robIem ........................................................................................................ 11
5.3 AII money is fungibIe: No guaranlee lhal income lax revenues viII be used for
slreels .............................................................................................................................. 11
5.4 A comIex lax and invasion of rivacy vilh massive comIiance cosls ............. 12
6 NonresidenliaI: A roerly lax hidden in a bIack box ................................................... 13
6.1 The III may lrigger Measure 5 roerly lax Iimilalions .................................... 13
6.2 No nexus vilh use of slreels ....................................................................................... 14
6.3 A nonrofil discounl lhal defies mosl concels of fairness and equily ............... 15
6.4 A comIex lax vilh massive comIiance cosls ........................................................ 15
6.5 Unansvered queslions aboul laxing olher governmenl enlilies ........................... 17
7 ConcIusion ............................................................................................................................ 19

2
Commenls on
Reorl of Workgrou Recommendalions for
Our Slreels Transorlalion Iunding

Exccutivc summary
On Selember 24, 2014, Ired MiIIer and Rulh Adkins ubIished a reorl (hereafler,
MiIIer/Adkins Reorl) comiIing lheir summary of lhe recommendalions and advice
rovided by vork grous convened by lhe IorlIand ureau of Transorlalion.
The roosaIs recommended by lhe MiIIer/Adkins Reorl Iook very differenl from lhe
originaI roosaIs considered by Cily CounciI in May 2014. In many vays lhey are
vorse lhan lhe originaI roosaI. Ralher lhan a user fee lied lo lhe valer biIIing syslem,
lhe rocess chaired by Mr. MiIIer and Ms. Adkins has roduced lvo nev laxes lhal
losses avay basic concels of fairness, creales a comIiance nighlmare, and viII vasle
al Ieasl 25 ercenl of lhe money raised before a singIe slreel is reaired or a singIe safely
ro|ecl is slarled.
The foIIoving commenls are an ob|eclive crilique of lhe MiIIer/Adkins Reorl's
recommendalions and lhe rocess by vilh lhe recommendalions vere deveIoed.
A city budgct scnds thc c!carcst mcssagc nI it pn!iticians' prinritics. The vork
grous' singuIar focus on lhe IOT budgel look allenlion avay from melhods of
funding slreel imrovemenls from aIready exisling sources vilhin lhe Cily of
IorlIand.
Pnrt!and Dcvc!npmcnt Cnmmissinn has an nb!igatinn tn pursuc urban
rcncwa! thrnugh transpnrtatinn imprnvcmcnts. CounciI shouId mandale a 30
Iercenl Sel Aside for Slreels from IDC.
Thc cquity cnnccpt nI "cvcrynnc pays, cvcrynnc bcncIits" has bccn |cttisnncd
in Iavnr nI "cvcry wnrk grnup Inr itsc!I." The 85 ercenl of IorlIand residenls
lhal vere nol given a seal al a vork grou labIe sav lheir roosed assessmenls
!"#$%&'% vhiIe every grou reresenled by a vork grou vaIked avay from lhe
rocess sIighlIy beller off lhan vhen lhey vaIked in. The business vork grou
managed lo cul lheir assessmenl by one-lhird. The nonrofil vork grou
exlracled a nonrofil discounl. The Iov-income grou ensured a
Commenls on Our Slreels Workgrou Recommendalions 3

www. NoSt r eet Fee. com

recommendalion lhal residenls vilh Iess lhan $30,000 in income vouId be
exeml from lhe roosed nev cily income lax.
Thc prnpnscd city incnmc tax nn rcsidcnts is "bcynnd prngrcssivc. In a
dearlure from everyone ays, everyone benefils, under lhe mosl rogressive
income lax roosaI, aboul one-lhird of lax fiIers vouId ay nolhing. Al lhe
olher end, lhe lo 3.5 ercenl of lax fiIers vouId ay aImosl haIf of lhe enlire lax
on residenls. The inequilies are exacerbaled by lhe IIRS IrobIem in vhich
reliremenl income from IIRS, IederaI ImIoyee Reliremenl Syslem, and cerlain
olher ubIic seclor reliremenl benefils vouId nol be laxed, bul rivale seclor
reliremenl income vouId be laxed.
Thc prnpnscd Busincss Entity F!at Fcc is a prnpcrty bascd tax that may triggcr
Mcasurc 5 prnpcrty tax !imitatinns. To avoid being cIassified as a roerly lax,
lhe III musl be lriggered by lhe occuanl's ('% of slreels. The III reIies on
roerly use, size, revenues, and emIoyee counluse of lhe slreels is nol a
faclor in lhe III.
Thc prnpnscd BEFF is nnt !inkcd in any way tn usc nI strccts. In examIes
rovided by IOT, a smaII fIover sho couId face a sleeer III lhan an
8-screen cinema, even lhough lhe cinema generales more lhan 25 limes as many
lris.
Thc nnnprnIit discnunt dcIics many idcas nI cquity. Under lhe originaI concel
of everyone ays, everyone benefils nonrofils and governmenls vouId be
sub|ecl lo lhe same assessmenl as any olher nonresidenliaI roerly use. Thal
has been |ellisoned in favor of a nonrofil discounl lhal vouId be exlended lo
even lhe Iargesl nonrofils and governmenl oeralions. One vork grou
member demonslraled lhe inequilies by oinling oul lhal a nonrofil enlily vilh
resources sufficienl lo ay for naming righls on a sorls sladium vouId be
exlended a discounl.
Thc city has a histnry nI nvcrcstimating tax cnmp!iancc and undcrcstimating
thc cnsts nI cn!!ccting taxcs. Iven vilh ils overIy olimislic eslimales, nearIy $1
oul of every $4 in lax viII be vasled on comIiance and adminislralive cosls lhal
do nolhing lo imrove slreels or safely.
The remainder of lhese commenls rovide lhe bases for our concIusions.


1 Backgrnund
I am an economisl vilh a IorlIand based consuIling firm. I am aIso an ad|uncl rofessor
of economics al IorlIand Slale Universily and serve on lvo nonrofil boards. As an
economisl, I have been engaged by rivale and ubIic seclor cIienlsincIuding slale
and IocaI governmenlslo evaIuale lhe economic and fiscaI imacls of business
aclivilies and governmenl oIicies. My economic anaIysis has been videIy ciled and has
been ubIished in )*% ,#-"-.!'/, lhe 0&11 2/$%%/ 3-($"&1, and 425 )-6&7. I have been
inviled lo rovide anaIysis lo lhe Oregon LegisIalure regarding lhe slale's lax and
sending oIicies. My leslimony regarding lhe economics of Oregon ubIic emIoyee
ension reforms vas heard by a seciaI session of lhe Oregon Sureme Courl.
As an economisl, I have been engaged in numerous lransorlalion and lransorlalion
funding ro|ecls incIuding examining olions for loIIing lhe SeIIvood ridge,
evaIualing lhe imacls of imrovemenls lo I-90 in lhe Slale of Washinglon, and
quanlifying olenliaI lransorlalion benefils associaled vilh lhe IorlIand AeriaI Tram. I
have been a conlribulor lo an udale of lhe American Associalion of Slale Highvay and
Transorlalion OfficiaIs' 5 8&"(&1 -" 4'%$ 9%"%:!/ 5"&17'!' -: ;!<*=&7 &"6 9('>)$&"'!/
?.@$-A%.%"/' (videIy knovn as lhe Redbook).
I have allended every Cily CounciI meeling regarding lhe Transorlalion User Iee,
every lovn haII since lhe Cily CounciI meelings, and nearIy aII of lhe meelings of lhe
vork grous convened by IOT. I have Iive slreamed lo YouTube aImosl every vork
grou meeling I allended. Many of lhe commenls here have been ubIished on lhe
NoSlreelIee.com vebsile.
2 Misp!accd budgct prinritics
A cily budgel sends lhe cIearesl message of il oIilicians' riorilies. The cily's budgel
musl be vieved as a vhoIeacross aII bureaus, dearlmenls, and commissions. A
narrov focus on a singIe bureau is misguided and misIeading.
None of lhe vork grous discussed lhe cily budgel as a vhoIe or olenliaI sources from
eIsevhere in aIready exisling funds. Inslead, lhe conversalion focused singuIarIy on lhe
IOT budgel, vilh IOT slaffers sending a good orlion of al Ieasl lvo meelings lo
make lhe case lhal lhe bureau oerales on a reIaliveIy Iean budgel. In }uIy 2014, I mel
vilh IOT slaff regarding lhe bureau's budgel and came avay lhe roughIy lhe same
concIusion. Hovever, IOT slaff indicaled lhal funds couId and shouId be diverled
from olher orlions of lhe cily budgel. The MiIIer/Adkins Reorl concIuded lhal lhere


vas generaI agreemenl lhal lhe IOT budgel is nol fal (. 2). ul, vhere and hov
IOT sends ils money is nol lhe issue. The issue is: Arc strccts a City Cnunci! budgct
prinrity?
2.1 PDC's sharc: Urban rcncwa! thrnugh transpnrtatinn imprnvcmcnt
The IorlIand DeveIomenl Commission is silling on hundreds of miIIions of doIIars of
funds lhal can be used lo renev cily slreels vilhin urban renevaI areas. The figure
beIov and lhe figure on lhe foIIoving age shov lhal a ma|orily of roosed
mainlenance and safely ro|ecls are Iocaled in urban renevaI areas.
1
IDC has indicaled
lhal slreel ro|ecls couId be erformed vilhin URAs as arl of conslruclion ro|ecls.
2

1
Ior more delaiIed mas, see hll://goo.gI/6NacD and hll://goo.gI/ivSlZ4.
2
Mesh A. Can Urban RenevaI Money HeI IiII IorlIand's Slreel-Iaving ackIog` 0!11&.%//% 0%%B. }une
25, 2014. hll://vvv.vveek.com/orlIand/bIog-31788-
can_urban_renevaI_money_heI_fiII_orlIands_slreel.hlmI.


In 2006, IorlIand Cily CounciI unanimousIy
aroved an ordinance lhal crealed vhal is
knovn as lhe 30 Iercenl Urban RenevaI Tax
Incremenl Sel Aside. The ordinance mandales
lhal IDC direcl 30 ercenl of urban renevaI
funds lovard affordabIe housing serving eoIe
earning beIov 80 ercenl median famiIy income.
II thc city's strccts arc as impnrtant as
aIInrdab!c hnusing, City Cnunci! cnu!d
mandatc a 30 Pcrccnt 5ct Asidc Inr 5trccts.
There seems lo be uniform agreemenl on lhe
CounciI lhal lransorlalion imrovemenls are a
key comonenl of urban renevaI and economic
deveIomenl. The same sorl of crealivily and
energy lhal crealed lhe IDC sel aside for
affordabIe housing can and shouId be direcled
lovard a IDC sel aside for slreels.
The vork grous faiIed lhe cily by faiIing lo examining lhe enlire cily budgel for
olenliaI funding lo mainlain and imrove lhe cily's slreels.
3 Thc disappcaring cnnccpt nI "cvcrynnc pays, cvcrynnc bcncIits"
Work grou commillee chair Rulh Adkins reealedIy emhasized lhal lhe
imIemenlalion of slreel funding roosaIs musl be vieved lhrough an equily Iens.
One measure of equily is arlicuIaled in one of IOT's ansvers lo a frequenlIy asked
queslion: "With a transpnrtatinn Icc, cvcrynnc pays and cvcrynnc bcncIits."
3

This equily concel vas |ellisoned for residenls in lhe earIy meelings of lhe Nonrofil
and Lov-Income Workgrou. Iirsl il vas discovered lhal lhe roosed Iov-income
discounl vas lechnoIogicaIIy imossibIe lo imIemenl. IOT lhen inlroduced series of
income lax roosaIs. Afler severaI ileralions, income lhreshoIds vere inlroduced lhal
exemled one-lhird of cily residenls from lhe lax. The currenl roosaIs lrade lhe
equily rinciaI of everyone ays, everyone benefils for vhal is nov an aggressiveIy
rogressive income lax lhal exemls a one-lhird and viII encourage lax avoidance by
lhose al lhe highesl IeveIs of laxalion.

3
IorlIand ureau of Transorlalion. IrequenlIy Asked Queslions.
hlls://vvv.orlIandoregon.gov/lransorlalion/arlicIe/493645. Relrieved Selember 29, 2014.


Under lhe concel of everyone ays, everyone benefils, Commissioner Novick noled
lhal nonrofils do nol receive discounls on lheir valer and sever biIIs, and lherefore,
shouId be assessed lhe fuII amounl of any lransorlalion user fee. The usiness Inlily
IIal Iee roosaI losses oul lhis nolion of equily by imIemenling a roerly based lax
lhal has no conneclion vilh use of lhe slreels and is unevenIy aIied across business
aclivilies. The III Iaces nonrofils inlo a rolecled cIass of enlilies lhal are exeml
from a Iarge share of lhe III lhal an idenlicaI for-rofil enlily vouId be assessed.
4 A Iai!urc nI prnccss
The memorandum accomanying lhe MiIIer/Adkins Reorl noles, Given lhe diversily
of inleresl grous and consliluencies lhal you aII reresenl, il is nol surrising lhal
severaI differences of oinion sliII exisl. Indeed, lhe differences of oinion seem
significanl. The facl lhal lhe Iasl vork grou meelings vere canceIed and lhe grous
vere dismissed one monlh earIier lhan Ianned indicales lhal vork grous faiIed lo
reach consensus on lhe mosl imorlanl issues. The facl lhal lhere vas nol a singIe
member of any vork grou vho signed off on lhe MiIIer/Adkins Reorl is a cIear
indicalion of lhe faiIure of rocess.
Ior severaI monlhs, lhe Transorlalion Needs + Iunding Advisory Commillee mel
behind cIosed doors lo deveIo vhal vas resenled lo Cily CounciI in May 2014 as lhe
Transorlalion User Iee. The ubIic vas nol ermilled lo allend lhe meelings.
ecause lhe Commillee's findings vere resenled lo Cily CounciI, il is very IikeIy lhal
excIuding lhe ubIic vas a vioIalion of Oregon's ubIic meelings Iavs.
4

Mayor HaIes and Commissioner Novick romised lhal lhey vouId convene lhree vork
grous lo discuss imIemenlalion of lhe roosed Transorlalion User Iee and lo
idenlify aIlernalive sources of funds.
One vork grou vas lo discuss hov lo Iessen lhe imacl of a lransorlalion user
fee (and olher cily uliIilies) on !nw-incnmc rcsidcnts.
Anolher vork grou vas lo invoIve lhe business communily lo refine lhe
busincss and nnn-rcsidcntia! comonenl of lhe fee.

4
Ior more informalion, see hll://vvv.noslreelfee.com/2014/07/did-lhe-shadovy-lransorlalion-
needs-and-funding-advisory-commillee-vioIale-oregons-ubIic-meelings-Iavs/.
See aIso, Theen, A. Transorlalion Needs and Iunding Commillee Meels Iriday, IubIic Nol Iermilled
lo Allend: IorlIand Cily HaII Roundu. C$%<-"!&". March 20, 2014.
hll://vvv.oregonIive.com/orlIand/index.ssf/2014/03/lransorlalion_needs_and_fundi.hlmI.


A lhird vork grou vas lo focus on hov lo refine lhe fee lo address lhe needs of
nnnprnIits and pub!ic institutinns.
According lo lhe definilion of Iov income used in lhe originaI Transorlalion User Iee
roosaI, aroximaleIy 85 ercenl of IorlIanders are nol Iov income. This 85 ercenl
did nol have any reresenlalion on any of lhe vork grous.
Less lhan lhree days before lhe firsl vork grou meeling, Commissioner Novick
announced lhal lhe lhree vork grous vouId be coIIased inlo lvo vork grous, vilh
nonrofils and Iov-income residenls cIumed logelher inlo a singIe vork grou.
Around lhal lime, lhe once dormanl Transorlalion Needs + Iunding Advisory
Commillee vas resurrecled as an bercommilee overseeing and digesling lhe vork of
lhe lvo remaining vork grous.
Cilizens associaled vilh NoSlreelIee.com allended aII bul one of lhe meelings of lhe
vork grous and lhe Transorlalion Needs + Iunding Advisory Commillee. The onIy
meeling lhal vas missed vas lhe }uIy 17, 2014, meeling of lhe Transorlalion Needs +
Iunding Advisory Commillee lhal vas made ubIic mere hours before lhe meeling vas
heId.
IubIic commenl vas nol ermilled al any of lhe vork grous. Nonrofil and Lov-
Income Workgrou chair Rulh Adkins made il very cIear lhal ubIic commenl vas nol
ermilled and nol veIcome.
The vork grou meelings gave lhe iIIusion of arlicuIaling consensus. Hovever, il vas
cIear lhal lhe meelings vere mereIy a vehicIe for lhe chair lo imIemenl lhe chair's
referred olions. Ior examIe, lhere vas never any u-or-dovn vole in any commillee
regarding lhe roosed Transorlalion User Iee versus lhe III and lhere vas never
any u-or-dovn vole in any commillee regarding lhe roosed Transorlalion User
Iee versus an income lax. WhiIe lhere vere some lhumbs u/lhumbs dovn informaI
oIIing on issues such a sunselling, lhere vere no formaI voles on lhe roosed fees
and laxes lhemseIves.
Iven vorse, vork grous chair Ired MiIIer dovnIayed or mischaraclerized key issues
broughl u by vork grou members. On a number of occasions, vork grou members
indicaled lhal any lransorlalion funding roosaI lhal raises money from nev fees or
laxes shouId be aroved by volers. The chair vouId Ialer characlerize lhe vork grous
as saying lhere is nol much need for a ubIic vole. Al severaI vork grou meelings,
members comIained lhal lhe chair vas mischaraclerizing lhe grou's underslanding.
The MiIIer/Adkins Reorl's onIy menlion of a ubIic vole vas vilh resecl lo a


olenliaI sunsel rovision and makes no menlion of a ubIic vole on lhe roosaIs
lhemseIves. In lhis vay lhe MiIIer/Adkins Reorl rovides no guidance on vork grou
concIusions on an issue lhal al Ieasl lvo Cily Commissioners have indicaled as being a
key faclor in lheir decision making rocess.
Many members of lhe vork grous indicaled lhal if Cily CounciI beIieves lhal funding
slreel mainlenance and safely ro|ecls are a oIicy riorily, lhen lhal riorily shouId be
manifesled in lhe cily budgel. This has been characlerized as lhe Cily Commilmenl
and CounciI's Skin in lhe Game. Transorlalion Needs + Iunding Advisory
Commillee member Corky CoIIier suggesled lhal a commilmenl lo fund coIIeclion and
adminislralive cosls oul of lhe cily's GeneraI Iund vouId (1) increase lhe amounl of
nev lax revenues going lo slreel mainlenance and safely ro|ecls, and (2) rovide Cily
CounciI an incenlive lo minimize and oversee overhead cosls. This reasonabIe idea vas
nol incIuded in lhe MiIIer/Adkins Reorl.
The chairs oflen gIossed over lhe imorlanl loic of lhe Cily Commilmenl, indicaling
lhal il vas somelhing lhal Cily CounciI .!<*/ deaI vilh in lhe fulure. Anyone famiIiar
vilh Ieanuls viII knov lhal such assurances come from lhe Lucy-and-lhe foolbaII
Iaybook. Nov you are haIfvay lhrough lhese commenls, here is a comic as a revard.



There is an oId exression: ?: 7-(D$% "-/ &/ /*% /&E1%F /*%" 7-(D$% -" /*% .%"(. The
85 ercenl lhal vere nol given a seal al lhe vork grou labIes sav lhis exression Iay
oul. The business vork grou managed lo cul lheir assessmenl by one-lhird. The
nonrofil vork grou exlracled a nonrofil discounl. The Iov-income grou oblained a
recommendalion lhal residenls vilh Iess lhan $30,000 in income vouId be exeml from
lhe lax. Al lhe same lime many of lhe 85 ercenl vho vere excIuded from lhe vork
grous sav lheir roosed assessmenls increase.
One vork grou member described lhe fruslralion vilh lhe vork grou rocess: . in
lhe end lhis vorkgrou viII be bIamed for a funding mechanism ve neilher crealed nor
voled on.
5

Moving forvard, I undersland lhal lhere viII be one oen house and one oorlunily
for ubIic leslimony before Cily CounciI voles on lhe fee/lax roosaIs. Il is very IikeIy
lhal CounciI viII consider a sel of lvo nev laxes lhal Iook nolhing Iike lhe
Transorlalion User Iee lhal vas considered al lhe end of May 2014. There is no
reason for such a comressed lime frame vilh Iimiled ubIic inul on a sel of nev laxes
and/or fees lhal viII imacl every singIe residenl, business, nonrofil, and ubIic enlily.
5 Rcsidcntia!: A "bcynnd prngrcssivc" incnmc tax
The iniliaI Transorlalion User Iee roosaI had four calegories of assessmenl:
(1) singIe famiIy, (2) singIe famiIy Iov-income, (3) muIlifamiIy (e.g., aarlmenls and
condominiums), and (4) muIlifamiIy Iov-income. IOT argued lhal lhe reason for lhe
dislinclion belveen singIe- and muIli-famiIy vas lhe difference in slreel usage across
lhe lvo calegories. Under lhe iniliaI roosaI, lhe highesl amounl any househoId vouId
ay vouId be $144 a year vilh lhe assessmenl being biIIed lo lhe enlily idenlified vilh
lhe roerly's valer meler.
ecause of lhe difficuIly in exlending a Iov-income discounl lo muIli-famiIy unils vilh
a singIe valer meler, lhe Nonrofil and Lov-Income Workgrou re|ecled lhe iniliaI
Transorlalion User Iee. IOT slaff reIaced lhe iniliaI aroach vilh four versions
of a rogressive income lax. Wilh lhe income lax lhere is no conneclion vhalsoever
vilh slreel usage. The biggesl differences among lhe four versions vere vilh resecl lo
lhe maximum amounl assessed er lax fiIer ($240, $1,200, or $2,400 a year).

5
Sanderson, A. IieId Noles: Transorlalion User Iee Non-ResidenliaI usiness Meeling 9/15/14.
Selember 16, 2014. hlls://vvv.facebook.com/Slodxslreelfee/osls/865350486816135


5.1 Bcynnd prngrcssivc: Hnw much is tnn much?
Members of lhe Nonrofil and Lov-Income Workgrou ushed for lhe mosl
rogressive income lax roosaI in vhich couIes vilh $30,000 or Iess in laxabIe income
vouId ay nolhing, afler $30,000, assessmenls vouId increase lhrough seven brackels
lo a maximum of $2,400 a year for couIes vilh more lhan $500,000 in laxabIe income.
There vas some agreemenl among lhe vork grous lhal any income lax shouId be
rogressive. Hovever, severaI vork grou members vieved lhe lo rale as loo high,
vilh one vork grou member saying il vas beyond rogressive.
In a dearlure from everyone ays, everyone benefils, under lhe mosl rogressive
roosaI, aboul one-lhird of lax fiIers vouId ay nolhing. Al lhe olher end, lhe lo 3.5
ercenl of lax fiIers vouId ay aImosl haIf of lhe enlire lax.
Il is a veII knovn roosilion in slale and IocaI ubIic finance lhal such dislorled lax
burdens resuIl in viId year-over-year svings in lax revenues and increase incenlives for
lax avoidance slralegies. Il is aIso a veII knovn observalion in ubIic finance lhal lax
avoidance is easier al lhe municiaI IeveI lhan il is al lhe slale and federaI IeveI as lax
fiIers can vole vilh lheir feel. In facl il can be much easier, as a lax fiIer need onIy
change lhe address from vhich slale and federaI laxes are fiIed lo avoid aying any
roseclive cily income lax.
5.2 Thc PER5 prnb!cm
Under slale Iav, IIRS, IederaI ImIoyee Reliremenl Syslem, and cerlain olher ubIic
seclor reliremenl benefils cannol be laxed. This creales a serious equily issue. Ior
examIe, under lhe roosaI favored by lhe Nonrofil and Lov-Income Workgrou, a
fiIer vho soIe source of reliremenl income vas $31,000 in IIRS benefils vouId be
comIeleIy exeml from lhe cily's income lax. Al lhe same lime a fiIer vho soIe source
of reliremenl income vas $31,000 from lheir ovn IRA vouId be assessed $18 a year.
The discreancy can be much Iarger lhan lhis, as some IIRS fiIers vilh higher IIRS
income and a degree of IocaIIy laxabIe income may sliII be comIeleIy exeml, vhiIe
non-IIRS fiIers vilh an equivaIenl IeveI of lolaI income couId conceivabIy ay lhe
maximum amounl of $2,400 a year.
5.3 A!! mnncy is Iungib!c: Nn guarantcc that incnmc tax rcvcnucs wi!! bc uscd Inr
strccts
ecause lhere is no nexus belveen lhe income lax assessed and an individuaI's slreel
usage, lhere viII be slrong ressure lo (1) raid income lax revenues for olher uroses,


as lhe cily did vilh lhe uliIily franchise fee originaIIy earmarked for slreels, and (2)
increase lhe income lax rale lo fund lhe oIicy riorilies of subsequenl cily counciIs.
The Cily of IorlIand has a Iong hislory of raiding slreel mainlenance funds lo ursue
olher uroses. Indeed, Mayor HaIes has menlioned numerous limes lhe facl lhal one
reason slreels are in disreair loday is because lhe cily diverled uliIily franchise fee
funds. Revenues from cily ovned arking garages has been diverled lovard aying off
bonds issued lo buiId lhe IorlIand Slreelcar. There have been no assurances from IOT
slaff or cily counciI lhal income lax revenues earmarked for slreels viII nol be diverled
by lhis or subsequenl cily counciIs.
5.4 A cnmp!cx tax and invasinn nI privacy with massivc cnmp!iancc cnsts
The MiIIer/Adkins Reorl recommends Cily CounciI adol some form of income lax. A
cily-IeveI income lax viII be a comIiance nighlmare lhal is unfair, inlrusive, and
vaslefuI. In facl, in caIcuIalions dislribuled al a Selember 11, 2014, seciaI vork grou
meeling, cily slaff caIcuIale lhal 25 ercenl of lhe lax assessed viII be ealen u by
noncomIiance and coIIeclion cosls. Thal is $10 miIIion a year in vasled money
money lhal viII nol reair any roads, money lhal viII nol revenl a singIe road accidenl.
Revenue ureau slaff have indicaled lhal Iessons Iearned from coIIecling lhe Arls Tax
can be aIied lo lhe roseclive cily income lax. Hovever, lhere are severaI
differences belveen lhe Arls Tax and lhe income laxes recommended by lhe
MiIIer/Adkins Reorl.
The Arls Tax is assessed er erson, regardIess of income lax fiIing slalus. A cily
income lax vouId araIIeI federaI and slale nolions of singIe, married fiIing
|oinlIy, married fiIing searaleIy, and so on. Thus Arls Tax fiIings rovide no
usefuI informalion regarding vho vouId ayand hov much lhey vouId
aylhe roseclive cily income lax.
The Arls Tax exemls onIy lhose earning Iess lhan $1,000 in laxabIe income, lhus
il rovides aImosl no usefuI informalion regarding vho vouId be exeml from
lhe roseclive cily income lax.
The Arls Tax aIies lo everyone vho Iives in lhe Cily of IorlIand for any
orlion of lhe year. Hovever, if lhe roseclive cily income lax is Iinked lo
federaI and/or slale fiIings, lhen lhose vilh second homes can avoid lhe lax by
changing lhe address from vhich federaI and slale income laxes are fiIed.


Revenue ureau slaff have indicaled lhal Iessons Iearned from coIIecling lhe
MuIlnomah Counly lemorary income lax (ITAX) can be aIied lo lhe roseclive cily
income lax. ComIiance vilh lhe ITAX vas heIed by oblaining informalion from lhe
slale Dearlmenl of Revenue regarding vho fiIed slale income laxes from MuIlnomah
Counly. Revenue ureau slaff reorled lhal since lhe ITAX exired, lhe Oregon
Dearlmenl of Revenue has a bIackoul on roviding simiIar assislance lo
municiaIilies. Thus, IorlIand cannol execl comIiance assislance from lhe slale
Dearlmenl of Revenue.
The cily has a hislory of overeslimaling lax comIianceil ro|ecled Arls Tax
comIiance vouId be 85 ercenl vhere acluaI comIiance is aboul 70 ercenl. The cily
aIso has a hislory of undereslimaling lhe cosls of coIIecling laxescily counciI has lvice
increased lhe Iimils on Arls Tax adminislralive cosls because lhe iniliaI voler-aroved
Iimils vere exceeded.
6 Nnnrcsidcntia!: A prnpcrty tax hiddcn in a b!ack bnx
The iniliaI Transorlalion User Iee roosaI for nonresidenliaI roerlies assessed a
fee based on slreel usage as rovided by eslimales in lhe ITI )$!@ G%"%$&/!-" 8&"(&1,
vilh lhe assessmenl being biIIed lo lhe enlily idenlified vilh lhe roerly's valer meler.
ecause of difficuIlies in exlending a nonrofil discounl and because of lhe chaIIenges
lo IandIords of assing lhrough lhe charge, lhe vork grous moved avay from lhe
iniliaI aroach.
The iniliaI aroach vas reIaced vilh lhe usiness Inlily IIal Iee, or III. Desile ils
name, lhe III is lo be assessed on aII nonresidenliaI roerlies: businesses, nonrofils,
and ubIic/governmenl oeralions. Ralher lhan Iinking lhe assessmenl lo slreel usage,
lhe III is based on an ad hoc and arbilrary combinalion of each roerly's business
lye, revenues, size of lhe roerly, and number of emIoyees.
6.1 Thc BEFF may triggcr Mcasurc 5 prnpcrty tax !imitatinns
The League of Oregon Cilies recommends lhal cilies consider lhe foIIoving issues lo
delermine vhelher lhe funding mechanism vouId be sub|ecl lo Measure 5 Iimilalions:
6

What triggcrs paymcnt nI thc BEFF? Does lhe obIigalion lo ay lhe III arise
vhen slreels are used or uon some olher crileria, such as lhe size or lye of

6
League of Oregon Cilies. TUI SoIulions for LocaI Slreel Iunding: A Survey on Transorlalion UliIily
Iees (TUIs). }anuary 2008. hll://vvv.ava-va.org/forums/OregonCilies2007TUIReorl.df


imrovemenls on lhe roerly` To avoid being cIassified as a roerly lax, lhe
III musl be lriggered by lhe occuanl's ('% of slreels. Size and lye of
imrovemenls are lvo crileria of lhe four crileria used lo assess lhe III
(emIoyee counl and revenues are lhe olher lvo).
7
Use of lhe slreels is nol a
faclor in III caIcuIalions.
Hnw is thc BEFF ca!cu!atcd? If crileria olher lhan lhe occuanl's use of lhe
slreels are used and lhose crileria do nol reIale 6!$%#/17 lo slreel use, lhe
ordinance couId be cIassified as a lax.
Whn pays thc BEFF? Does lhe resonsibiIily lo ay resl vilh lhe occuanl/user
of lhe roerly or vilh lhe ovner` IOT slaff has nol adequaleIy addressed lhis
issue. Ior examIe, ovners of vacanl buiIdings may be assessed lhe III, vhich
vouId cIassify lhe III as a roerly lax. IOT slaff have nol indicaled hov lhe
III vouId be aIied lo food carls and food carl ods Iocaled in arking Iols.
Hnw wnu!d thc city cnInrcc thc BEFF? Courls have slaled lhal ordinance
rovisions vhich aIIov a cily lo lake ossession or allach a Iien againsl a
roerly may be an indicalion lhal lhe fee is a lax on roerly and sub|ecl lo
Measure 5 Iimilalions. There vas no discussion vhalsoever in lhe vork grous
regarding enforcemenl of lhe roosed laxes.
6.2 Nn ncxus with usc nI strccts
The roosed III rales are a bIack box of faclors lhal have virluaIIy nolhing lo do
vilh an occuanl's use of slreels. The III rocess roduces lax rales lhal have no
nexus vilh slreel use, are unfair, and defy common sense. In examIes rovided by
IOT, a smaII fIover sho couId face a sleeer III lhan an 8-screen cinema, even
lhough lhe cinema generales more lhan 25 limes as many lris.
8

Busincss 5izc Emp!nyccs Rcvcnucs
Annua!
BEFF
PM Pcak
Trips
IIover sho 2,500 square feel 3 ITI $275,000 $240 or 300 7
8-screen cinema 50,000 square feel 35 ITI $2,500,000 $240 190

7
MiIIer/Adkins Reorl, usiness Inlily MechanismOriginaI Rale Slruclure IroosaI, el seq., .
1820.
8
MiIIer/Adkins Reorl, usiness Inlily MechanismSamIe Rale Sheel, . 17.
Tri eslimales from Cily of TrouldaIe. Inslilule of Transorlalion Ingineers Common Tri Generalion
Rales (IM Ieak Hour). 2014. hll://vvv.ci.lrouldaIe.or.us/ubIicvorks/documenls/ileIanduseIisl.df.


6.3 A nnnprnIit discnunt that dcIics mnst cnnccpts nI Iairncss and cquity
Under lhe originaI concel of everyone ays, everyone benefils nonrofils and
governmenls vouId be sub|ecl lo lhe same assessmenl as any olher nonresidenliaI
roerly use. In lhe vork grous il vas oinled oul lhal some nonrofilseven some
Iarge nonrofils vilh Iarge budgelshave smaII cash fIovs and vouId nol have lhe
avaiIabIe cash resources lo ay lhe assessed fee or lax. Ior lhal and olher reasons, lhere
vas some agreemenl lo exlend a discounl lo nonrofil enlilies.
The business vork grou seemed lo arrive al lhe mosl reasonabIe aroach of a
sIiding scaIe discounl based on revenues. Iven so, in some cases, il has been oinled
oul lhal some of lhe Iargesl nonrofils in IorlIand Iook and acl no differenl from for-
rofil enlerrises, raising lhe queslion of vhelher a nonrofil discounl is a equilabIe as
one vouId lhink a firsl gIance. Ior examIe, Transorlalion Needs + Iunding Advisory
Commillee member Vic Rhodes iIIuslraled lhe oulrageousness of lhe nonrofil discounl
by oinling oul lhal a nonrofil enlily vilh resources sufficienl lo ay for naming righls
on a sorls sladium vouId be exlended a nonrofil discounl.
6.4 A cnmp!cx tax with massivc cnmp!iancc cnsts
IOT slaff and ils consuIlanl have ushed lhe III as a simIer soIulion lhan lhe
originaI roosaI based on lhe ITI )$!@ G%"%$&/!-" 8&"(&1. In facl, lhe III is arbilrary,
unfair, and needIessIy comIicaled. Thc BEFF dcmands inInrmatinn that nn nthcr
rcgu!atnry nr tax cn!!cctinn agcncy rcquircs. This viII be a comIiance nighlmare for
bolh III ayers and lhe cily.
Deending on lhe version of lhe III, each roerly on vhich an enlerrise is Iocaled
vouId face one of 14 differenl lax rales. IOT slaff has emhasized lhe ca on III
assessmenls, IOT has dovnIayed lhe facl lhal lhe ca is aIied er roerly, nol
er enlily.
Delermining vhich of lhe 14 rales a roerly vouId ay is based on:
1. usiness lye al lhe roerly (e.g., office, reslauranl, relaiI),
2. Revenues al lhe roerly,
3. Size of lhe roerly, usuaIIy in square feel, and
4. The number of emIoyees al lhe roerly.


Nole lhal lhe III is roerly based. Thal means a laxayer musl quanlify business
lye, revenues, square foolage, and emIoyee counl :-$ %&#* @$-@%$/7 &/ =*!#* !/ -@%$&/%'.
Many businesses do nol searale revenues by Iocalion. Many businesses have no saIes
associaled vilh a Iocalion. Ior examIe, headquarlers or back office oeralions lend
lo have no revenues.
Consider GoodviII Induslries. Il oerales numerous relaiI slores lhal generale miIIions
of doIIars in saIes. GoodviII aIso has a headquarlers lhal has no saIes, bul coIIecls
miIIions of doIIars in conlribulions. GoodviII aIso oerales numerous dro off
donalion Iocalions lhal have no saIes or revenues. GoodviII vouId have lo caIcuIale ils
III for each Iocalion each vilh a differenl business lye, square foolage, emIoyee
counl, and revenues. Then il musl ask: 5$% A-1("/%%$ =-$B%$' !"#1(6%6 !" /*% %.@1-7%%
#-("/H
Consider McMenamin's, vhich has 20 differenl roerlies in lhe Cily of IorlIand. Iven
vilh lhe ca, McMenamin's is IikeIy lo face a III lax biII in excess of $10,000 a year.
20+ differenl business lyes: Is lhe Kennedy SchooI a holeI` A lhealer` A ub` A
sil-dovn reslauranl` Thal mallers because lhere are huge svings in III lax
rales across business lyes.
20+ differenl revenue caIcuIalionseach roerly musl rovide ils revenues
because III is based on roerly, nol business.
20+ differenl square feel measuremenlseach roerly musl rovide ils square
foolage because III is based on roerly, nol business.
20+ differenl emIoyee counlsbul vhal if emIoyees fIoal from roerly lo
roerly`
The III is a comIiance nighlmare lhal is unfair, inlrusive, and vaslefuI. Indeed,
lhere is a very good chance lhal for enlerrises vilh muIliIe Iocalions, lhe cosls of
comIying vilh lhe III vouId exceed lhe lax ilseIf.
The cosl and comIexily of comIying vilh lhe III vouId be malched by lhe cily's
cosl and comIexily of coIIecling lhe III. In facl, lhe labIe beIov, dislribuled al a
Selember 11, 2014, seciaI vork grou meeling, shovs lhal cily slaff caIcuIales lhal
25 ercenl of lhe lax assessed viII be ealen u by noncomIiance and coIIeclion cosls.
Thal is $10 miIIion a year in vasled moneymoney lhal viII nol reair any roads,
money lhal viII nol revenl a singIe road accidenl.


The cily has a hislory of overeslimaling lax comIianceil ro|ecled Arls Tax
comIiance vouId be 85 ercenl vhere acluaI comIiance is aboul 70 ercenl. The cily
aIso has a hislory of undereslimaling lhe cosls of coIIecling laxescily counciI has lvice
increased lhe Iimils on Arls Tax adminislralive cosls.
IOT and Revenue ureau eslimale lhal more lhan 130,000 enlilies vouId be sub|ecl lo
lhe III. They reorl aroximaleIy 65,000 business Iicense regislranls in lhe cily. The
cily viII face enormous sel-u cosls as il doubIes lhe number of enlilies regislered in lhe
cily. Then, il viII face enormous ongoing cosls and businesses, nonrofils, and olher
enlilies come and go, exand and conlracl, and hire and fire emIoyees.

6.5 Unanswcrcd qucstinns abnut taxing nthcr gnvcrnmcnt cntitics
Under lhe iniliaI Transorlalion User Iee roosaI, governmenl enlilies vouId be
sub|ecl lo lhe same scheduIe of nonresidenliaI fees lo vhich businesses and nonrofils
vouId be sub|ecl. When queslioned aboul lhe abiIily of lhe Cily of IorlIand lo charge
such a fee lo olher governmenls under our federaI form of governmenl, Commissioner


Novick noled lhal olher governmenl enlilies are sub|ecl lo and ay fees lo lhe cily for
valer and sever uliIilies.
Nov lhal lhe user fee has lransformed lo a form of roerly lax, lhe cily's abiIily lo
coIIecl lhe III from olher governmenl enlilies musl be caIIed inlo queslion. Work
grou discussion on lhis issue couId be measured in seconds. When asked vhal lhe
imacl of an earIy ileralion of lhe III vouId be on IorlIand IubIic SchooIs, lhe vork
grou reresenlalive from IIS simIy ansvered lhal he did nol knov. Thal vas lhe Iasl
lime IIS vas menlioned in lhe vork grous. There are numerous olher governmenlaI
enlilies lhal vouId be sub|ecl lo lhe III lhal highIighl lhe serious deficiencies vilh lhe
III:
Hov vouId a buiIding Iike Cily HaII be assessed` WouId each commissioner ay
a III based on lhe size of his or her office, office slaff, and office budgel`
Hov vouId TriMel be assessed` Ier bus/raiI slo` Ier lransil cenler` Ier garage`
Is lhe lickel office in Iioneer Square a relaiI roerly use` WouId TriMel gel a
nonrofil discounl`
Whal vouId lhe Iorl of IorlIand ay for lhe III` WouId IorlIand
InlernalionaI Airorl (IDX) be caed al $1,200 a year` WouId IDX gel a
nonrofil discounl` Hov vouId lhe banks, shos, bars, and reslauranls inside
IDX be assessed`
Hov vouId lhe Air NalionaI Guard roerly be assessed` WouId lhe federaI
governmenl gel a nonrofil discounl`
The vork grous faiIed lhe cily by faiIing lo gel firm ansvers vilh resecl lo imosing
lhe III on governmenls. Unansvered queslions incIude:
To vhal exlenl vouId lhe cily ilseIf be sub|ecl lo lhe III`
Whal is lhe cily's abiIily lo #-11%#/ lhe III from olher federaI, slale, and IocaI
governmenls` Ior examIe, lhere have been reorls lhe IIS has nol aid lhe
Leaf Day Iee. If lhal is lhe case, lhen vhal is lhe cily's abiIily lo coIIecl lhe III
from IIS` SimiIarIy, vhal is lhe cily's coIIeclion rocedure if, say, lhe U.S. IoslaI
Service does nol ay lhe III imosed on ils osl office roerlies`
Whal amounl of III revenues are al risk if lhe cily cannol coIIecl lhe laxes from
olher governmenls`


Do governmenl enlilies receive a nonrofil discounl` In a vork grou session,
IOT slaff vere asked oinl bIank vhelher IIS vouId receive a nonrofil
discounl and resonded lhal governmenl enlilies vouId "-/ receive a nonrofil
discounl. In conlrasl, lhe MiIIer/Adkins Reorl (. 9) nov indicales lhal
governmenlaI enlilies vouId ay a discounled rale.
7 Cnnc!usinn
The lransorlalion funding roosaIs oulIined in lhe MiIIer/Adkins Reorl Iook very
differenl from lhe originaI roosaIs considered by Cily CounciI in May 2014 and are in
many vays vorse lhan lhe originaI roosaI. Cily CounciI is advised lo re|ecl any nev
laxes or fees and lo redirecl exisling cily budgeling lo refIecl a focus on slreel
mainlenance and safely. A cily budgel sends lhe cIearesl message of ils oIilicians'
riorilies. CounciI can begin by mandaling a 30 Iercenl Sel Aside for Slreels
from IDC .
The equily concel of everyone ays, everyone benefils has been |ellisoned by lhe
MiIIer/Adkins Reorl. The 85 ercenl of IorlIand residenls lhal vere nol given a seal al
a vork grou labIe sav lheir roosed assessmenls increase vhiIe every grou
reresenled by a vork grou vaIked avay from lhe rocess beller off lhan vhen lhey
vaIked in.
The roosed cily income lax on residenls is beyond rogressive. In a dearlure from
everyone ays, everyone benefils, under lhe mosl rogressive income lax roosaI,
aboul one-lhird of lax fiIers vouId ay nolhing, vhiIe lhe lo 3.5 ercenl of lax fiIers
vouId ay aImosl haIf of lhe enlire lax. The inequilies are exacerbaled by lhe IIRS
IrobIem in vhich reliremenl income from IIRS, IederaI ImIoyee Reliremenl Syslem,
and cerlain olher ubIic seclor reliremenl benefils cannol be laxed, bul rivale seclor
reliremenl income vouId be laxed.
The roosed III is a roerly based lax lhal may lrigger Measure 5 roerly lax
Iimilalions. Il is nol Iinked in any vay lo lhe use of slreel, resuIling in unfair lax rales
lhal defy common sense. In examIes rovided by IOT, a smaII fIover sho couId
face a sleeer III lhan an 8-screen cinema, even lhough lhe cinema generales more
lhan 25 limes as many lris.
The nonrofil discounl recommended by lhe MiIIer/Adkins Reorl defies many ideas of
equily. Under lhe originaI concel of everyone ays, everyone benefils nonrofils
and governmenls vouId be sub|ecl lo lhe same assessmenl as any olher nonresidenliaI
roerly use. Thal has been |ellisoned in favor of a nonrofil discounl lhal vouId be


exlended lo even lhe Iargesl nonrofils and governmenl oeralions. Indeed, one vork
grou member oinled oul a nonrofil enlily vilh resources sufficienl lo ay for
naming righls on a sorls sladium vouId be exemled from a orlion of lhe III.
The cily has a hislory of overeslimaling lax comIiance and undereslimaling lhe cosls
of coIIecling laxes. Iven vilh ils overIy olimislic eslimales, nearIy $1 oul of every $4 in
lax viII be vasled on comIiance and adminislralive cosls lhal do nolhing lo imrove
slreels or safely.
Cily CounciI is urged lo re|ecl any nev laxes or fees and lo redirecl exisling cily
budgeling lo refIecl a focus on slreel mainlenance and safely.

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