January 15, 2024

Doing good for the city, and the price businesses pay

Here’s some good news to start your year off right:

In December, representatives from a special Central City Task Force made up of public and private-sector leaders unveiled ten priority recommendations aimed at addressing Portland’s most critical issues.

The list isn’t perfect—we’ll get into that momentarily—but it’s a solid start. And I’m compelled to give props to everyone who came together to make it happen, particularly during a tense and chaotic year of restructuring. It feels pretty great to see a strong sample of local business leaders demonstrating their willingness to listen, work together, and make progress toward creating the reality we want for our city, state and region.

Health begets health

Governor Tina Kotek (who’s also a task force co-chair) said in a press release that “Portland’s success is a bellwether for the entire state.” I agree. While Portland obviously doesn’t represent all of Oregon, the city’s health does impact the state’s, and positive changes here make a difference for everyone.

Those of us in Portland’s commercial real estate world are well acquainted with the city’s “most critical issues”—by which I mean the many manifestations of social and economic upheaval we see every day: the proliferating homeless camps, the widespread public drug use, the ubiquitous litter and graffiti.

It’s clear that the task force has done a lot of work to call our fouls accurately, and I’m deeply encouraged that six of their 10 recommendations target root causes of the humanitarian crisis on our streets. The rest of the list provides recommendations for law enforcement, city cleanup and tax relief—more traditional city-planning focuses that can also make a big difference.

The “tax” we overlook

People have a way of stepping up to manage messes when no one else is doing it, and those in businesses and organizations are no exception. Many private businesses, including ours and our clients’, have invested significant resources to ameliorate city problems that have outpaced government response, especially since 2020.

We’ve written about watching from the 1000 Broadway Building as downtown protests turned violent; in the aftermath, property owners used their own funds to clean up. We also have countless examples of businesses being negatively impacted by unwanted visitors experiencing a variety of mental health or addiction-related challenges. When managers call the police in situations that absolutely warrant a response, they’re frequently told officers are unavailable.

With no reasonable sense of when the situation will improve, landlords and managers have little choice but to find their own solutions.

So this budget season, yet again, we’ve found ourselves advising clients to increase funds for property security, on-site porters, building maintenance, and proactive measures to reduce vandalism. We’ve referred property managers to the Street Art Alliance to commission murals, discouraging graffiti; but we’ve also recommended a few 7,000-volt fence installations to prevent access to vacant lots.

These costly interventions impact the health of city businesses across office, retail and industrial buildings, which means business tenants have to pay more for their leases and maintenance, and they raise the price of goods and services for customers.

This is part of our inflation problem—we can’t just blame it on supply chain issues or the labor market. When the government passes the buck to property managers for public and property safety, everyone in Portland pays.

The true cost of a crisis

One of the Central City Task Force’s objectives was to evaluate the resources we have available, including the option of tapping into emergency funds.

But Oregonians aren’t generally known for making spot-on budget projections—see this year’s $5.6 billion kicker announcement for a painful illustration of the state’s tendency to pass on funding opportunities, then have its needs pass prediction. Want city-specific examples? Portland ran out of budgeted graffiti-removal funds in August, but also returned 80% of the $146,000 a private citizen donated for trash cleanup five years ago, citing a lack of staff.

The task force is obviously aware of these missteps, and their recommendations for meeting priority targets include personnel as well as money. But it’s unclear how fully they considered all the ways Portland’s businesses are currently (and unsustainably) funding stopgap efforts to address the same targets. Factoring in these costs would go a long way toward making realistic projections—and real change—possible.

Sustainable work is good work

Please don’t hear me telling any property owner to stop working hard for a flourishing city. We love doing our part to keep Portland beautiful and wonderful, and so do our clients. Full stop.

But many, many businesses have had their presence, their resources and their ability to contribute quashed in the past few years. Instead of attracting downtown businesses, the city has hindered the growth it wants to achieve. And when it comes to incentivizing a healthy business presence in Multnomah County, I believe the task force’s tax-relief recommendation misses the mark.

The idea of tax relief is great, but there are tax policies that have a much larger impact than the Downtown Business Incentive program’s $1,000 return on hundreds of thousands invested in new lease commitments (according to my calculations).

For example, there’s the gross-receipts-based Corporate Activity Tax “imposed on companies for the privilege of doing business in Oregon”—a 2020 description that hasn’t aged particularly well. The CAT is a killer for service businesses and others with low profit margins, and restructuring it would go much farther than the DBI toward fostering a business community with the resources to stay and improve city health.

“Portland is what we make it.”

I’ll land on these words, which hung over task force representatives as they revealed their list of recommendations, because they’re our driving force. And because they’re true, even when we have to jump hurdles and look past inefficiencies to see it.

More can be done in Portland. More will be done in Portland, even this year. And I hope we all keep listening to each other, sharing our experiences, collaborating, creating and supporting the good efforts we see happening here.

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