Thursday, June 16, 2011

Portland budget to be adopted today

The Portland City Council will adopt our new budget today on June 16.  With a couple of candidates announcing their run for Mayor, this is a good time to see whether we agree with how our money is spent.
In this series, we’ll review the city budget and discuss one goal per article, whether that goal was achieved, and how much was spent on it.
The Numbers
The total budget is $2,797,348,621.  It’s up $21 million, about ¾ of one percent, from last year. 
Where we get the money
27% ($751 million) - money that was left after the city paid last year’s expenses (“Beginning Balance”)
20% ($574 million) - borrowed money (bonds)
19% ($520 million) - fees and service charges
16% ($452 million) - taxes
10% ($280 million) - paid to the city through government programs
  6% ($154 million) - license and permits
  2% ($66 million) - other sources
The amount the city is getting from other government programs is down considerably, as lower tax revenues have necessitated spending cuts during the economic slowdown. 
Where we spend the money
Expenses are just over $1.7 billion
25% ($425 million) - Public Utilities (water and sewage)

24% ($423 million) - Public Safety (police, fire and emergency communications)

18% ($301 million) - Community Development (zoning, permits, erosion control)

13% ($229 million) - City Support Services (city attorney, management and finance)

12% ($217 million) - Transportation & Parking

  6% ($113 million) - Parks, Recreation, & Culture
  1% ($18 million) - Elected Officials

The remaining $1 billion of the budget is allocated to:
Contingency                                       $626 million
Ending Fund Balance                      $  68 million        
Debt Service                                      $416 million
Cash Transfers                                  $592 million
Intra-city Transfers                       -$780 million

Economic Assumptions
Slow growth, low inflation and a stabilized housing market
This budget assumes that we will not fall back into recession, and that inflation will not grow uncontrollably.   The city presumes that the economy and the revenues it produces will grow, but very slowly.  Both national and local economic indicators support these assumptions, but if unforeseen circumstances cause either a recession or high inflation, money the city collects from revenues will fall short of this budget’s projections.
The budget assumes “some much needed stabilization of the local housing market by the summer of 2012.”  According to the real estate Multiple Listing Service, both average and sales prices in Portland have recently improved from falling by 29% from 2007, to falling by 27%, in other words we’ve recently recouped 2% of the nearly 30% we’d fallen.  To conclude that recent local data are a sign of stabilization in the coming year is premature, particularly since local property values fell in the later stages of the housing correction.  

Robert Shiller, co-creator of the S&P/Case-Shiller Home Price Indices, stated on June 9, 2011, "Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can't forecast the future because you have no comparison."

Therefore the risk that 2012 housing related revenues will fall short of budget projections is significant, since the basis for the anticipated housing recovery is anticipated is, at best, a “shot in the dark.”

Funding the library will be more expensive
A levy that provides some of the money used to operate the library expires next year.  Portland property owners will be asked to renew the levy, which will cost more because interest rates are projected to rise.  Virtually every reputable economist agrees that interest rates are likely to rise soon.
That extra interest (see Debt Service above) will probably increase city expenses by about $5 million.  No library cost cutting plan to make up for this additional expense is currently in the budget.
Mayor’s Goals
In building this budget, the Mayor stated five key goals:
1. Return the City to full prosperity and invest in a stronger, more resilient City.
2. Help those hit hardest by the recession and provide support to the most vulnerable in our community.
3. Protect public safety services.
4. Increase the City's focus on equity to ensure that every Portlander has access to the most equal of opportunities.
5. Identify neighborhood nuisances and ensure more responsive City services.
Note that goals 2 and 4 are virtually identical.  Since helping the vulnerable in our community is such a priority in this budget, we’ll start with examining how well we’re doing with achieving that goal, and how much we’re spending to do it.
Clearly, Portland is not a terribly diverse city.  According to the US Census Bureau, as of 2000, the city of Portland is 78% white, 7% black, 7% Latino, 6% Asian and the rest American Indian and Pacific Islander.   The non-white or Asian population is 16%.  Achieving minority equity, the Mayor’s fourth stated goal, is laudable.  Whether a new city office is the best way to achieve that goal is a debatable question.
New Program
The Office of Equity - $525 thousand
Mayor Adams intends to spend $525 thousand to create a new city agency to provide more equity for minorities.

How will this new department help?
Mayor Adams: Well, we don’t know.  So in terms of what is the Office of Equity going to do? Fundamentally, is figure out why Portlanders of color are actually seeing an increasing gap between white Portlanders, why that is and what we can do about it.
Talk of the Office of Equity has prompted city commissioners to note that other city bureaus already address issues of fairness, equality and opportunity, and correctly so.

In addition to the $618 thousand that funds Office of Human Relations and Diversity Development and Affirmative Action Office, there is an additional $95.057 million in city funding that address minority inequity issues.  They are:

1.        The Portland Housing Bureau - $88.5 million.  Organized on July 1 of last year, the PHB “continues efforts to synthesize programs, consolidate policy and investment approaches, and chart a new and forward-looking path.”   In other words, so far, it is thinking up programs and making policy.

 “As it continues to chart its path, it is emphasizing equity in its program investments.  An emerging equity agenda recognizes the historic and institutional barriers to housing, homeownership, and   economic stability experienced by communities of color. PHB seeks to place a greater reliance on community-validated data (such as the Coalition of Communities of Color report) to understand unmet needs, and to more intentionally hold its partners accountable for removing barriers to serving members of minority communities in greater numbers.”   

In other words, when it does do something, it will try to promote economic stability and housing for minorities.  Perhaps it can tell the Office of Equity how to do this.  Better yet, if it does its job, there will be no need for the Office of Equity.

Here’s how the PHB spends its money.  $6.8 million for the administration and support staff , $2.376 million for economic opportunity, $5.74 million for homeowner access and retention, $13.47 million for housing access and stabilization, and $60.1 million for housing production and preservation.  Programs total $88.5 million.

As mentioned previously, both home median and sales prices are down 27% from 2007, and the Portland price to rent ratio is 22.41.  A price-to-rent ratio over 21 indicates the cost of owning a home is far greater than renting.  This fact places Portland as the fourth most expensive city in the US to buy versus rent.  That is likely the greatest barrier to home ownership in the city, regardless of the minority status of the buyer.

2.       The Office of Neighborhood Involvement - $3.9 million   The ONI also has a goal of “expanding civic engagement – applying an equity lens.   As Portland grows and becomes more diverse, ONI seeks to continue to expand involvement and bring additional people and communities into the public dialogue. The City has also recognized that historical efforts to involve under engaged groups (people of color, people with disabilities, renters, people with low income) in City initiatives have not been very effective. In exploring solutions to this problem, ONI supports the existing neighborhood system's efforts to engage all neighbors. The support is through small grants, outreach, leadership training, and technical assistance…”

The budget allocates $3.9 million to the Neighborhood Resource Center, while recognizing that its “efforts to engage under engaged groups have not been effective.”  All programs by the ONI total over $7 million.

3.       The Portland Development Commission - $1 million   The PDC seeks to “… achieve Portland’s vision of a diverse, sustainable community with … quality jobs and housing for all.” 

Under its “Partners for Economic Progress Initiative,” the budget allocates $242 thousand that will “focus primarily on 2-3 economically challenged business areas, outside of urban renewal areas used to seed small-scale neighborhood economic development projects identified and developed by the community.”

Under its “Small and Neighborhood Business Technical Assistance” program, the budget includes $600 thousand to fill gaps in business technical assistance services with a focus on stabilizing and growing small businesses with modest incomes, businesses located in economically challenged areas, and businesses whose owners may need services provided in languages other than English.”  This funding will provide “tailored business technical assistance to 100 targeted businesses.” 

Under its “Economic Opportunity Initiative,” the budget includes $158 thousand to fund workforce development service to 148 low-income youth.”

Total expenditures under the Neighborhood Economic Development department are $1.689 million.

4.       Office of the Mayor - $685 thousand   The Mayor’s budget includes $450 thousand “to support youth initiatives that drive the city towards greater equity and economic stability.”

Under its “Cradle-to-Career Implementation,” the budget includes an additional $235 thousand “to address the chronic educational challenges and prolific disparities in our schools.”

5.       Office of Management & Finance - $804 thousand   This budget includes $129 thousand toward its “Minority Evaluator Program Staff” to “require that all evaluation panels for Requests for Proposals include at least one minority community member.” 

Its “Future Connect Scholarship” program allocates $500 thousand to “create a pathway to an Associate's Degree by helping our youth with financial burden of attending college. It also serves as an incentive for the youth who are most at-risk of not graduating college on time.”

Its “East Portland SUN School Equity” program allocates $100 thousand for “programs to improve student’s academic success.”  Since “Douglas High … is the only high-poverty index school in the region without a SUN program,” these funds will provide the start-up amount for a SUN High School.

Its “CASH” Oregon program provides $75,000 for “free tax preparation service” for “low income individuals … (many of whom) are challenged by language barriers and lack basic financial literacy.  In addition … CASH also assists people to get their financial houses in order by connecting them to educational resources and related community services. 

6.       Special Appropriations - $168 thousand

“Regional Arts and Culture Council Equity & Diversity Initiatives” provides $48 thousand to “expand its outreach to minority communities … to invest in more cultural diversity training; translate guidelines and application materials into Spanish, Russian, Chinese, Somali and Vietnamese …  and increase … to one full time employee the staff … dedicated to coordinating these diversity outreach activities.”

Its “Black Parent Initiative” provides $100 thousand which “inspires and mobilizes black parent to ensure their children achieve educational excellence” through “one-on-one training … using the Effective Black Parenting model, individualized service plans, classes and support groups.”

Its “Cully-Concordia Adult ESOL Classes spends $20 thousand to “continue the English for Speakers of Other Languages Classes” tailored to the needs and desires of each student.”


Mayor Adams’ $525 thousand Office of Equity will be added to the $95.675 million already spent on attaining equity for the Portland population that is non white or Asian.  In other words over 36% of $1.7 billion budget expense is allocated toward attaining equity for 14% of the Portland population. 
Again, by no means am I suggesting that equity is not a laudable goal.  I am simply pointing out that the problem does not appear to be the amount of money that is spent on achieving the goal; rather, how effectively those funds are being spent.
Generally, successful public policy to achieve financial equity involves two types of investment:  Education and jobs.  Government cannot create jobs in the private sector, but can make policies that are friendly toward business creation and job expansion. 
The types of jobs that are likely to flourish amid our current economic climate of outsourcing and computerization are those that require physical presence (janitors, gardeners, teachers, nursing-home aides, etc.) and those that  exchange information in ways that email and teleconferencing don’t accommodate (software development). 
As you can see, these jobs are at the low end (janitors, etc.) and high end (software engineers) of the economic spectrum, causing some to describe both our local and national economy as a “barbell,” with jobs on either end of the spectrum, and few in the middle.
Clearly, our current policies have not achieved economic equity in the city.  It requires a much more targeted approach than is being taken with our $96 million currently allocated to achieve this objective.
As to equity in home ownership, Portland home median and sales prices are down 27% from 2007, and the price to rent ratio in Portland is 22.41.  As mentioned previously, a price-to-rent ratio over 21 indicates the cost of owning a home is far greater than renting.  This fact places Portland as the fourth most expensive city in the US to buy versus rent. 

The greatest barrier to home ownership in the city, then, is the cost of home ownership vs. renting. The $88.5 million Portland Housing Bureau, with its agenda to recognize “the historic and institutional barriers to housing, home ownership, and   economic stability experienced by communities of color,” cannot further its agenda without recognition of the fact that the barrier to home ownership exists for all citizens in the community.

In our next discussion, we’ll review city policy and expenses in the area of public safety.  I welcome your comments and encourage you to discuss these issues both here and with your neighbors and City Council representatives.

No comments:

Post a Comment