No New Street Fee: City Council Should Approve Street Maintenance from the General Fund

Last week Portland City Commissioner Steve Novick suggested that the City Council approve $7 million in General Fund dollars to help pay for street maintenance. The City expects to have a surplus of some $9 million this fall, allowing new discretionary requests from individual bureaus.

Such a transfer would be far preferable to enacting a street tax, which has been widely opposed. Continuing to push the tax would be divisive and a huge waste of time for the hundreds of city residents who would show up to oppose it. Street maintenance is one of the most basic responsibilities for any municipality. Therefore, it is appropriate to use property tax dollars from the General Fund to maintain the road network.

Moreover, the City Council has an abysmal track record of managing dedicated transportation user fees. This was highlighted in a report issued last year by the Portland City Auditor, showing that dedicated transportation revenues had been going up over the last decade, while actual spending on road maintenance had dropped. This conclusion makes any proposed tax increase a non-starter.

The unexpected budget surplus gives the Council a graceful way to put the street tax proposal to bed. They should take the opportunity and move on.

The Portland Seed Fund: Lots of Fertilizer, Little Growth

By Joel Grey

The Portland Seed Fund (PSF) started in 2011 as a joint public-private venture intended to close a funding gap for entrepreneurs attempting to start a business. It invests $25,000 in each selected startup and reserves money for follow-up investments. The City of Portland, the City of Hillsboro, and the State of Oregon diverted tax dollars to underwrite the majority of the cost for the first Seed Fund and a significant portion of the second Seed Fund. This totaled $3.4 million through 2014.

Another $100,000 was proposed in the requested budget for the Portland Development Commission (PDC) this year. The 2014-2015 budget has been adopted but does not specify whether funding for the PSF is included. The PDC has ignored multiple requests for comment. The City of Portland and the Oregon Growth Account are the two biggest sponsors, both putting in $1.5 million or more.

Portland obtains its money from taxpayers directly; the Oregon Growth Account is a state-run venture capital fund using dollars appropriated from the Oregon Lottery.

The Seed Fund was promoted as a way for public entities to help private companies get started, with the expectation that the Fund would eventually earn money. However, it is not possible to determine whether the Seed Fund is earning a positive rate of return, or even what is being done with its money, despite the fact that it utilizes public funds.

The Seed Fund does not publicize which businesses are still open, and even when contacted did not respond to requests for its return on investment (ROI). The public entities were unable to provide the Fund’s ROI as well. The City of Hillsboro communicated that it was not able to invest directly, but had used an intermediary that would also receive any ROI. Various people at the City of Portland, including several at the City Budget Office and the PDC, were also unable to supply an ROI; some did not know what the ROI was and others have simply not responded to information requests.

Out of the 46 companies funded, most appear to still be open; but one has closed, another has moved to California, and two more appear to have closed, lacking corporation status, websites, and offices.

Regarding the funds spent by Hillsboro and Portland, Article XI Section 9 of the Oregon Constitution states: “[n]o county, city, town or other municipal corporation, by vote of its citizens, or otherwise, shall become a stockholder in any joint company, corporation or association, whatever, or raise money for, or loan its credit to, or in aid of, any such company, corporation or association.” Portland and Hillsboro got around this provision by giving their initial offerings to the Oregon Entrepreneurs Network, which then gave the money to the Seed Fund.

For the second Seed Fund, the City of Portland created its own intermediary, the Portland Economic Investment Corporation, which will be the group that handles the investment.

When asked, the City of Hillsboro said that it is not an investor; but by any standard of common sense it is. The city appropriated money for the Seed Fund, and the intermediary is just a screen. The money was always intended for the Seed Fund.

The managers of the Fund have admitted “[t]he Seed Fund could exist without public money.” This begs the obvious question: Then why is public money involved? If a private enterprise can exist without public money, for what reason is the public money involved?

The Portland Seed Fund is an example of “mission creep” in government. The three jurisdictions that launched this Fund have important work to do in such areas as law enforcement and protection of property. There is no reason to spend public money on non-essential and highly risky tasks such as equity investing in new private companies. The Portland Seed Fund should be shut down, and a full accounting of its spending should be provided to taxpayers.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

A Prescription for Affordable Housing in Portland

A new issue faces Portland. City Hall is considering waiving development fees for developers of market-rate housing in the Old Town Chinatown district. Chinatown is Portland’s oldest neighborhood and has earned an unpleasant reputation. City Hall claims that waiving these fees, which cover a project’s impact on urban infrastructure, can stimulate building in Chinatown. In the past, only developers of so-called “affordable housing” have been granted this waiver.

Critics argue that this is an expensive subsidy for big businesses which aren’t providing affordable housing. However, they assume that market-rate rent is permanent, no matter how much housing is built. This may not be true. As the supply of market-rate apartments increases in Chinatown, the market rate can be expected to decrease. Essentially, housing is made affordable by supplying more of it.

Waiving fees deprives certain city bureaus of funds; but perhaps these funds could be better spent, in this case, by private developers. If the City wishes to revitalize Chinatown, it needs to encourage more people to live there, and the best encouragement is lower rent. This can be accomplished by decreasing development fees and encouraging construction. More housing and lower rents could be good for Portland.

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Portland Public Schools’ New Ombudsman Should Be Independent

By Joel Grey

In response to parent complaints, Portland Public Schools will create a new ombudsman position. An ombudsman is a person within an organization who provides accountability and investigates complaints.

It’s a good thing for public schools to have an ombudsman. An ombudsman is dedicated to listening to parents’ concerns and preventing abuses within the system. Accountability is important because people will often get away with whatever they are able to, and an ombudsman makes it harder to escape independent oversight.

The problem here is that the school district has placed the ombudsman within the public relations department, reporting directly to chief of community involvement and public affairs, rather than to the superintendent. The job of public relations isn’t to investigate and stop abuses within the system; it’s to improve the public’s view of the schools. Placing an ombudsman in a PR department makes it appear to parents that the position is just for show.

An ombudsman should be as independent as possible and report to the highest level of an organization―in this case, directly to the superintendent. This is what Newark Public Schools does, and it is a common practice. Without independence, the ombudsman may appear to parents to be simply a tool to placate their criticisms without effecting real reform.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

The “Sharing Economy” Benefits Homeowners, Guests

By Everet Rummel

An emerging sector of many local economies is “homesharing,” or renting space in your home to strangers for a short term, usually a few nights. Smartphone apps such as Airbnb allow owners to list their homes for renters to see. Homesharing is controversial because it remains informal in most places and challenges the status quo of residential living and conventional hotels.

In Portland, homesharing falls under traditional bed and breakfast regulations. These may be too expensive for the typical homeowner, so many homesharers operate illicitly.

In an effort to regulate homesharing and make compliance cheaper, the Portland City Council has taken testimony from citizens. Sharers say that renting provides them with supplementary income, allowing them to keep their homes or enjoy their retirement years. Renters benefit from low prices and a more authentic atmosphere compared with hotel rooms. Opponents of homesharing fear increased noise, diminished neighborhood safety, and that lucrative short-term rental prices would attract landlords to the market, making long-term rentals less affordable.

However, noise and safety issues can probably be resolved by talking to your neighbors and complaining to police if things get out of hand. A study by the Rosen Consulting Group shows that short-term rentals make up a small fraction of the total rental housing stock in San Francisco, so they are unlikely to affect rents. With many benefits and low costs, Portland should embrace homesharing and interfere with it less.

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

The Portland Seed Fund: Boom or Bust?

By Joel Grey

The Portland Seed Fund started as a public-private venture intended to close a funding gap for small loans to entrepreneurs. The City of Portland, the City of Hillsboro, and the State of Oregon provided a majority of the funds for the first Seed Fund and a significant portion of the second Seed Fund. It was sold as a way for public entities to help private companies begin, with the expectation that the Fund would earn money.

At this time, it is impossible to say whether the Fund has earned a profit because that information is not publicly available, and none of the public entities involved could give an answer when asked what the return on investment had been. The first person I contacted at the Portland Development Commission said the Seed Fund didn’t sound familiar. The City Budget Office also didn’t initially recognize the name of the Seed Fund, but a budget analyst eventually contacted someone at the PDC. However, that person has not responded.

The conclusion from all of these conversations is that there is little or no accountability in place to ensure that taxpayer money is being well spent, nor is there a way for taxpayers to see how their money is being spent.

Ultimately, there are professionals who risk private money in venture capital firms. Government entities shouldn’t play venture capitalists with taxpayer funds.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Portland Should Be Fair to Taxis by Setting Them Free

By Everet Rummel

This issue affects almost all city-dwellers, and cities around the world are taking action. Some view it as their own livelihoods being at stake. It has even sparked mass protests in Europe. The issue? Whether or not cities should allow Uber, and other GPS-based ridesharing services, to operate within their jurisdictions.

Ridesharing apps like Uber and Lyft connect commuters with certified drivers willing to offer rides for a fare. The idea sounds innocent enough, but Portland and other cities strictly limit the number of taxis and for-profit drivers who are allowed to operate, how small each cab company can be, and how much or little they can charge.

Across the U.S., governments have rushed to regulate ridesharing and sometimes ban it altogether. California has warned ridesharing companies to stay clear of the airports. Virginia and Austin, Texas have banned them completely.

The European protesters claim it isn’t fair that ridesharing services can operate unregulated, while taxis are heavily regulated; the playing field isn’t level. And they’re right. But rather than cooking up expensive regulations and restricting taxis and ride-sharers in cities, which hurts customers, let’s make taxi and ridesharing drivers free to operate and earn a living. Let’s deregulate so more drivers are on the road and more customers are getting rides. As Portland and other cities consider allowing Uber to operate legally, we should keep these points in mind.


 

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Should Portland Residents Pay Another Fee to Cover Basic Road Maintenance?

Portland Mayor Charlie Hales is proposing a new transportation tax for 2015. He claims this is needed to offset a decline in revenue.

However, the facts show a different story. Total revenue for transportation has been growing for decades. For example, from 1996-2007, Portland transportation revenue grew by 60%. According to the city auditor, that was the largest increase among all city agencies during that period.

Portland’s general fund has also been flush. Between 2003 and 2012, the amount of annual tax revenue the city received from each Portland resident increased from $2,292 to $2,656. Total property taxes grew by 27% during that time.

Despite all this money, the city’s streets are poorly maintained. The problem is that local politicians have preferred to spend vast amounts on frivolous toys like the eastside streetcar and Milwaukie light rail, rather than taking care of basic maintenance. As a result, transportation debt service has increased from 10% of discretionary spending to 20% in just the past four years. The charge card is getting maxed out.

Instead of demanding more tax dollars for shiny new objects, the City Council should maintain and improve the basic road network. If this task is too difficult, taxpayers should ask why we bother to have a city government at all.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

The Last Communist City: Havana or Portland?

It’s clearly a stretch to describe Portland as a communist city, but there is an eerie similarity between Portland and the real communist city of Havana.

 

Portland-based independent journalist Michael J. Totten recently traveled to Cuba to see for himself the Havana that most tourists never see. He published his fascinating account in a long column he titled “The Last Communist City.”

 

He explains what happens when “…one of the world’s richest countries…rather than rais[ing] the poor up…shoved the rich and the middle class down. The result was collapse.”

 

Among his many insights are these:

 

  • “In the United States, we have a minimum wage; Cuba has a maximum wage—$20 a month for almost every job in the country.”

 

  • “As for the free health care, patients have to bring their own medicine, their own bedsheets, and even their own iodine to the hospital.”

 

  • “Leftists often talk about ‘food deserts’ in Western cities, where the poor supposedly lack options to buy affordable and nutritious food. If they want to see a real food desert, they should come to Havana.”

 

Coincidently, last week The Oregonian published an editorial  critical of Portland’s almost fanatical (my word, not theirs) anti-Walmart policies.

 

I couldn’t help thinking that Totten’s insights about Havana should stand as a warning to those who support so-called social-investment and related policies in “progressive” Portland.

 

Read Totten’s column and then ask yourself whether Havana residents wouldn’t be much better off with a Walmart, or any similar store, in their midst.

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Airbnb, Destructive Innovation, and Liberty

By William Newell

Portland is brainstorming regulations for temporary lodging made possible by websites like Airbnb. Airbnb describes itself as a “community marketplace for people to list, discover, and book unique accommodations around the world.” The proposed rules would make homeowners pay a tax, get a permit, and follow certain limitations. Portland’s slow and conditioned acceptance of home lodging businesses serves as a microcosm of one of America’s most troubling problems: our fatal conceit.

Individual liberty is a founding principle of American government and one of our most sacred rights. We protect our individual liberty in part because the dynamism that liberty affords individuals is necessary for a flourishing society. The only time individual liberty is to be attenuated is when one individual interferes with the rights of another.

Portland’s rules simply encourage a political system that erodes liberty and takes with it America’s diversity, dynamism, and drive. If a widow living on a fixed income wants to rent a room to help make ends meet, why should she be stopped because her home wasn’t “zoned” for lodging? If a young couple rents an extra room to pay off college loans, should they have to pay tourism taxes? Those who advocate for bans or restrictions not aimed at mitigating externalities and protecting individual rights are really questioning the underlying dignity and respect we should each be afforded.

*In his essay on the failures of central planning, The Fatal Conceit, Friedrich Hayek argued that individuals are best suited to know their own circumstances and to act to improve them. Actions based upon the presumption of superior knowledge by governments to impede individual endeavors tend to fail and to create more harm than otherwise would have occurred.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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