Portland budget challenges include inflation, revenue losses, homeless services

Portland budget challenges include inflation, revenue losses, homeless services

Portland faces a number of challenges as the city develops a budget for the coming year, including rising inflation, the loss of one-time state and federal funds, and costs associated with opening a new homeless services center .

“The biggest challenge on everyone’s mind – on businesses and residents’ minds – is inflation,” Brendan O’Connell, director of finance, told the city council during a workshop on Monday.

As the city enters budget season, officials will also consider losses from one-time USA Rescue Plan Act funding and $7.4 million in state funding awarded to the city last year to offset general assistance costs. ARPA funding is expected to decrease by $4.75 million from the $7.5 million in the current budget.

The city budget this year is $269 million, not including school spending or self-funding bills for sewer and stormwater operations and the Portland International Jetport. The mill rate is $13.61 per $1,000 of assessed value after a 4.8% combined city and school tax rate increase approved last year.

The city’s current budget for the Oxford Street shelter is about $5.2 million, but the cost is expected to increase by at least $4 million when the city opens a new homeless services center in Riverton this spring. That includes an annual lease increase from $168,000 to $2.5 million – though the city will eventually be able to buy the building for $1 – and a new $1 million contract for dining.

Other challenges include increases in debt service and state property valuations, which can affect how much state funding the city receives through municipal revenue sharing and school funding; a loss of parking revenue from the Portland Landing project on the eastern waterfront; and new costs associated with the clean elections program and tenant protections approved by voters last November.

The Charter Commission estimated it would cost $290,000 to fund clean elections, a mechanism for publicly financing eligible candidates in municipal races, and city staff is requesting four new positions at a cost of $310,000 to help maintain the tenant protections that was accepted in the Question C referendum, to be implemented.

O’Connell told council the estimated impact of revenue losses and new expenses would be $23 million, although nothing has been finalized and there are still many unknowns. “Hopefully this number will be significantly lower,” he said.

Monday’s workshop was not all bad news. O’Connell said the city could also see higher interest rates on investments this year and that hotel costs for the homeless and asylum seekers decrease.

In addition, O’Connell said, the city is optimistic about legislative proposals this year, including some focused on general assistance reform, that could benefit Portland. Savings opportunities could total at least $2 million, he said.

The budget year begins July 1, and the city council and city manager will review department submissions and come up with final budget figures over the next few months. The city manager is expected to present her proposed budget to council in April with final council approval in May.

City council members and Mayor Kate Snyder said Monday night that they want to stabilize the city budget as federal COVID-19 funds dwindle while trying to address ongoing staffing issues. The city has about 270 vacancies out of a staff of 1,400.

“I look at this upcoming budget and probably for several years now as rebuilding budgets – rebuilding staff capacity and morale so that we get the things done that we want to get done,” Snyder said. “I feel that we are caught between wanting to be aspirational and needing to be prudent and realistic. It’s quite a difficult place, but it’s a balance we’ll be working towards together in the coming months.”

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