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Tuesday, September 20, 2005

"They run you out"

I was having a nice conversation with a young entrepreneur a week or two ago. A really bright guy. He told me about his startup company, which has got a great product line, big ideas, and bright prospects. Toward the end of the conversation, I mentioned that I was a blogger, and told him I'd be interested if he ever had any thoughts about what it's like to be a small business in Portland (where his shop is currently based).

I didn't have to wait for a response. "Oh, we're getting out of Multnomah County," he said, matter-of-factly. "It's in our three-year business plan to leave before we get to be profitable. Our investors are expecting it. We can't stay here -- they run you out."

I think it's time that we Portlanders start figuring out a plan to fix this one. Waiting for city government to do it is a joke. They're too busy playing Monopoly with the Usual Real Estate Welfare Suspects, and the average Joe isn't invited.

Comments (33)

Jack, Jack, Jack-

Portland did not 'run' this businessman out of town. he was lured by the $10 minimum corporate tax (dangling carrot) held by the state.

if you're going to bust stones, start in salem.

With the existance of the private automobile, people willing to commute long distances to work, the laughably tiny taxes on business, and the Republicans making certain that those taxes will never be reinstated, there's really no upside to businesses staying in Multnomah County. I think that's why the city is doing all these stupid luxury housing projects; they may not pay (ahem) jack for property taxes, but a stack of 120 apartments paying $900/apartment is a much better bet than an old business site that can't be zoned or taxed.

(I am, of course, making wild guesses about corporate taxation in Multnomah County. But looking at the hideous fees businesses have to pay for almost any sort of civic improvements in the city of Portland, I'd have to guess that tax revenues from businesses here give a whole new meaning to the word 'pathetic')

Ummmmmmm, we own a business and I WISH we only had to pay a $10 corporate state tax. And don't even get me started about taxes on small businesses, or S corps. It is small businesses who pay the lions share of taxes and gets nothing back for it.

We started our business in Portland because we thought this was such a lovely city and we wanted to be a part of it. Then, WHAM, what a slap in the face with the the city fees, city business taxes, county tax, the I tax and state taxes were. SLAP!

Anyone who startes a business here is either crazy, ill informed or simply innocently wanted to be a part of the city only to learn the hard way that the city leadership feels business OWE THEM for the honor of doing business in this town.

The day we can move or sell our business we will. And I assure you, there is no ten dollar carrot out there for people who are earning an income from their business. We're getting hosed.

OK, I feel better now.


From what I read, it appeared that the guy's three-year business plan calls for exiting Multnomah County. Of course, that means exiting Portland, but I think that the combined influence of city/county in terms of their active disenfranchisement of business is the issue here.

I used to have a small business in Portland (boutique bodyshopping; I gave it up after dealing with the State of California's tax service for a year) and I must say that the local taxes never really bothered me compared to the torrent of tax mailings I had to send to the federal and California governments. Of course I did it seven years ago, before the economy and city revenues went belly-up; my experience with the new starving Multnomah County is restricted to just being a homeowner.

I think a lot more people might be sympathetic to businesses if they would propose something that would limit their taxes while at the same time (a) doing something about the short-term loss of revenue, and (b) not relying on overly optimistic projections of increased business activity.

That is, businesses take it as the gospel that if we cut their taxes, revenue will go up because there will be more business activity to tax, even at a lower rate. It's trickle-down economics 101. But, what happens if there is NOT any increase in economic activity? As I see it, the city/county is left holding the bag.

Additionally, in the short term, any cut in business taxes would yield an immediate decline in city/county revenue. So what's the proposal for dealing with that? If they haven't looked, there's not a lot of fat out there.

I'm all for cutting the business tax, but not if it means a corresponding cut to the police, fire, parks, education, and mental health budgets, all of which are already teetering on the brink.

Small businesses don't pay the $10 minimum corporate state tax. They pay plenty. I know, because we pay them. But our city of Portland/Mult Co tax takes 25% of our net income. The tax hits hardest the types of small, creative businesses (like ours) that the city says it wants to attract. As I've stated before, the owners compensation component of the city's business tax hits hardest small, closely held professional companies. Software firms, accounting firms, law firms, insurance agencies. These hard-hit companies are for the most part non-polluting, small firms that provide high wage jobs. The city's business tax brings in forty million a year... a mere ten percent of the general fund and a tiny sliver of the entire budget. Until they figure a way to spread it more equitably companies that can leave will leave.

Until they figure a way to spread it more equitably

Is anybody even working on it down there?

Actually, Sam Adams knows the scope of the problem and is working on it. His problem is getting a total of three votes. His previous reform proposal would have reduced our liability by 75%. He was gunned down by Mayor Potter, Commissioner Sten and Commissioner Leonard. He's taken it back to the drawing board.

No business has to locate (or stay) in Multnomah County or the City of Portland. If the business community believes that the terms of doing business are better in Washington County, Oregon, or Clark County, Washington, then they'll set up shop there, or move there. It is a mistake to frame the issue as whether a "cut" in business taxes in Multnomah County will result in a "reduction" in governmental revenue, because that formulation is based on the incorrect assumption that there's a base of business that Multnomah County is somehow entitled to. Businesses and business people are leaving. The county and city will try to make up the lost revenue by raising taxes and fees on the businesses and business people who remain, making it more likely that they will leave as well. You'll be left with a business community of hospitals and Starbucks shops.

But we'll have an aerial tram running between them [rim shot]!

It seems that the powers-that-be want to turn portland into an inside out city. Soon, everyone will live in the city and work in the burbs. It might even work if Portland keeps a school or two open.

The city of Portland does nickle and dime businesses especially if you are trying to grow inside Portland. The biggest complaint I hear repeatedly isn't taxes but the notoriously labeled "fees" for everthing needed to be productive and the various regulators you must deal with in Portland. In fact I remember a CPA asking Congressman Blumanuer about all his customers exiting the city of Portland (most for Clark County). Earl responded that 'Portland has low taxes compared to other cities!' - the CPA responds 'not if you re-label fees as taxes.'

Traffic Impact Fees, Permits, Inspection Fees, Sign Permit Fees, Business License Fees, and a whole host of other fees that aren't as expensive or aren't required outside of Portland are the issue. Compound this with the fact that Portland can't seem to prioritize how it spends money while schools go underfunded and crime goes unfought.

I work in outside sales with a territory throughout Portland with several hundred small businesses as customers. The biggest complaint I hear consistently from business people who are politically liberal is millions are available for a PDC conference room in an unrentable building, millions are available to pursue PGE, millions are available to build unwanted lightrail, and millions are available to subsidize housing for millionaires.

The guy they charged $60,000 to move his pizza parlor across the street says it all.

The guy they charged $60,000 to move his pizza parlor across the street says it all.

The guy is Carl Sandstrom, Jack, and his pizza parlor is 'It's a Beautiful Pizza." The street is SE Belmont. I didn't set the charge, but I'm the guy who collects the money. I'm also the guy who helped him appeal this to Council.

It wasn't $60,000, originally, more like $30,000...and the then Commissioner of Transportation Francesconi cut the SDC charges for small business after Carl's appeal, so it dropped to even less.

The problem is that Carl BOUGHT the building across the street, so this was treated as something "new." And so with a "transportation impact." From a common sense perspective this is absurd.

Before Carl transformed the place --and transform it he DID and they have GREAT pizza and good micro-brews-- it was a dry-cleaner. Y'know, people coming and going, picking up and dropping off stuff. Not like neighbors walking to a local pizza joint.

New business SHOULD pay for their impact on infrastructure. That is not a bad principle. What we have, though, is illogic in how that is determined...and small business suffers for it. I try to eat there regularly, not becaause I knew Carl before all this --I didn't-- but it helps me sleep at night. And the pizza is really good. Try the Jerry Garcia sometime.

I know the place quite well. I ate at the old location many times when I lived in Buckman.

It shouldn't cost $30,000 or 30 cents to move your business across the street. And as far as "New business SHOULD pay for their impact on infrastructure," that's just another way of saying, "Private enterprise, stay away."

Moreover, that supposed "rule" doesn't seem to apply to new condo owners, luxury apartment dwellers, the convention hotel, and all the other Portland bullcr*p. If you know the right people, you can pound the infrastructure, for free.

I know the place quite well. I ate at the old location many times when I lived in Buckman.

Carl should get an award for neighborhood improvement, not an SDC charge. As for impact fees, everyone should pay their fair share. That's not anti-business, that's a way to help make an environment that's good for business. But, I agree, that means no special breaks for anyone. Period.

"It sounds like a noble idea," said Carl Sandstrom, owner of It's a Beautiful Pizza on Southeast Belmont Street. Sandstrom was featured in the Tribune last summer after he was asked to pay $36,000 in transportation development charges to move his neighborhood pizza parlor across the street.

The Trib had it as $36,000.

Do other localities charge fees for "infrastructure impact"? If they don't, how is Portland ever going to compete with them? I'm weary of being right in principle but going broke in practice.

My, but this irony is delicious.

Systems development charges, or SDCs, have grown in this state (Portland's are middle of the road, compared to other metro cities) in large part owing to the philosophy that growth should pay its own way.

The other way of paying for infrastructure is for the government to front the costs, and then recup it from property taxes or user fees.

Respectfully, Jack, since I know you have a first class intellect: how do you reconcile a position that is less than welcoming toward growth with your criticism of the policy that development pay its freight?

Moving a business into an existing empty storefront is not "development," and it arguably isn't even "growth." Those are the charges that I find objectionable. I'd like to bring back the 30,000 jobs that have left Portland in recent years, and put the workers in the existing housing stock or something comparable. Portland bought to be competitive in trying to achieve those goals.

I also draw a line between businesses, which tend to create jobs, and luxury retiree housing, which, once built, does not.

If that empty storefront doesn't have connections for infrastructure, then the growth-pays-for-itself argument suggests that the impact should be borne by the new use.

Granted, the existing use should be transferrable, and if it wasn't in the case of the pizza guy, duh. Big surpise, new SDC policies need tweaking before they get it right. My recollection is that Franscesconi finally figured out a way to solve that one, as the obvious answer eventually dawned on him: give the dude transfer rights, even if he didn't own the original space (which I think was the rub) or the new space, and was just a tenant.

But none of the technical stuff, even if you get it right, has much bearing on the underlying policy. Be that as it may, that doesn't mean the public discussion appreciates these nuances. Too many people are in the business of making a buck off of portraying the city in a negative light to actually view the situation objectively.

If we really wanted to help small business, we'd front the infratructure costs and take the gamble that they'd get repaid. But you have to realize that such a posture runs afoul of the inertial stuff that puts the burden on growth.

I also draw a line between businesses, which tend to create jobs, and luxury retiree housing, which, once built, does not.

Parks System Development Charges, on the other hand, are charged only on residential development. (Though there are exceptions for 'affordable housing' which raises issues of equity.)

Back to Carl's "It's a Beautiful Pizza," the irony is that moving his business across the street because he bought the building did not add traffic impact. If anything, it represented a reduction from the heavy traffic of the previous dry cleaner.

The other big issue: how those transportation SDC revenues get spent. They don't stay in the nieghborhood but provide for new capacity elsewhere...like paying for streets and sidewalks in areas like SOWA.

The whole system needs rethinking and an overhaul.

Here's some more silly irony. Our business is medical related and clients are scheduled every 30 minutes. Our traffice impact is very low. The space we are in was previously a pizza parlor with lots of drive in business. We could logically prove that our business would impact the street LESS than the prior business, but we had the pleasure of paying for an impact study. Call it a study, but it's plain extortion.

Another funny: Remember, medical related business. Sick or hurt patients. They required us to put in a bike rack to encourage our clients to arrive by bike and help ease the traffic burden. When was the last time you rode a bike when you were injured or sick? Where is the logic!?? There is none.

When they built the Jiffy Lube on Sandy the city required them to put in a bike rack for their customers. I'm not sure what they charge for a bike chain greasing.

When they built the Jiffy Lube on Sandy the city required them to put in a bike rack for their customers. I'm not sure what they charge for a bike chain greasing.

Every time I take my bike to Jiffy Lube, they tell me I need to have my coolant flushed and my air filter changed! Well I'm not falling for it anymore.

It is my understanding that the Pizza fee was redused to 27,000.00 How kind.

Contrast that with Trammel Crow's Merrick luxury apartments granted a 10 year property tax abatement.
Check out the Merrick luxury at

Then check out this PDC report
Lloyd District: 184 market rate apartments (The Merrick) were supported by tax abatements. Staff was focused on identifying projects and sites that would implement the housing strategy.
Page 14 shows the tax abatement exempted $392,000 in property taxes in FY 02/03 alone. Also very kind.
Many more enlightening numbers in this report. Take a look.

Contrast that with Trammel Crow's Merrick luxury apartments granted a 10 year property tax abatement.

Here's something I've always wondered: what's going to happen to those occupancy rates when the property taxes kick in 10 years down the line?

I'm of the opinion their will not much, if any, difference in the apartments as they are built and rented to market rate with the tax abatement never really passing through to the renters.

It is much easier to afford the payments on a luxury condo costing 400 600 or $800,000.00 when you don't have to pay the property taxes.

However, there appears to be a secondary covert subsidy when they do kick in because the assessed value is often far beneath the real market value.

The underlying problem is none of the local government agency are adequaltey collecting and tracking all of the total costs, benefits and effects of all these progams and giveaways.
No business plan for the public's interest. Imagine that.

It is my understanding that the Pizza fee was redused (sic) to 27,000.00 How kind.


Carl hired an attorney, and got the original SDC transportation charge --aka "pizza fee"-- reduced to $26,900. When we assessed that, which he appealed to Council, it was subsequently reduced to $18,644. (Still $18,644 too much in my opinion.)

Just to set the record straight. This is, after all, the Blog of Record? (Sorry Kari.)

Well done Frank.

How about the Merrick?

In the FY 02/03 they were exempted $392,000 in property taxes. For nothing.

Does anyone know what the public bought, got or will get?
As far as I can tell it's nothing all on all counts.


Do you live in Portland?

If I were you I would keep pounding that Pizza Story. Even if it were a brand new store, those fees make no sense. $18,000 in fees to open a business in Buckman is crazy. If you sold slices at $2 each, the first 9,000 slices would pay the City of Portland just for the privilege of doing business in a part of town that desperately needs continuing investment. That is insanity.


Why would it matter if Steve lives in Portland?

He's been pointing out the scam of urban renewal/tax abatements and the bleeding of public money to pad the pockets of favored real estate developers (who in turn fund the campaign coffers of city council members) for several years.

I've yet to see anyone convincingly argue for the public benefit of these boondoggles.

But does he live in Portland? Oh there's an important question. If not, I suppose, there is no legitimacy to any of his concerns, and no need for any PDC officil or city coundil member to answer them?


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