Upcoming spending cuts are coming into focus for the City of Portland, with a new financial forecast predicting a $27 million gap for the budget year that begins July 1.
Most bureaus that rely on the City’s general fund will need to reduce spending by 8 percent to fill an ongoing hole of $21 million per year and stabilize finances for the long-term, according to the general fund forecast, released Tuesday by the City’s economist. Meeting this target will require the City to cut programs and staffing.
An additional $5.8 million will be needed to fill a one-time gap in the next budget, to bridge finances until property taxes rebound the following year. This shortfall can potentially be covered by unspent funds from the current budget year – achieved through current precautionary cost-saving measures as City leaders plan for financial challenges ahead.
The new forecast accounts for spending that is already committed. Additional cuts would likely be needed to offset additional spending, such as sustaining programs with expiring one-time funding, settling active labor negotiations, or investing in other priorities not already approved by the Portland City Council.
With expenses growing faster than revenue, the City has been bracing for difficult choices. In late October, Mayor Ted Wheeler asked service areas to develop concepts for cutting 5 to 8 percent of their general fund spending. Public safety bureaus are exempt.
“We have been able to get a head start in making thoughtful choices to stabilize the City’s finances for the next budget year – and for the long-term,” said Chief Financial Officer Jonas Biery, who oversees the Budget & Finance Service Area. “Now, we have more detailed targets.”
The biggest driver in the City’s forecast: historically low increases in assessed property values, primarily due to high vacancy rates and lower demand for office space in downtown Portland. Downtown property values have plummeted from pre-pandemic heights, suppressing tax revenues.
Another major revenue source, Portland’s 2.6 percent business license tax, took a dip last year due to volatility as the economy recovered from the pandemic. This funding source is expected to rebound this year.
But revenue isn’t growing fast enough to keep up with the City’s expenses – which are increasing due to inflation, rising healthcare costs, critical infrastructure projects and legal obligations.
Over the past few months, City leaders have started identifying concepts to cut spending. They will zero in on proposals during January and release preliminary budget recommendations and options for community feedback at the end of February.
This year’s budget development coincides with Portland’s transition to a new form of government. Incoming Mayor Keith Wilson will formally propose a budget at the beginning of May for consideration and adoption by the expanded, 12-member city council.
FY 2025-26 General Fund & Portland Clean Energy Fund Forecast 572.88 KB