$40M error: Metro bungles math for new income tax

Civic Affairs

Earnest drafting of the Metro proposal began in January

PORTLAND, Ore. (Portland Tribune) — In a stunning reversal, Metro Council President Lynn Peterson announced late Tuesday evening the regional government had for day been relying on the wrong revenue numbers for a proposed income tax.

It was a $40 million error.

“A miscommunication led to an inaccurate estimate of what a regional income tax on high earners would raise,” Peterson said in a statement sent to the Tribune. “I want to apologize to the coalition for the confusion and look forward to following up and getting it right.”

As it turns out, Metro’s looming 1% income tax on high-earners is projected to only raise $135 million — not the $175 million promised during the Tuesday, February 18 work session. The mistake wasn’t just a slip of the tongue: the incorrect number was printed in several official documents distributed at the meeting.

But the bad math was apparently first noticed by Willamette Week, prompting Peterson to send a correction to the weekly paper. That statement has been obtained by the Tribune.

“The goal remains the same: To provide supportive housing services for every person experiencing chronic homelessness in our region, and help as many people as possible who are on the brink of homelessness around greater Portland,” the statement continues. “Metro will continue to work with our partners because it is so important.”

Most money measures take more than a year to craft, but earnest drafting of the Metro proposal began in January.

The editorial boards of both the Oregonian and the Pamplin Media Group have urged Metro to slow down on one measure, noting that even in a crisis, it’s important to get things right.

Haste in government can lead to embarrassing errors, like the typo in a recent Columbia County 9-1-1 levy that caused the measure to assess value at 1/100th of the intended rate.

The regional government now predicts it can create supportive housing for virtually everyone who is chronically homeless if voters approve a new 1% income tax on high-earners this May.

At the same time, the Metro money measure is getting a haircut — with the expected revenue now estimated at $175 million a year, about 30% less than the $250 million originally projected.

These are “large estimations, but widely accepted,” said Jes Larson, Metro’s housing policy manager. “The opportunity before us will have an enormous impact on the community.”

Metro Council hashed out the specifics of the marginal income tax which will apply to all earned income above $125,000 for individuals and $250,000 for families at a rate of 1%, during a Feb. 18 work session.

But with just two days to go until the expected decision to refer the measure to the voters, the seven-person council had little time to tweak the measure. The most notable change at the meeting was the expiration date.

Instead of requiring voters to reauthorize the tax in 10 years, the council opted for a soft sunset, with “a ten year review, with a council action to continue,” according to Council President Lynn Peterson.

“If we move forward with this program, and it’s successful, we run the risk of the region saying, ‘the problem has been solved,'” noted Councilor Craig Dirksen.

The tax, if approved, would also apply to nonresidents who earn their income within the tri-county region governed by Metro. An 18-person oversight committee will monitor the fund and issue annual reports, with all members appointed by the Metro Council. Five percent of the proceeds will be dedicated to administration after revenue collection begins in 2021.

Metro expects to distribute the revenue to local governments based on population. That means about 49% of the money would flow to Multnomah County, 34% to Washington County and 18% to Clackamas County.

“There’s real need in my district as well. There’s folks camping in parks in Oregon City that have no place to go in our current system,” said Councilor Christine Lewis, who represents much of Clackamas County.

According to a meeting memo, Metro anticipates spending $10,000 on average for each household’s supportive housing, plus another $10,000 in average rental assistance per household.

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