By Robert McCullough

Two months ago I wrote a guest column in The Oregonian questioning the sudden jolt in the proposed street fee shifting road maintenance costs from large road and fuel users to Portland’s middle class residents.  The column initiated a two-month-long battle to see the calculations behind the street fee.  Finally, after litigation and the threat of a contempt of court citation, the city of Portland finally provided the calculation on Dec. 23.

Oregon’s open-documents laws provide that all existing documents are public.  The long delay raises the question, “Were the calculations so difficult to see because of embarrassment over their shoddy workmanship or do they reveal a shifty backroom deal?”  The answer, thankfully, tends to support “shoddy” rather than “shifty.”  This is good news.  Bad calculations can be fixed, once identified.  Correcting bad politics is far more challenging.

Oregon road taxes have followed a simple model pioneered in Oregon almost a hundred years ago.  Fuel taxes tend to recover road maintenance costs from large road users.  The proposed tax turns this on its ear.  Large road and fuel users are capped at a low nominal charge where small road users are not.  Middle class and small business users will be paying more than major transportation companies.

A careful review of the calculations shows the answer why.  The first step in the street fee calculation is to attribute road use (aka “trips”) to different industries.  The calculation found that transportation companies used the roads at one third the rate of hospitals and hotels, and less than one half the rate of restaurants and stores.

If this sounds odd to you, you are in good company.  It flies in the face of almost all traditional studies. As usual, the devil is in the details. To make this calculation, the PBoT analyst calculated the road use of 52 different Portland transportation companies and agencies.  He then compared it to other industries and set the tax rate accordingly. There was little in the way of error checking. 

The transportation list included a tattoo parlor, a resale shop, elderly housing, residential housing and the Volunteers of America.  It missed almost all of the transportation companies and agencies except for one TriMet facility (the eastside bus maintenance facility) and two flights per month on United Airlines.
Not surprisingly, dropping the major rail, truck, and air facilities reduced the road use considerably and conferred a windfall of the major road and fuel users.  The result was that Portland’s massive transportation infrastructure have avoided almost all of the tax.

The remainder of the analysis fares no better.  The two largest Portland employers – a small colonic cleansing firm and the Multnomah Bible University Bookstore (32,307 and 25,958 employees respectively) – occupy a central role in the calculations.  Total Portland employment assumed in the study is over 2 million employees – three full time jobs for every man, woman, and child in the city.  Conservatively, the number of errors runs into the thousands.

While amusing, the muddled arithmetic comes with a considerable cost for Portland’s residents and businesses.  The complicated tax will mean that not only is the city planning to add staff to implement the income tax for residents (businesses are exempted from the business tax), but the major errors in the business fee will keep the city in litigation for years to come. The tiny colonic cleansing firm (actually just three employees) will be overcharged for its imaginary staff and its inclusion in the overcharged medical industry.

Commissioner Steve Novick has remarked that this can all be fixed after the new tax is passed.  This is not remotely correct.  Counting tattoo parlors and resale shops as trucking companies distorts the actual tax rates – not just who gets sent the bill.  But it gets worse – the city has very little data on employment, floor space, and revenues by address – critical parts determining the actual tax paid.  Clearing up this muddle for hundreds of thousands of business locations will take years and a whole new city staff to implement.

For those of you with more interest, a copy of our study is available at www.mresearch.com.

Robert McCullough, an energy economist, is president of Southeast Uplift and writes on behalf of the Southeast Uplift board.

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