Nearly a year after a voter-approved tax on large Portland retailers was implemented in order to pay for clean energy projects and jobs, some businesses continue to dispute if they should be subject to the tax.
At issue is the city’s categorization of some businesses as large retailers, a label that makes them subject to pay a 1 percent surcharge on revenue from retail sales in Portland. Under the terms of the voter-approved measure, those are businesses with at least $1 billion in annual revenue nationwide and at least $500,000 in yearly Portland sales.
Voters approved the initiative in November 2018. The tax went into effect January 1. Utilities, credit unions and co-ops are exempt, as are the sales of health care services, most groceries, medicine and prescription drugs.
Some businesses that fall outside of the exemption rules contend they are not large retailers, either. In recent months, representatives of construction and waste management companies have contacted the city regarding the matter.
The Portland Business Alliance said it’s been advocating since last fall for the city to implement a more narrow definition of which types of businesses are categorized as large retailers and for the definition to be more in line “with the precise statements of the measure’s authors.”
“We continue to work with advocates and City Hall to align the clean energy surcharge with what voters were told it would be,” Andrew Hoan, the group’s president and CEO, said in a statement. “These conversations are ongoing, and we hope to conclude this work with an outcome that does not competitively disadvantage Portland businesses, while also supporting the goals of the fund.”
Amy Lewin, a Portland Business Alliance spokesperson, declined to specify what types of businesses the group is seeking to have excluded from the tax.
The city estimates the surcharge could generate $54 million to $71 million a year. The proceeds will be deposited into the Portland Clean Energy Community Benefits Fund and distributed as grants to nonprofit groups. The first round of grant funding — $7 million —is estimated to begin in summer 2020. A nine-person committee of community members, five of whom were appointed by the Portland City Council on Sept. 25, will be in charge of recommending which projects get funded.
The city said it can’t provide a list of companies required to pay the tax or of which ones have paid so far, saying whether tax returns have been filed or how much in sales they reflect is protected financial information. He said the city estimates 500 to 1,000 companies are subject to the surcharge and the city has collected about $11 million thus far.
Tim Becker, a Mayor’s Office spokesperson, said he would not comment on the business alliance’s assertions because “the development of the initiative remains in process.”
Dan Drinkward, vice president of Portland-based Hoffman Construction, said he and other firms have been trying for months to get the city to reconsider their companies as being subject to the tax. Their stance is the city shouldn’t categorize construction companies that fit the revenue criteria as large retailers.
The industry standard for construction contractor contracts call for the client to add the 1 percent tax to its total costs, Drinkward said. OHSU, for example, has told Hoffman and other firms to add the 1 percent tax to their project budget costs.
“It would increase the costs of our projects and force schools, hospitals and other clients to either increase budgets or reduce the scope,” Drinkward said.
He said he believes it could impact future construction in Portland.
“Small-scale development will continue to be done by smaller contractors, but I think the surcharge would be a significant factor on whether large-scale development happens here or somewhere else.”
The Portland Haulers Association, which represents the city’s residential solid waste and recycling collection services, sent a memo to the Portland City Council in July asking that none of their members be categorized as large retailers.
Three of 11 residential franchisees are large publicly traded companies with at least $1 billion in sales and thus subject to the surcharge. The other eight are small family-owned local firms and aren’t. To cover the 1% tax on the three big haulers, the city raised all residential customers’ solid waste and recycling bills an average of 20 cents per month beginning in July. At this point, all 11 hauling companies collect the 20 cent monthly, haulers association president Vallerie Hill said.
Hill said the 20 cent increase may not cover all the fees owed by the three affected haulers and it’s unclear what the companies not subject to the tax are supposed to do with the extra funds they collect.
“Exemption would eliminate inequities, discrepancies and confusion for the haulers,” Hill wrote. “More importantly, it would create clarity for customers by establishing rates that reflect the cost of the service customers are receiving from curbside waste removal and recycling.”
Hill, owner of Gruetter Sanitary Service, told The Oregonian/OregonLive on Thursday that association members “are complying with the rules relating to the clean energy surcharge and will continue to do so unless something changes.”
Becker said the mayor’s office has given no formal response to the association’s memo.
-- Everton Bailey Jr.
ebailey@oregonian.com | 503-221-8343 |@EvertonBailey
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