Entrepreneurial Investment Strategy

Sam,

You continue to revive my hope in politicians. The fact that you follow through on your campaign promises even after you have been rebuffed -- thank you.

Shelley

I like the fact that this is focused on helping small businesses.

Some Comments:
Before you get too smug, look where we rank on these:
Cost of living:.....145 (200 is worst -> San Francisco CA)
Crime Rate:.........150 (200 is worst -> Tucson AZ)......Too much tax abatement?
Income growth:...181 (200 is worst -> Flint MI)............. Not good for the future of a new business.
Job Growth:........115 (200 is worst -> San Jose CA)
Link for the chart: http://www.forbes.com/lists/2006/1/2400.html

About the proposal:
1. Increase owner’s compensation deduction to $125,000
Good.

2. Raise Gross Receipts Exemption to $50,000
Why so low? Why not at least the same as the owner’s deduction or twice that? (I assume you mean the threshold that triggers filing)

3. Institute a progressive minimum tax based on:
a. Employees
b. Gross Revenues in Portland OR
c. Combination of both options
Instead of this, why not some sort of minimum tax for large, profitable companies that earn profits in Portland. PGE under Enron comes to mind.

4. Establish $2 million economic development fund
– Fund would target business retention, recruitment and expansion
activities outside of the Urban Renewal Districts.
Spend the 2 mil figuring out how to reduce business hassles such as:
1. Can’t advertize you business on the side of your building.
2. “A” board registration & tax - just set rules and issue citations.
3. Sign regulations that apply to signs promoting your business?
4. Any kind of required report is a hassle and takes time from running the business.
5. Lobbying state to do same.

Here’s how a city the planners keep badmouthing, compares to Portland:
#15 Atlanta GA Population: 4,806,700
.............................................. RANK.......Portland RANK
Colleges1...............................9 .............12 (worse)
Cost of Doing Business2......37.............8 (better)
Cost Of Living3..................119 .........145 (worse)
Crime Rate4........................128..........150 (worse)
Culture & Leisure5...............42 ............43 (tie)
Educational Attainment6......35............49 (worse)
Income Growth*.................191...........181 (better, both bad)
Job Growth*.......................104...........115 (worse)
Overall................................ 15..............20

Thanks
JK

Sam's proposal is an absolute requirement for the city and important first step in getting the product of our intellectual assets to stay in the city. Over the last two decades, Portland has become a “brain colony” of Washington, California and the nation at-large. We produce the goods and services but the profits go out of city and out of state (with the exception of a few brands). Witness the number of patents invented here but that go out of state by assignment. Look at this trend that compares Oregon patents issued to patents assigned compiled by Swider Medeiros Haver at www.smhllaw.com/innovation.htm (thanks to our Portland State Intern Sewan Kim). This is one indicator of the value of businesses located in city. There are other indicators.

The trend of headquarters moving out of city and state hits small businesses the hardest – big firms hire small firms to help them, capital is created to start, maintain and grow businesses. Look for evidence of this in the fact that service providers, such as law firms, must look to merger partners to survive. See http://portland.bizjournals.com/portland/stories/2006/10/16/story3.html for the latest merger mania with law firms. Mergers may mean more revenue in the short term. But the big profits, employment and tax revenue goes to location of the headquarters. Service firms may be a leading indicator as no clients equals no businesses to service – the same is true for caterers, builders, printers and custodians. And what is on the horizon if we do nothing or wait for a perfect solution:

"The baby-boomers are approaching retirement. Women's rush into the workplace has at least slowed, and may have reversed. Teenagers are working less. And hostility to immigration, another source of labour, is rising: witness the barriers along the Rio Grande."
-- Economist, October 28, 2006 p. 17.

The explosive productivity growth from 1990 to today is declining (there are many factors including the normalization of information technologies into business). America’s three percent economic growth annually is slowing down – over the long haul and Portland must move swiftly to stem this tide locally as best it can.

As a result of either a real or perceived “anti-business climate” Portland cannot stand still. Sam wants to reverse these realities and perceptions and level-headed leaders know that he is right. And the approach taken here data driven – thanks to months of number-crunching by Sam’s team – not emotional. Even the skeptic should support this reform as a long overdue change – we know what the result is of doing nothing will be – an economy killer. A strong economy is the best way to fund services that government provides. Every tax dollar must be earned in the private sector first. This is the most intelligent and viable step the Portland can take.

Martin Medeiros

Sam,

I think you are on the right track when it comes to reducing city business taxes for small businesses. I commend you for that. However, I also agree with Jim that additional taxes need to be collected from large and corporate businesses with the money possibly going into some kind of economic development fund.

Still, just reducing city small business fees is not an all encompassing solution to both retain businesses and reduce the costs of living in Portland, and thereby retain families that are also fleeing to the suburbs. For example: The schools, the libraries and Metro are all currently asking property taxpayers for more money. Yet the Portland City Council continues to hand out property tax abatements to developers like candy. Property tax abatement programs need to be eliminated on all but low income housing projects. All property owners, including high density and TODs need to pay their fair share for schools and city services. Property taxpayers, including those outside urban renewal districts, are also assessed to help pay off urban renewal bonds. Urban renewal districts must be allowed to expire on schedule and not be extended or expanded. Portland’s politically motivated storm water run off fee is extremely excessive. It also needs to be eliminated on all properties.

Finally, it is not just high taxes and fees that drives business out of the City. It is lack of accessibility, specifically parking. I know of two medium to large sized business that over the last decade or so got out of Portland for that very reason; not enough parking!!! Zoning codes need to be revisited and changed such that they allow for more parking, and/or require parking or more parking with development in some locations. This includes both storefront districts where no publicly owned parking lots exist, such as in Hollywood District, and with new housing developments so parked cars from these new residences do not spill over onto the streets. Regularly parked cars in front of somebody else’s house or property is becoming a concern that is growing. The solution is a design code change that requires no less than one motor vehicle parking space per residential unit. This provides a balance between residents that do not have a car and residents that require more than one parking space.

Why is it called an abatement or rebate when one just doesn't pay "as much" of their income in taxes? Doesn't make a lot of sense.

But on the note of the topic at hand, good, you should DECREASE the amount of overhead for small businesses. But don't act or talk about it like you're doing them a favor, if anything it is the other way around. You owe small business this, it's what makes this city worth something.

All the trams, streetcars, and ligth rail in the world with an environmental twist don't amount to anything without small businesses.

...and Portland is doing really badly in the small business category right now.

"Name the two medium and large sized companies that left Portland due to parking."

Look at the stores in Bridgeport that didn't decide to open or expand in Portland. Look at the companies that expanded in Beaverton, Lake Oswego and Vancouver because of easier employee access and parking instead of Portland.

Right now, downtown's biggest employers are CoP, State of Oregon and Multnomah County.

However, bravo to Mr Adams, he finally made the connection that lower business taxes may actually increases business and job growth.

Sam’s idea is the best one in years to give the Business Income Tax and License Fees long needed reform. I would like to suggest that the Mayor and Commissioners Leonard, Salzman, and Sten all give this proposal a open-minded look and see if their support cannot be seen as good for all of Portland’s citizens.

Here are some questions I would like the Mayor and Commissioners to answer when they review this proposal:

1. Are you for tax and fee fairness? If so, why do over 2,600 large businesses pay a minimum of only $100?
2. Why have the tax increases of the last 5 years to pay for schools not been evenly distributed among all Portland businesses? Don't large businesses need good schools, too?
4. Why not reform the BIT/BLF to subsidize jobs instead of corporate profit? If we can't tax profits on earnings outside Portland, why not reform the minimum fees and subsidze job creation?
3. Since 1980, the same businesses paying the minimum have not kept up with other business sectors on job creation, so why do we continue to subsidize businesses that are not creating new jobs?
5. Do you think Economic Development should have a job creation component? If so, please look at this as a way to support job creators that fall outside Tax Increment Financing Districts(PDC).

Sam, I keep hearing the term "family wage jobs" - exactly how much does that calculate out to per hour? And for what size family? Does it mean if a person is earning a certain hourly wage (family wage) that if his family gets bigger we need to increase his wages?

And yes, I really am dead serious about the above questions.

Sam,

A gross receipts tax as a possibility? No, this doesn't take into account a businesses profitability, or ability to pay, and reeks of our current payroll tax system for Trimet, FUTA, and SUTA.

I'm also curious how you calculated how many businesses would receive a reduction in BLF, when you haven't established what method exactly you will use for taxation.

I believe this method will punish companies with moderate gross sales, but low profitability.

Great proposal. I hope everyone gets on board with that! Business owners need room and encouragement to grow. This break would help immensely.

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