Three Portland city councilors have proposed a tax increase on retailers to help fill gaps in the city’s $93 million budget gap.
On Thursday, councilors Steve Novick, Jamie Dunphy and Angelita Morillo, proposed increasing the Portland Clean Energy Fund’s 1% tax on large retailers to 1.33% and directing those additional funds to the general fund.
In late February, City Administrator Michael Jordan released recommendations about how to balance the funding gap. He proposed significant cuts to the transportation bureau, to park services and summer programs and the elimination of nearly 300 jobs across all city bureaus. The city government is facing significant financial shortfalls due to factors including inflation, expiring pandemic-era federal funds and spending tied to public labor union contracts.
FILE - Portland City Administrator Michael Jordan, second from right, at a City Council meeting, Feb. 5, 2025, Portland, Ore. Jordan outlined the city's budget situation in a meeting Feb. 28, 2025.
Anna Lueck for OPB
Jordan also proposed moving about $19 million of the Clean Energy Fund’s generated interest to the city’s general fund to fill some of Portland’s gaps. Generated interest refers to revenue PCEF receives simply by earning interest on its vast savings account.
But Novick said in a statement Thursday that councilors heard from hundreds of Portlanders that those cuts to city programs are “unacceptable”.
“And yet, to balance the budget, the Mayor and Council would have to cut much more,” his statement said. “Since the vast majority of the General Fund goes to police, fire, parks and homeless services, it seems unavoidable that those services are at risk. Faced with those choices, we feel it is incumbent on us to put an alternative on the table for consideration.”
The proposed increase on city retail sales could generate more than $60 million a year for the general fund.
Related: Portland’s climate action fund could double spending over the next five years
The three city councilors who pitched this additional retail sales tax also propose exempting small businesses that generate $100,000 in sales or less per year. Presently, only businesses with less than $50,000 in retail sales per year within city limits are exempt from the tax.
“Raising the small business license fee exemption to $100,000 gives real relief to the independent contractors, startups, and family-run shops that keep Portland’s economy moving,” Dunphy said in a statement. “This change is about fairness — and it’s funded in a way that protects the parks, public safety, and essential services that Portlanders count on every day. We’re making sure big corporations pay their fair share so our city can keep working for everyone.”
FILE - PDX Community Solar is a more than 2,200 panel project, located in Northeast Portland, aimed at helping lower helping energy bills for low-income qualified Cully neighborhood residents. The PDX project is funded through a grant of more than $4 million awarded to Verde from the Portland Clean Energy Fund.
Monica Samayoa / OPB
According to the proposal, the additional 0.33% tax on sales would be directed to the general fund, “leaving Portland’s investment in PCEF intact.”
Novick said the tax increase was pitched to give city leaders an option to consider, in advance of Mayor Keith Wilson’s budget proposal on May 7.
“If Mayor Wilson presents a balanced budget without unacceptable cuts to public services, I’ll be happy to pull this measure,” Novick said. “But if not, then I believe adding new revenue should be a part of the conversation.”
Deputy City Administrator Donnie Oliveira said PCEF remains committed to the Climate Investment Plan and “any proposed changes to the existing revenue structure will be deliberated by City Council.
To increase the PCEF tax rate and redirect those additional dollars to the general fund would require a majority vote from city council.
Related: Portland city commissioner proposes $540M of climate action funds toward city bureaus
A history of diverting PCEF funds
This is not the first time the fund has been eyed by city councilors to backfill the general fund.
The Portland Clean Energy Fund is a first of its kind justice and climate program aimed at reducing greenhouse gas emissions while advancing racial and social justice, and was created by voters.
It’s funded through a 1% tax on the retail sales of large companies in the city. Since its inception in 2019, revenue has repeatedly exceeded forecasts. Initial estimates calculated the fund would raise $40 million to $60 million each year. The tax surcharge has instead generated hundreds of million more than anticipated — $1.5 billion more.
The money is used to fund a range of climate-related projects, including energy-efficient retrofits, renewable energy development, and job training in the construction and energy fields.
Before the city transitioned to a new form of government this January, the PCEF windfall prompted former city councilors and the former mayor to bring forth several proposals to filter some of that money toward direly underfunded city bureau budgets.
That included a proposal from former Commissioner Carmen Rubio, which revamped the climate action fund and created a five-year Climate Investment Plan which included $540 million to city bureaus. That proposal passed and those city bureaus are now receiving more than $740 million over the next five years.
A screen shot of the Portland Clean Energy Fund's updated spending March 2025.
The Portland Clean Energy Fund / The Portland Clean Energy Fund
Last July, former Portland Mayor Ted Wheeler transferred $7.6 million from the PCEF’s generated interest to the general fund. It was the first time the city diverted money from the fund for programs not directly tied to climate response.
That same proposal to backfill the general fund with PCEF interest is up again — this time nearly $19 million of the fund’s generated interest could be up for grabs.
Related: Portland to transfer more than $7 million from city’s climate action fund to general budget
Awards to city projects tied to climate goals
During last week’s Climate, Resilience, and Land Use Committee, co-chaired by Novick and Morillo, members heard from city and PCEF staff about how much the climate fund has generated, what has been allocated and what has been spent.
In December, PCEF awarded $300 million to eight large-scale projects, to be paid over the next five years. PCEF staff said they received more than $2.4 billion worth of proposals. Within that specific funding allocation, the Portland Bureau of Planning and Sustainability is set to receive $20 million, the Portland Bureau of Transportation will receive $20.5 million and $41 million is set to go to the Portland Bureau of Fleet and Facilities.
Committee member Councilor Candace Avalos said she was deeply concerned about how much money is being diverted to city bureaus rather than local community organizations.
FILE- Portland City Hall, Nov. 15, 2024.
Kristyna Wentz-Graff / OPB
Avalos said city bureaus are “historically underinvesting in front-line communities.”
Those “front-line communities” that PCEF aims to serve include low-income communities, communities of color, and other groups especially hard-hit by climate change.
“The city needs to continue to hold itself accountable to how it is making those decisions and that it has community in mind,” Avalos said during the meeting.
She called for more accountability about how exactly PCEF’s city bureau money is being spent and said city leaders should ensure that spending is connected back to “the original mission in ensuring that communities are the focal voice.”
The Climate, Resilience and Land Use Committee plans to discuss the proposal to increase the PCEF tax to assist with city budget needs during an April 10 meeting.
Related: Portland’s climate action fund awards $300 million to large-scale projects
PCEF promises when running for office
During their campaigns for City Council seats, Morillo, Novick and Dunphy were asked by OPB and the Oregonian/OregonLive.com if they supported putting the Portland Clean Energy Fund back on the ballot and what, if any changes would they support.
Each candidate said they did not support putting the tax back in front of voters and they suggested changes, including using it to assist with the general fund.
Dunphy’s candidate questionnaire said: “I believe that it should be protected. We should use PCEF to reframe how we spend general fund dollars to maximize the benefits of this program. It cannot be treated as a slush fund or a general purpose sales tax.”
Morillo’s said: “We need to implement the will of the voters as they originally intended. I will only support changes to the fund where the money will continue to be used to address the effects of climate change that primarily affect communities of color.”
Novick answered: “PCEF needs to start rigorously evaluating which projects most effectively reduce emissions and help low-income people. Transportation is the biggest source of emissions and a big expense for low-income people, so projects like 82d Avenue Bus Rapid Transit should be a priority.”