Emails Show Why Metro’s Multibillion-Dollar Transportation Measure Has Drawn Lots of Opposition

The documents WW obtained shed light on three issues: what the tax actually is, how Metro exempted local governments, and how much that exemption might cost.

Unemployment in Multnomah County stands at 11%, a point higher than the state average. More layoffs are expected when the summer travel and dining season ends. Schools won't open before April, and many local businesses will see no revenue until a vaccine for COVID-19 emerges.

Yet in this dismal economic climate, Portland voters face a remarkable slate of requests for new taxes on the November ballot.

Among the money measures: a $1.2 billion Portland Public Schools bond; a $387 million Multnomah County Library measure; a $240 million Portland Parks & Recreation operating levy; and a Multnomah County preschool measure that would raise $133 million next year.

"I can't remember a time when there were so many tax measures on the ballot," says Jim Moore, professor of political science at Pacific University.

But without a doubt, the measure that has elicited the strongest response is the package of transportation investments that Metro, the regional government, just sent to voters—a $4 billion tax to fund a new light rail line to Tualatin, a new Burnside Bridge, and several highway fixes.

Some of the region's biggest private employers, including Intel and Nike, oppose the measure, as do the Portland Business Alliance and Oregon Business & Industry. (A dozen business groups asked Metro to delay the measure.)

"This level of opposition is rare," says Moore. "Big companies and the business groups usually work closely with government to determine what is doable."

The business groups either support or are neutral on the other November tax measures, but they've already hired leading political consultants from both sides of the aisle—Kevin Looper on the left and Dan Lavey on the right—and one of the state's top law firms, Harrang Long, to challenge Metro's measure.

Opponents object to the taxing mechanism, which will charge employers, both for-profit and nonprofit, up to 0.75% of payroll.

Joe Cortright, a Portland economist, says academic research is clear: Payroll taxes provide a disincentive to hiring and are borne mostly by employees.

That's a sentiment opponents of the tax have embraced.

"COVID-19 is a time when we're turning to government for a lifeline, not an anchor," says Ken Madden, owner of Madden Industrial Craftsmen, who opposes the measure. "Metro's new wage tax is exactly the wrong tax at the wrong time. It will hurt family paychecks and threaten jobs."

Prior to the pandemic, business groups were working with Metro on transportation investments—they want better freight mobility and less traffic congestion.

Business opposition only arose after COVID-19 crushed the economy. But Metro Council President Lynn Peterson firmly rejected requests from businesses that she delay the measure.

Her insistence on moving forward has galvanized opposition—and led to speculation that Peterson is using the transportation package to solidify her credentials as a candidate for governor in 2022.

"There's no question she's interested in running for governor," says lobbyist and KGW-TV political analyst Len Bergstein. "I'm sure she's hoping this measure will be a demonstration of that kind of leadership."

Peterson's desire to move the measure forward, even at considerable cost, was most evident in a last-minute exemption Metro included in its ballot referral July 16.

The transportation fixes, which Metro dubbed "Get Moving 2020," are aimed at improving safety, benefiting communities of color, relieving road congestion, and addressing climate change.

The biggest-ticket items are an extension of the MAX light rail line from Portland to Tualatin ($2.8 billion), Burnside Bridge replacement and transit upgrades ($970 million), and Southwest Tualatin Valley Highway safety and bus projects ($800 million), and 82nd Avenue bus and safety upgrades ($730 million).

But after its project budget was complete, Metro unveiled a hefty exemption on the day it sent the measure to voters, adding a carve-out for local government employees, with little explanation.

Emails and text messages WW obtained under a public records request show that Metro scrambled to alter the tax at the last minute and has been less than transparent about the legal rationale and fiscal impact of doing so.

A TriMet bus on North Lombard Street. (Brian Burk)

The emails WW obtained shed light on three issues: what the tax actually is, how Metro exempted local governments, and how much that exemption might cost.

One example: Metro's lawyers argued in Multnomah County Circuit Court on Aug. 23 that the taxing measure should be called a "business tax" on the ballot.

Opponents argued in their court filings that the mechanism is more accurately called a "payroll tax."

Polling shows the distinction is an important one for voters: "Payroll tax" polls worse than "business tax."

The difference is what's being taxed: A payroll tax, like the one that provides the majority of TriMet's funding, for instance, is levied as a percentage of all wages an employer pays, while a business tax is a percentage of revenues or profits.

In the emails WW obtained, Metro's own employees repeatedly refer to the agency's measure as a "payroll tax" but never as a "business tax."

Andy Shaw, Metro's government affairs director, answered WW's questions about the emails while making clear he could not discuss campaign issues because of elections law.

So why did Metro employees repeatedly refer to the measure as a "payroll tax" in internal communications prior to referral?

Shaw acknowledges they did so, and the Metro Council decided to use the term "business tax" for clarity.

"The term 'payroll tax' currently refers to two different taxes paid in this state: one paid by employers (to TriMet) and one by employees (to the state)," Shaw says. "A term that describes two different things is not precise enough."

Opponents say the explanation is simpler: The term "business tax" polls better with voters than does "payroll tax."

Shaw told WW in July that Metro decided to exempt local governments because of "limitations in state law around the ability of local governments to tax each other, which creates ambiguity" and "to protect the ability of local governments to respond to critical needs."

On July 17, records show, Julia Brim-Edwards, a Nike executive, asked Metro for that justification. "Can you send me the legal analysis that was done by Metro on the exemption for state and local governments from the employer payroll tax?" Brim-Edwards asked.

Shaw acknowledges Metro never responded to Nike's request because there is no such formal analysis.

"On the day of the referral vote without prior notice, the Metro councilors decided to exempt local governments, including Metro, from payment of this wage-based payroll tax. Contradictory reasons were given for removing local governments from this payroll tax on wages. Some councilors said there was a legal reason to exempt governments from the tax, and yet no legal analysis was provided at the public meeting to justify this exemption," says Nike spokesman Greg Rossiter.

"The lack of transparency in not sharing the analysis is unfortunate, especially since the exemption appeared to provide government entities with special treatment that was not given to other employers, including nonprofits, businesses and churches."

"The council decided to err on the side of caution on the advice of the Metro attorney," Shaw says, "to eliminate the ambiguity and provide certainty."

Opponents say they suspect the exemption was granted to blunt resistance from local governments and public employee unions. (It's notable that local governments pay TriMet's payroll tax.)

Metro has been similarly opaque about the impact of exempting local governments—which Shaw told WW on July 21 could be "as low as 5%."
Emails make it clear Metro did not really know the cost when it added the exemption.

As Metro scrambled to quantify the cost of letting local governments off the hook in the days before referral, emails show Metro chief financial officer Brian Kennedy asked the consulting firm ECONorthwest for the cost of exempting local governments: "A reasonable assumption would be that [about] 11% of the local and private total would come from local governments," came the answer.

Later that day, Shaw asked Kennedy for a number. "We think the range is 7% to 15% of total revenue," Kennedy replied.

Shaw now says he wishes he'd provided a range: "In hindsight, it would have been better to have expressed the revenue impact as a range of 5% to 10% to better express the impact."

Opponents note that Metro has good reason to minimize the impact of the giveaway to local government employers—to mitigate opposition from private employers who will pay the tax.

"When you look at all the measures coming in November," Bergstein says, "transportation is the one on which COVID-19 has the biggest impact. It's hard to believe voters will approve them all—something's got to give."

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