Return of Chucky

Portland needs to make big spending cuts. New mayor Charlie Hales is swinging the ax.

Portland City Hall is awfully quiet for a palace amid a revolution.

Since the start of the year, the place has felt like a barely solvent art gallery sold to absentee bankers. Outside the mayor's office on the third floor, the hush is so complete you can hear a single visitor approaching by the tap of shoes on the stone staircases.

There's a new mayor behind the oak doors, but Charlie Hales is seen so rarely in these corridors, it's as if he has yet to arrive. 

It's an arresting contrast to the final months of former Mayor Sam Adams, when Adams dashed between city commissioners' offices with his latest, frenetic idea, and City Hall staffers convened impromptu strategy sessions in the second-floor men's room to trade information about the 11th-hour deals Adams might be hammering out. 

"Things got crazy," says City Commissioner Amanda Fritz. "There's a feeling of anticipation now. A lot of people are waiting for Charlie.” 

But behind the closed doors of the mayor's office, Hales and his staff have been hosting meetings that start at dawn and often extend deep into the evenings. 

The silver-haired Hales—a city commissioner from 1993 to 2002—campaigned as an operator who knew the place blind. He pledged a back-to-basics agenda that would trim the fat from Portland's government. 

But Hales, 57, has returned to a city in financial distress like he never saw in his last go-round. The City of Portland enters its annual budgeting process in a $25 million hole—and has, to Hales' shock, only $75,000 left to cushion the general fund for the next five months. (See sidebar and graphic on page 16.)

Hales has been forced into a crash course in the inner mechanism of Portland government. 

On Feb. 4, he will take control for three months of all 27 city bureaus that handle the daily grind of the city, everything from extinguishing fires to pruning park bushes. Hales is demanding each bureau put forward ways to cut 10 percent off the top.

Hales has already cut a program he and Adams both supported: $395,000 for the nonprofit Worksystems Inc. to fund summer teen internships and job-training programs.

"No time like the present to start digging out of this hole," Hales says. "This is a pain that's going to continue."

Under Adams, City Hall became notorious as a place that would find a few thousand dollars for any project, even if it wasn't something the city was strictly responsible to fund.

In just 30 days, Hales has made it clear he is targeting more than just the most flagrant expenses. No program is safe.

Charlie Hales' chief of staff, Gail Shibley, voted for Eileen Brady.

She supported businesswoman Brady in the mayoral primary last May, and shifted to Hales only in the November general election. 

But when Hales interviewed her, they discovered a shared enthusiasm: cutting overhead costs and protecting basic needs. 

At the time, Shibley, a former legislator, was overseeing the Oregon Health Authority's environmental public health office—and growing frustrated that the state bureaucracy spent so much on administration and facilities that it couldn't hire new inspectors of X-rays and radioactive materials. 

"It's to protect us from radiation—hello!" Shibley says. "Gloria Steinem had this saying many years ago: If you want to know somebody's values, don't listen to what they say. Look at their checkbook."

But Hales and Shibley were both startled by the city's financial woes. He now believes a $25 million budget gap is a best-case scenario—things could get worse fast. 

"Maybe it's a $40 million hole," he says.

Shibley slashed costs immediately: cutting by nearly half Adams' 25-member staff. The smaller staff saves the city $600,000 a year in salaries.

Adams led a team of young wonks, each with an assigned area of specialty—all the way down to a "youth strategies policy coordinator" and a "new media manager."

Hales' team has fewer people, but with much longer résumés—and unlike Adams' staffers, they can buy drinks without getting carded. 

Shibley, 54, was Oregon's first openly lesbian state representative, and a one-time City Council candidate. Public safety policy director Baruti Artharee, 60, was state housing director and second in command at the Portland Development Commission. Policy director Ed McNamara, also 60, developed nonprofit housing for 30 years. 

Even the mayor's spokesman has a plush CV: Dana Haynes, 52, is a former journalist who writes thriller novels about plane-crash investigators. His first book, 2010's Crashers, opens with a vivid and detailed depiction of the charred wreckage of a commercial jetliner that falls out of the sky near Salem.

City Hall insiders say Hales' pared-down office won't be able to handle the load of managing 27 bureaus, even for three months. One longtime activist made a bet with Hales' staff that the ranks will swell by the end of the year.

"Fact of the matter is, somebody's got to do the work," Fritz says. "And I think he's going to find that out."

Josh Alpert has his own idea for the rows of empty cubicles that take up the center of Hales' office, like a police squad room abandoned for a big case: "I thought, maybe bocce."

Alpert, one of Hales' four policy managers, is the most visible mayoral staffer in City Hall. Some of Hales' staff won't start their jobs until February—so Alpert has been tasked with meeting dozens of city bureau staffs.

"It's been like going to college," he says, "but on crack."

Alpert, a skinny, gray-bearded 40-year-old who arrived at City Hall from the Trust for Public Land, first worked for Hales at the end of his last City Council turn. Alpert's new assignment: to learn what each bureau does in the wake of Hales' edict that each bureau must identify its core 90 percent of services—and prepare to lose the rest to budget cuts.

"That's going to be the name of the game," Alpert says. "Getting our fiscal house back in shape will allow us to go to the public with a straight face and say, 'We did it the right way.'"

By all accounts, the task of curbing city expenses has energized Hales. 

He arrives at City Hall at 7 am and leaves each night with a stack of bureau budgets in tow. During his commissioner days, he and his staff often took lunches at the nearby Lotus Cardroom & Cafe. In the past month, no one in his office can recall seeing him go out for lunch—he brings pad Thai or a wrap from nearby food carts to eat during meetings.

"In the 12 years that I've known him, I have never seen him happier," Alpert says. "He is just radiant. We're slashing budgets, and feeling good about it. I don't mean that to be flip. It's already been painful."

Adams had either been a city staffer, commissioner or mayor for the past 20 years. His colleagues can hardly believe he's gone: At her reaffirmation ceremony Jan. 5, Fritz introduced Hales to the audience as "Mayor Sam Adams."

Others are flat-out delighted. "I just keep pinching myself that we have a new mayor," says Commissioner Dan Saltzman, who was often shut out of Adams' bargaining process.

But Adams' departure and Hales' arrival means a resetting of the power balance at City Hall. 

By taking all bureaus as his own Feb. 4 and asking his fellow commissioners to join him in looking at the entire budget, Hales risks upsetting the alliances and marked territory that powers City Hall.

In Portland's rare and exotic form of government—known in civics jargon as a "weak-mayor system"—each commissioner holds a parcel of bureaus. The assignment of coveted bureaus means status. It also balances control of the city.

So most of the real dealmaking at City Hall doesn't take place in council chambers on Wednesday mornings—that's just the public event that displays already established factions and agreements. 

Instead, decisions are reached in an improvised dance of commissioners and staffers walking across the brown-and-white checkerboard marble of the second floor to each other's offices for "drop-ins"—one-on-one meetings that can be held without a quorum. (Once three commissioners are in the same room, the meeting is public.) 

"We have a culture where if a commissioner drops in, we stop what we're doing and attend to it,” Fritz says. “Sorry, folks, but the mayor takes precedence.” 

Mayors have taken temporary control of all bureaus before—former mayors Vera Katz and Tom Potter did this when they first took office, though Adams skipped it. But never in a moment when such a large budget shortfall puts every program under the microscope.

The open question is whether the commissioners can withstand the urge to defend the bureaus they've held.

Nearly every commissioner's office has a story about former Commissioner Randy Leonard protecting his turf—the water and fire bureaus. In the past year, Leonard bristled when Saltzman questioned a $5 million purchase of two new fireboats. And several City Hall sources say Leonard told his bureau staff not to talk to Fritz's office.

"We'll see if I can raise an issue about another bureau and not be politely batted down by the commissioner in charge—umbrage expressed," Saltzman says. "Old habits die hard."

On Jan. 7, Water Bureau director David Shaff sat in the Rose Room on City Hall's third floor, listening to Portland's financial staff list the various financial crises the city faces. 

He leaned back in his swivel chair.

"We're all in the same sucky spot," Shaff said. "There's not a lot of time, and we all have to adjust to the new direction."

Shaff's position actually has been more precarious than most: He was hired by the recently departed Leonard, the Water Bureau's spending came under media scrutiny last year, and Hales gave newspapers mixed signals about whether he'd keep him.

Hales canned one bureau chief even before taking office: Portland Bureau of Transportation director Tom Miller. 

Hales now says he won't take the "opportunity for a purge" of any other bureau directors—even Shaff is safe. But he's asking them to do something almost as unpleasant: identify which of their own staff to lay off. 

"Forcing people to go to 90 percent is a hideous and painful exercise," says Commissioner Nick Fish, adding that it's the right move. "We'll see whether the spirit and the tone [Hales] set continues through the budget process."

Saltzman, a veteran of 15 city budgets, says bureaus often employ what's known as a "Washington Monument strategy": offering their grandest edifices for cuts, and expecting the City Council to back away from trimming popular programs. 

“Most general-fund bureaus will put the things they think we’re least likely to cut as their priority cuts,” Saltzman says. 

In past budgets, the Police Bureau has volunteered to end its mounted-patrol program—the officers on horseback most beloved by the public. The Water Bureau has offered to shut off the water flow on the Ira Keller and Salmon Street fountains. The Office of Management and Finance has suggested reducing the availability of its 24-hour on-call technology specialist, who can fix the 911 lines if they malfunction.

Saltzman says Hales should call these bluffs. 

"I'd just love to see the expression on their faces when the mayor says, 'OK, we're just taking those 10 percent cuts, and we’re done.’ I hope he will.” 

The first proposals released by the bureaus appear to be serious offers. 

The Parks & Recreation plan is the most detailed so far: It includes eliminating a $153,000 Dutch elm disease prevention program and stopping annual payments of more than a half-million dollars to Multnomah County's Aging & Disability Services. The Bureau of Transportation says it could trim $1.8 million in capital projects. The Office of Neighborhood Involvement is looking at reducing its graffiti-abatement team. 

Hales says he believes bureau staff will cooperate—and relieve some of the pressure from the thinned mayor's office.

“I hope they’re straight with me,” he says. 

In the reverberations of Hales' arrival, it's too early to spot any personality conflicts on the recently minted City Council. But one distinction is emerging. Saltzman and Fritz, both smarting from four years feeling shunted out of deals, are eager to begin the impending cost-cutting exercise—Saltzman, in his stone-faced way, borders on gleeful—while Fish and new Commissioner Steve Novick are more apprehensive. 

Novick is still moving into his office. He’s drinking out of a red coffee mug emblazoned “Commissioner Randy Leonard.” 

Novick has been delving into the budgets of the bureaus Leonard held. He's been far more willing to question spending—even putting a hold on a $19.4 million design contract for Washington Park reservoirs after Fritz dropped in to voice concerns.

"People are worried about the budget, obviously," Novick says. They've also let him know their frustrations—the Water Bureau's customer-service department has complained that some citizens hate the city's phone-hold music. Adams instituted the "Listen Local" program, which plays local indie rock—Loch Lomond and 3 Leg Torso have been featured—while customers are on hold. 

“I’m going to ask Mayor Hales to make me the commissioner in charge of hold music,” Novick says. “It’s way too parochial.” 

He has written an extensive list of hold songs customized to each bureau. The Water Bureau would get "Waterfalls" by TLC; the Police Bureau, "I Fought the Law."

But Novick has also taken seriously the dictate to save money. He's starting with a bare-bones staff of three, and waiting to add people until he knows what bureaus he'll oversee. In four weeks, he hasn't hired a receptionist. On Jan. 9, a week after his term started, his office's front desk was deserted. 

This caused trouble for his chief of staff, Chris Warner. “We need to know when people walk in,” Warner observed. 

Two days later, Novick dug up a small silver concierge bell and placed it on the front desk for visitors to ring.

Once in office, Hales made some budget-cutting decisions quickly. The Worksystems contracts were among the first things to go. 

Hales wasn't just targeting one of Adams' favorite programs. He was cutting a program he had repeatedly said on the campaign trail he wanted to expand—those pledges are still on Hales' campaign website. 

Shibley told Worksystems about the budget cuts Jan. 16, but Hales kept it quiet for more than a week. 

His office was worried the news would spoil a trip to President Barack Obama's inauguration for De'Ontria McFerson, a high-school intern with County Commissioner Loretta Smith's office. McFerson got the internship through Worksystems. 

"It's tough," Shibley says. "But [Worksystems] get it. It's not about them. It's not about not respecting the work that they do. It's about, 'Welcome to this budget era.'"

Heather Ficht, Worksystems' director of youth workforce initiatives, says the loss of city money means the nonprofit can't find a summer career-training program for 10th-graders, nor 100 of the 315 paid internships it offers each year.

"It means 100 kids won't have opportunities they would have—largely low-income kids of color," she says. "What are these kids going to do?"

Hales says he wants the programs restored as soon as possible. But he says they won't be the last student programs he'll cut.

He already knows which one he's dreading most.

"It's the student TriMet pass," he says, referring to the bus passes for Portland Public Schools high-school students that Adams worked out a deal to keep last summer. "I know the value of that YouthPass, and I respected Sam for fighting for it. It's going to be really painful."

Hales also went to the Obama inauguration, where he and his wife, Nancy, attended one of the balls. He also lobbied administration officials, including U.S. Secretary of Transportation Ray LaHood, for federal funds.

At the top of the Hales agenda is getting other governments to pick up tabs. 

On Jan. 8, Hales sat in the Rose Room with a pack of state legislators, listening to Portland Police Chief Mike Reese ask them for state support for mental health care to help resolve the Police Bureau's settlement with the U.S. Department of Justice.

At the end of the meeting, legislators were sold.

"We'll get you some money," said state Rep. Margaret Doherty (D-Tigard).

Hales, who had been mostly silent through the meeting, shouted in reply. “Let the record show!” he said. 

Hales has met several times with Multnomah County Chairman Jeff Cogen, knowing a leaner city budget is likely to shut off the flow of city money to county programs.

"I expect that we'll have a very adult, difficult conversation," Hales says. "What's your job? What's our job? Who has the money to pay for this?"

Len Bergstein, a lobbyist at City Hall and the state capitol, says Hales can leverage his budget-hawking into getting what he wants from the county and state. 

"He's got a little bit of a halo effect here," Bergstein says. "He can reduce budgets and still have an aggressive agenda. The City of Portland can come down here and say, 'Look, we've got our house in order—and here's where our interests align.' It's not a new thing every day."

Hales, who returned from Washington, D.C., with a bad cold and hacking cough, expects he will spend the first six months of his term disappointing bureaus, other governments and the people of Portland who have come to expect the city to keep funding beloved projects.

"We have to demolish the fiction that there's always a little money stored away in a box someplace in City Hall," he says. "And if you push hard enough, and if you lobby loud enough, they'll go find that box and pay for your favorite program. I wish that were the case. But that box does not exist—or if it exists, it was emptied.” 


Way Down In The Hole

To paraphrase famed budgeter Oscar Wilde: Losing a million dollars is a misfortune, but losing $25 million looks like carelessness.

As Mayor Charlie Hales begins his term, the City of Portland faces a $25 million shortfall—about 6.5 percent of its $390 million annual general fund. It's in that hole even though city revenues have steadily grown since 2008.

What put Portland in the red? City economists blame three main factors:

The Multnomah County Library taxing district ($10 million)

When voters passed a permanent funding stream for the county library system in November, that squeezed the amount of property-tax dollars the city can collect. As explained by WW last summer ("When Stacks Attack," Aug. 1, 2012), Oregon property taxes are limited by state law—and every time a new tax is added, the amount left for other governments shrinks.

The Police Bureau's settlement with the U.S. Department of Justice ($5.4 million)

When the DOJ announced its findings that Portland cops had engaged in a pattern of excessive force against the mentally ill, the Police Bureau agreed to resurrect its crisis-intervention team. The contract with the feds also requires community mental-health programs.

Last year's budget commitments ($8.6 million)

For years, the city has funded certain projects with repeated "one-time" money, in effect creating a shadow budget beneath the general fund. The City Council moved these costs into the general fund—and that change hits this year's budget. The spending includes $4.9 million for a homelessness "safety net," such as shelters and rent assistance; $3.1 million for small-business assistance, including the Portland Seed Fund; and $447,232 for cleaning up graffiti.

Other ($1 million)

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