City Hall must reduce services but it lacks the nerve to cut its budget for the arts.

Last December, the Regional Arts & Culture Council threw Mayor Sam Adams a huge going-away gala. 

The tribute, "pARTy in the Name of Art," included a "Sammania" show with Bodyvox dancers, Portlandia star Fred Armisen and singer Storm Large. And at the end of the night, celebrants were led by a student from PHAME Academy—an arts program for adults with developmental disabilities—in a sing-along of Modest Mouse's "Float On."

The arts council, known as RACC, had good reason to fete Adams. Behind the scenes, Adams increased the city's annual funding of RACC from $4.7 million in 2009 to $5.6 million last year. And then he fought for—and won—voter approval of a new $35-a-person arts tax.

RACC has never been more flush with taxpayer money. Even with Adams gone, nobody at City Hall is prepared to stop the music.

The city's budget faces a $25 million hole, and city commissioners have gone public this week with ideas for how to cut spending, including cutting police ranks and selling surplus property.

Mayor Charlie Hales has asked every city bureau to offer proposed budget cuts of up to 10 percent. Jeff Hawthorne, RACC's director of community affairs, says RACC has submitted a proposal to cut 10 percent of its special appropriation—about $379,000.

"We are cobbling together resources to invest in arts at a level that is finally consistent with what other leading cities in the United States are doing," Hawthorne says. He adds that a deeper cut—as much as $1 million has been discussed—"would be severe steps back."

But no one has had the nerve to call for cutting RACC any more—given that the arts council is about to get a flood of new money on top of the city's current subsidy that could more than make up for any budget reduction.

Commissioner Nick Fish confirms he and Commissioner Steve Novick considered calling for major cuts in RACC's budget this week but have held off, even as virtually every city bureau faces fiscal pain.

"We didn't have a good enough rationale," Fish says. "That said, the message needs to be that there are no sacred cows. Everybody needs to take a haircut, including the arts."

Records show RACC's hold on the city's finances runs deeper than many City Hall observers expected—and Adams' legacy may be a spigot of city money to arts organizations that's difficult to turn off. 

Founded by the city in 1980, RACC is an independent nonprofit that gets almost all of its money from government coffers. 

Last year, 70 percent of its $8 million budget came from the city. Its other government supporters—three counties and the Oregon Arts Commission—gave it less than $700,000 combined, and private donors added $1 million.

RACC gives grants to arts organizations, puts artists in elementary schools, and pays a staff of 34 employees—including six communications and outreach specialists.

The city's 2010 contract with RACC gives the arts council wide leeway in how it provides services to the city—possible tasks include acting as "Advocate for the arts at the local, regional, state and national level.” 

RACC also manages the city's "Percent for Art" program, which reserves 1.33 percent of all funding for capital building projects to buy and install public art.

The arts council has also used tax money to push for even more tax money. RACC gave $200,000 over the past two years to the Creative Advocacy Network, a nonprofit that led the fight for the arts tax, which passed in November with 62 percent of  the vote. 

The arts tax is supposed to bring in as much as $5.4 million a year more for RACC on top of the $5.6 million the city already gives it. 

At the heart of any effort to cut the arts agency is the extraordinary contract the city signed with RACC in 2010 that actually binds the City Council's hands when it comes to cutting RACC's budget.

In fact, the contract bars the city from cutting RACC's budget altogether, except in the case of a financial emergency—and even then strictly limits how far City Hall can go.

Specifically, the contract forbids the City Council from cutting RACC's budget at a rate greater than it's cutting other city bureaus.

Adams pitched the arts tax last year as new funding for RACC, and the budget measure promised that RACC's previous city funding wouldn't be touched.

RACC also has a powerful political base to protect its funding. "No cuts are popular," says former City Commissioner Mike Lindberg. "But the arts group has a greater organizational capacity to fill the City Council chambers."

And city commissioners are nervous that the arts tax may not hold up in court.

Fish issued a warning at a council meeting last month that RACC may not see a penny from the arts tax this year—the city probably won't distribute any of the proceeds from taxpayers until it settles a legal challenge from Lewis & Clark Law School professor Jack Bogdanski.

"This is a legal fight that a citizen has the right to bring, and the courts are the place we decide this," Fish says. "But I want to make sure people's expectations are in line with reality."

Novick says he's open to cutting 10 percent of all city funding for RACC, including arts-tax revenues—a reduction closer to $1.1 million.

“You should not assume that anything is sacred because you haven’t seen cuts to it yet,” Novick says. 

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