In introducing a presentation on the state of Portland’s economy, Portland Business Alliance director Andrew Hoan didn’t try to lessen the blow of the latest data.
“We’re in for a doozy,” Hoan told a room full of Portland business owners and investors Tuesday morning.
He wasn’t wrong. A report on the city’s economy by financial consulting firm ECONorthwest, commissioned by the region’s largest chamber of commerce, put numbers to some of the anecdotal fears shared by Portland businesses and policymakers since the COVID-19 pandemic cratered the local and global economy.
Compared to other similarly-sized cities, the report says, Portland has lagged behind on recovering financially since 2020. Like most cities across the United States, Portland saw a huge drop in employment as the pandemic began in spring 2020. But while cities such as Austin and Salt Lake City saw their employment rates return to pre-pandemic levels by April 2021, Portland waited until July 2022 to see a return to 2019 employment levels.
ECONorthwest’s Mike Wilkerson attributed that lag to strict state and local COVID regulations, which delayed when businesses could comfortably reopen in Portland.
Portland, seen from Pittock Mansion, June 8, 2021.
Kristyna Wentz-Graff / OPB
“Did that come with benefits? Yes,” said Wilkerson, pointing to the fact that the Portland area saw lower per capita pandemic deaths than cities with faster job recovery. “So, there are benefits, and there are costs.”
He also noted another difference between Portland and other cities that have bounced back more quickly: Portland’s downtown is defined by office buildings and not much else. With many offices still allowing their employees to work remotely, that has left a dearth of Portlanders frequenting downtown businesses.
Cities like Austin and Nashville, however, have more residential buildings in their central core. So even with people working from home, those cities’ downtown areas have still seen stable customers keeping the economy afloat. Wilkerson cited a recent report that found Portland’s downtown foot traffic remains 41% below where it was in May 2019.
“I think when we start to think about long term recovery, work from home is not an afterthought,” he said. “This is driving a lot of the changes.”
Multnomah County especially hard hit
Wilkerson said that the pace of job recovery in Portland still outpaces the amount of time it took for employment to recover during the Great Recession in 2008. Yet that job recovery took place equally across industries, while Wilkerson said the current employment resurgence is dominated by a few fields, such as construction and hospitality. At least 20,000 jobs in trades, transportation and warehousing Portland lost in 2020 haven’t come back.
Multnomah County has been uniquely impacted by job loss, with data showing it lagging significantly behind neighboring counties. While Multnomah County remains 4.5% below its pre-pandemic job levels, neighboring Clackamas County is 2% behind, while Washington County has seen a 1% increase in jobs over its pre-pandemic totals. Washington’s Clark County, which is home to Vancouver, has seen an 8% increase in jobs over its late 2019 numbers.
Clark County has also become a common landing place for former Portlanders. In 2021, more than 12,000 people moved out of Multnomah County. The report suggests that more and more Portlanders have crossed state lines to become Clark County residents in recent years; in the recent past, Portland saw a steady migration from Clark County.
Wilkerson posited that those fleeing Portland for Clark County might be doing so to avoid the Portland metro region’s growing taxes on property owners and businesses.
Between 2019 and 2021, the city’s annual taxes grew by $149 million to a total just over $1 billion. That increase has mostly been levied on businesses and high-income earners through ballot measures such as Metro’s Supportive Housing Services tax, which funds programs that help move people experiencing homelessness into permanent housing, or Multnomah County’s Preschool for All tax, which makes preschool free for county families.
The report shows that these tax burdens mean Portlanders of all incomes are bringing home less income after taxes than those living in neighboring cities, like Beaverton or Vancouver. At the same time, data also shows that Clark County in particular has seen a dramatic increase in household wealth in the past decade.
“Do we know the full extent to which [taxes] have caused migration? We don’t, but it’s pretty telling,” Wilkerson said. “What that means for individual businesses is, effectively, your choice of location now has an impact on what your profit is.”
Hoan, the head of the region’s largest chamber of commerce, told OPB that if businesses and individuals leave the Portland area due to high taxes, this could have harmful consequences on basic city services.
“The city depends on property tax and business tax for the general fund. What happens when the revenue fades?” Hoan said. ”To see taxes decline and costs go up, that’s when you get scarcity. And I don’t think people are ready for that conversation”
That conversation has begun to take shape for local elected leaders. During another Portland Business Alliance meeting in early February, Portland Mayor Ted Wheeler, Multnomah County Chair Jessica Vega Pederson and Metro Council President Lynn Peterson all expressed opposition to an upcoming ballot measure that would rely on a new capital gains tax to fund an eviction legal defense program. According to reporting by The Oregonian/OregonLive, Wheeler said he was concerned that an additional tax would drive investment out of Portland.
The Portland Business Alliance has a history of challenging proposed business taxes in court, and often lobbies Portland City Council against any policies that place financial responsibility on business owners. Since the start of the pandemic, the PBA has pushed the perception that the city’s homeless crisis and crime rate are a drag on the city’s economic recovery. The ECONorthwest report did not include any data that connected the city’s homelessness and crime issues to financial instability.
Wilkerson said that ECONorthwest’s findings will be included in a more in-depth financial report headed to Portland City Council in April. That report will highlight the impact that slow economic recovery has had on specific business areas, like Old Town Chinatown, downtown Portland, and the Lloyd Center. From his conversations with city leaders, Wilkerson said he’s confident that Portland’s elected officials understand the severity of the city’s current economic ecosystem.
While COVID’s impact on the local economy is undisputed, Wilkerson said that the city could still be reckoning with similar financial issues without the pandemic. That’s because Portland was already seeing a huge surge in population and job growth leading up to 2020, and economists were expecting a downward trajectory in the near future.
“You’re always going to have ups and downs,” he said. “Unfortunately, for us, that cyclical dip happened right at the start of the pandemic.”