Politics

Portland metro area’s homeless tax could bring in nearly $1 billion in unexpected revenue by 2029

By Alex Zielinski (OPB)
Oct. 26, 2023 10:20 p.m.

The voter-approved Metro supportive housing services tax is bringing in significantly more money than expected because wealthier residents continue to get wealthier.

FILE: Tents line the entirety of some city blocks in Portland's Old Town on March 23, 2022.

FILE: Tents line the entirety of some city blocks in Portland's Old Town on March 23, 2022.

Julie Sabatier / OPB

The tax built to fund homeless services in the Portland metro area is expected to rake in nearly $1 billion more than previously anticipated over the next six years.

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A revenue forecast prepared by Metro, the regional government that oversees the supportive housing services tax, shows that the tax is expected to collect around $437 million annually by 2029.

Metro initially estimated the tax would raise $250 million annually until it expires in 2031. If the tax raised that amount over the next six years, it would bring in $1.5 billion for regional homeless service programs. Metro’s current estimate, however, nearly doubles that figure to $2.4 billion in the same period of time.

While the region’s expansive homelessness crisis is in need of swift solutions, it remains to be seen if the counties poised to receive this influx of money will be able to quickly use the dollars to help people living outside.

The Metro tax was established by voters in 2020 and is meant to fund programs that help move people experiencing homelessness into stable housing. Its revenue comes from two sources: A 1% income tax on individuals earning more than $125,000 yearly and a 1% tax on net income for businesses making more than $5 million in revenue annually. The resulting revenue is distributed equitably among the three metro area counties — Multnomah, Washington and Clackamas.

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In 2021, the first year of the tax, Metro collected $240 million. In 2022, that number grew to $337 million. Metro estimates that for the fiscal year 2023, which ends in June 2024, the tax will bring in at least $357 million. Revenue is supposed to hold steady over the next six years.

According to Metro, this surge in revenue comes from the area’s wealthy taxpayers getting richer in recent years. Josh Harwood, the metro economist who wrote the revenue forecast, points to state revenue data indicating that in the tri-county region, the number of taxpayers making over $250,000 annually increased by about 25% between 2020 and 2021. And their incomes increased by 30% during this time.

“This is a stock of taxpayers that typically grows at smaller rates than that,” Harwood said.

Yet some of those high-income earners are leaving the Portland metropolitan area. Since the pandemic began, the Portland region has seen an unexpected population decline and exodus that has lost the region an estimated $1 billion in taxes.

This trend could deflate Metro’s ballooning revenue estimates.

“That’s a huge risk to the forecast as we go forward,” Harwood said. “But it’s still really early to tell.”

Harwood said Metro will look more closely at the migration trends to see their potential impact on future revenue in the coming weeks.

The question remains whether the counties poised to receive the surging tax revenue are prepared to distribute the dollars. Multnomah County ended the fiscal year in June with $42 million of its supportive housing tax dollars unspent, citing staffing shortages and wage problems at the nonprofits they contract with to provide housing programs. Metro leadership ordered the county to swiftly move the dollars out the door, which led to a months-long discussion at the Multnomah County board of commissioners. Board members authorized spending the excess dollars — paired with another unexpected influx of federal tax dollars — on standalone projects and attempts to fill gaps in current homeless services programs.

With more than expected tax funds on the horizon, Metro may play a more robust oversight role in how counties dole out resources in coming years.

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