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City of Portland, Oregon Office of Management & Finance FY 2020-21 Requested Budget Mayor Ted Wheeler Commissioner in Charge Tom Rinehart Chief Administrative Officer January 2020 OMF Budget Advisory Committee Report FY 2020-21 Budget Process About the OMF Budget Advisory Committee The Office of Management & Finance (OMF) implemented an Advisory Committee in 2006 comprised of customers and stakeholders. The committee includes two community members, six non-OMF bureau directors, two Mayor/Commissioner staff members, and one labor representatives (membership list follows). Chaired by OMF’s Chief Administrative Officer, the committee advises OMF on projects and programs, customer service issues, and budget decisions. The Advisory Committee convenes as OMF’s Budget Advisory Committee (BAC) during the budget process. Committee Process The OMF Advisory Committee began its FY 2019-20 campaign in September 2019. The committee serves as an enterprise advising body to OMF and convenes as OMF’s BAC during the budget development process. Mayor Wheeler released FY 2020-21 budget guidance in October 2019, directing bureaus to work collaboratively to identify long-term multi-bureau programmatic and operational efficiencies. Additionally, Mayor Wheeler asked bureaus to incorporate Climate Policy Commitments throughout base budgets and to reduce carbon emissions to prepare for the impacts of climate change in FY 2020-21 budget proposals. OMF shared initial budgetary challenges with OMF’s BAC during the November 2019 meeting. In January 2019, the OMF BAC was presented with summaries and costs for five decision packages that OMF will submit as part of its FY 2020-21 Requested Budget. As the City’s ongoing funds are severely constrained, OMF’s FY 2020-21 requests address the City’s ability to continue current levels of revenue collections, ensure the prudent operations and management of City facilities, and mitigate climate change impacts. The following contains feedback from the OMF BAC to OMF regarding decision packages proposed for OMF’s FY 2020-21 Requested Budget. Committee Feedback The Office of Management & Finance is submitting five decision packages in its FY 2020-21 Requested Budget. OMF’s decision packages address the following areas: • Clean Air Construction (oversight of the regional program) An Equal Opportunity Employer To help ensure equal access to programs, services and activities, the Office of Management & Finance will reasonably modify policies/procedures and provide auxiliary aids/services to persons with disabilities upon request. • Maintain Current General Fund Revenue Collection Levels • Facilities Services Core Operating and Climate Investments • CityFleet Climate Investments • Long-Range Facilities Master Planning Notably, the OMF BAC recognizes OMF has been disadvantaged in its effort to collect taxes due to inadequate staffing and technology. Appropriate levels of tax resources are critical to collect City funds. In recent years, the Revenue Division tax gap has steadily risen – resulting in under collection of millions of dollars that cannot be recovered at this point. The City’s new Integrated Tax System is a step in the right direction, but it will take time to realize the system’s full capabilities. To provide optimal government services to Portlanders, the City of Portland is obligated to collect every dollar owed. OMF provides asset management oversight for over 3,600 vehicles and 16 facilities. Having accurate data and systems to track and report on service delivery, costs, and preventive maintenance are important for a growing enterprise. OMF’s climate action packages advance the Mayor’s budget directive for FY 2020-21. The OMF BAC advises OMF to reexamine the workload and position classifications associated with these decision packages to identify potential savings. Lastly, the OMF BAC notes that OMF’s requests include a mix of one-time and ongoing resources for service provisions. There are some concerns with approving ongoing decision packages at this time, as the City’s economic forecast has limited ongoing resources. OMF Advisory Committee members OMF Leadership Sara Boone, Chief, Portland Fire & Rescue Carmen Merlo, Deputy Chief Administrative Lois Cohen/Kristen Bishop, Public Member Officer, Office of Management & Finance Kristin Dennis, Chief of Staff, Mayor Tom Rinehart, Chief Administrative Officer, Wheeler Office of Management & Finance Rebecca Esau, Director, Bureau of Development Services Michael Jordan, Director, Bureau of Environmental Services Robert McCullough, Public Member Jami Resch, Chief, Portland Police Bureau Suk Rhee, Director, Office of Community & Civic Life Sonia Schmanski, Chief of Staff, Commissioner Fish Chris Warner, Director, Portland Bureau of Transportation Rachel Whiteside, PROTEC17 Long Term Financial Liabilities and Recommended Solutions Responding to Mayor’s Budget Guidance January 28, 2020 Jessica Kinard, Budget Director Michelle Kirby, Interim Chief Financial Officer Tracy Reeve, City Attorney Introduction Binding City Financial Policy states that “[t]he City shall plan for the types and levels of investment necessary to ensure the sustained and equitable delivery of public services to the residents, businesses, visitors and customers of the City.” The City of Portland has several notable citywide financial liabilities looming over the next several decades that may threaten sustained and equitable service level delivery. As directed by the Mayor’s Budget Guidance, the City Budget Director, the Chief Financial Officer, and the City Attorney have conducted an initial assessment of the major citywide liabilities facing the City. This assessment functions as a starting point for future conversations and more detailed analysis; many of these liabilities have elements of uncertainty around the likelihood and magnitude of cost risk. Additionally, the Chief Financial Officer is in the process of generating the City’s first long-term financial plan, expected to be completed in the spring of 2020. This initial assessment memo is intended to be the starting point and will be expanded upon in the Long-Term Financial Plan. Summary of Liabilities The below categorization reflects initial estimates based on available information at this time. None of the liabilities discussed have precisely known costs and timelines for impact. An Equal Opportunity Employer To help ensure equal access to programs, services and activities, the Office of Management & Finance will reasonably modify policies/procedures and provide auxiliary aids/services to persons with disabilities upon request. Liability Estimated $ Impact Estimated Urgency Confidence Level of Risk Restrictive (>$30M) Near (1-3 yrs) Certain $ and timeline Significant ($5M-$30M) Medium (3-7 yrs) Certain $ or timeline Notable (<$5M) Long-term (7+ yrs) Uncertain $ and timeline Major Maintenance & Infrastructure Backlog • • • PERS Liability • • • Personnel Cost Mandates • • • Portland Harbor • • • Citywide Legal Liabilities • • • Technology & Equipment Replacement • • • Technology & Equipment Replacement • • • Columbia Levee • • • Summary of Recommendations FY 2020-21: • Deposit up to $5 million in City resources into the General Obligations Reserve, for transfer to a Side Account for PERS rate buy-down. The $5 million would consist of $1.5 million in one-time General Fund resources, and the remainder from other City funds. If this contribution could be leveraged by the State Employer Incentive Fund, an additional $1.2 million would be granted by the State. This total side account balance of $6.2 million invested in buying down our PERS rates would yield an estimated $10.8 million in savings over 20 years. This proposal is scalable. • Prioritize asset management systems and operations by supporting requests for software systems, condition assessments, and operational staff essential to ensuring project investment is maximized. • Consider depositing up to $2 million of discretionary resource in the General Obligations reserve to fund likely future costs such as Portland Harbor, Columbia Levee, mandated personnel costs and unforeseen legal costs. • Continue supporting data governance policy development as a precursor to supporting a technology and equipment replacement fund and allocation process. Future years: • Create and adhere to a funding plan for liabilities once costs are known for Portland Harbor, Columbia Levee, and personnel mandated costs. • Plan for and incentivize bureau investment in needed technology replacement needs by establishing a technology and equipment replacement reserve. Allocations from the reserve will be determined by agreed-upon City policies around data governance and technology plans. Long-Term Liabilities & Recommended Action Detail 1. Major Maintenance and Infrastructure Backlog The City’s most significant and urgent financial and service-level risk is the unfunded major maintenance and infrastructure backlog. The latest report estimated that the City would need to increase its investment by $568 million annually to close our current major maintenance funding gap. City Council, bureaus, and voters have approved significant resource investments in our asset base in recent years, and bureaus have also individually taken measures to address this issue. While the funding gap has continued to grow, the rate of growth in recent years has decreased1 and the City has made notable progress in our understanding of asset condition,2 which is an essential precursor to effectively addressing asset needs. However,

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