Consultants present plan to improve transparency and governance of Portland's internal service fund rates

City operations staff and consultants told the Finance Committee that Portland's internal service fund rate-setting processes are technically complex and have produced confusion and distrust between provider bureaus and customers, and they outlined a set of documentation, governance and communication reforms intended to increase transparency.

Sarah Morrissey, deputy city administrator for city operations, introduced the internal service fund project and said its goals are to make rate-setting more transparent, consistent and efficient for both service providers and customers. Jessica Kinnard of Equilibrium Collaborative summarized the firm's findings and recommendations after interviewing stakeholders and seven comparative jurisdictions.

Kinnard said Portland's internal service funds cover central services such as fleet, facilities, technology services, and printing and distribution. She explained that internal service funds must fully recover the cost of providing services and that customers often have limited ability to control those costs in the short term because many charges are fixed. That structural constraint, she said, contributes to tensions between customers and providers.

Key findings and near-term recommendations shared with the committee included:

- Prioritize clarity and documentation rather than oversimplifying formulas that could produce unfair charges. - Standardize rate construction and allocation criteria and publish guidance and decision trees for staff. - Consolidate billing codes so customers see fewer line items: the consultants reported the city currently has more than 450 service codes across the funds reviewed and that the Bureau of Technology Services alone has 177 codes. - Establish two administrative governance/advisory committees: a body for high-impact strategic issues and another for mid-level technical issues, to meet as needed and be periodically reassessed. - Improve communications and customer engagement tools so providers deliver the right information to the right audiences at the right time.

Kinnard said the consultants will deliver a white paper and final project deliverables to the city by the contract date (the presentation noted an original contract term that expires Aug. 20) and that consultants expect to provide limited implementation support through October.

Committee members asked detailed questions about how the new processes would create feedback loops for cost control, whether council would engage in rate oversight, and timing for any methodological changes. Ruth Levine, the city's budget director, said the practical work in the current budget cycle will be to document cost drivers in more detail and to group service codes for customers so bills look simpler, while methodological reallocations that materially change who pays what would likely take longer to implement.

Council members pressed consultants and staff about winners and losers from allocation changes, the role of service-level agreements in documenting performance expectations, and the cultural challenges created by Portland's recent change to a mayoral form of government. Morrissey and Levine said the governance committees and improved documentation are intended to rebuild trust and provide clearer decision processes for rate-setting.

Staff said some recommended reforms will be implemented during the current budget development process: better documentation of cost inputs, code grouping for customer-facing bills, and initial governance committee meetings. More involved methodological changes and service-level-agreement development were identified as out of scope for immediate delivery but as follow-on work.

The committee thanked staff and consultants and signaled support for next steps including white-paper delivery and initial implementation tasks.