County economist: downtown office losses and tax compression are cutting PPS levy revenue; district faces roughly $5M shortfall

Multnomah County economist Jeff Renfro told the Portland Public Schools board on Nov. 18 that a concentrated fall in downtown office property values and rising "compression" of property-tax bills have reduced collections on local option levies, contributing to a roughly $5 million shortfall in the district's current tax-roll expectations.

Renfro explained the three values used in Oregon's property-tax system: real market value (what a property would sell for), maximum assessed value (the Measure 50 baseline that grows roughly 3% per year) and assessed value (the lower of market value or maximum assessed value). He said many downtown office buildings saw real market value decline sharply during the post-pandemic period and that, for a growing number of high-value properties, market value has fallen below the maximum assessed value. Where that happens, assessed value falls with market value and taxable value shrinks.

Renfro also described "compression," a calculation the county uses to cap individual tax bills, which reduces collections for local option levies first when an owner's calculated bill exceeds the cap. He showed that a small set of high-value downtown office properties account for a meaningful drag on overall assessed-value growth. Renfro said the county's data show some of those high-rise office properties have lost substantial market value (he cited roughly $4 billion in lost downtown high-rise office value in Multnomah County compared with pre-pandemic levels) and that the number of major buildings whose assessed value is now tied to declining market value has risen sharply.

Michelle Morrison, PPS chief financial officer, told the board the district budgeted for continued levy-growth trends but the tax roll came in about $5 million lower than assumed; she said that shortfall flows directly to licensed FTE (teacher positions). Board members asked whether levy-structure changes could plug the gap; staff said legal limitations and compression rules constrain how much additional revenue a higher levy ask would yield and promised to return with precise legal guidance.

Renfro said the county's forecast assumes assessed-value growth will be below historical pre-pandemic highs for a period but that growth should normalize to about 3% in the medium term absent major new development. He also flagged that personnel costs drive most local government and school-district budgets, making persistent revenue pressure consequential for staffing and services.

What comes next: District staff said the local option levy will return to voters in 2028; board members asked staff to incorporate the tax-roll shortfall into next year's budget assumptions and to work with counsel and county staff on legal and structural options for future levies.