City economist: HR 1 contributed most of this year's shortfall; five-year forecast remains balanced under current appropriation policy

City Economist Peter Holzman presented an updated five-year general fund forecast and told the Portland City Council that a state tax change he labeled House Resolution 1 (HR 1) largely explains a current-year shortfall.

Holzman said the Legislative Revenue Office estimated HR 1's statewide impact at about $362 million and that, by his analysis, the change translated to roughly $21.4 million for the city this fiscal year. "Based on these estimates, had HR 1 not become law after the April 2025 forecast, there would be no current year deficit," Holzman said during his slide presentation.

Holzman framed the forecast with an explicit reminder that the forecast follows the council's financial policy: it models current appropriation levels (CAL), not current service levels (CSL). "My forecast by financial policy is current appropriation level," he said, adding that CSL expectations are typically higher than CAL and therefore could create gaps if CSL trends persist.

CFO Jonas Birri prefaced the presentation by noting forecasting limits and the office's multi‑update approach. "All predictions guaranteed wrong," Birri said in a remark that underscored the presentation's theme of uncertainty.

On revenue detail, Holzman said he has added about $5.3 million in next‑year business license tax (BLT) receipts tied to a federal-to-state disconnection adjustment but that other lines, such as utility franchise fees, were revised downward. The combined net of adjustments improved the FY26-27 position by about $2.5 million after accounting for expense reductions tied to CAL.

Holzman also flagged a material out‑year improvement tied to bonding: pension obligation bond payments falling off the budget schedule account for roughly $19 million of additional ongoing revenue in FY29-30, an effect he said the forecast counts when balancing the five-year outlook.

Councilors pressed Holzman and Birri on whether the forecast includes expected one‑time BLT receipts from a high‑value corporate transaction (referenced in the meeting as the Moda/Trail Blazers transaction). Birri said taxpayer‑confidentiality rules prevent the city from forecasting a specific taxpayer's liability until the payment is submitted and audited, so the administration does not carry that amount into the official forecast. "We don't carry that in the forecast just as we, you know, any large ... we can't predict the timeline or outcome of any specific large revenue income stream beyond what we see in the trending," he said.

Holzman said he will revisit BLT receipts in early May if collections materially deviate from expectations and reiterated that the forecast does not assume a recession in its baseline scenarios. He closed by noting the usual caveat: the forecast is sensitive to external federal and global events and remains subject to change.

What happens next: Holzman said he would provide a revenue update in early May if BLT collections materialize above or below expectations; otherwise, the administration will incorporate these figures during the budget process and the five‑year financial stabilization work Birri described.

Sources: Presentation and Q&A with Peter Holzman and Jonas Birri during the Portland City Council April 8 work session.