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City council greenlights tax breaks for businesses willing to rent in Portland's central city

With foot traffic slow to recover after the pandemic, Portland officials have been working to attract more people — workers and otherwise — into the downtown area.

PORTLAND, Ore. — A new tax incentive meant to draw businesses back to Portland's central city sailed through city council Thursday in a unanimous vote. The "Downtown Business Incentive" allows businesses to waive up to $250,000 in business license taxes they'd normally owe the city.

“A first-of-its-kind tax credit to actually reward businesses that sign long-term leases here in the central city that was hardest hit by the pandemic," said Andrew Fitzpatrick, the Mayor Ted Wheeler's director of economic development.

Foot traffic in downtown Portland and the surrounding district has been slow to recover after the pandemic, more so than in comparable cities.

According to Downtown Portland Clean & Safe, downtown saw 3.6 million visitors and workers in August of 2019. That number sharply declined during the pandemic, at times dropping below 1 million. 

The data shows an increase in the past two years, and in August of this year foot traffic climbed over 2 million. But that's still 60% of pre-pandemic levels. 

RELATED: Is downtown Portland still recovering, or is it getting worse?

That failure to thrive has been attributed to downtown office workers sticking with remote work post-pandemic, the high cost of doing business in Portland, the rise of unsheltered homelessness and decline in public safety.

"People got more comfortable working from home and they didn’t want to come into the office as much," said Vanessa Sturgeon, a longtime real estate developer and the chair of Portland's Clean & Safe program.

Sturgeon said that it's easier for businesses to move a few miles away from Portland and escape higher taxes and the mental health crisis.

“While offices in Lake Oswego, Tigard, Hillsboro Sunset Corridor are booming, downtown is seeing a tremendous vacancy," Sturgeon said.

Fitzpatrick said the City is working to find the right balance that will revitalize empty office buildings.

“It can be costly to live and do business here in the city of Portland and we’re trying to get that balance right,” Fitzpatrick said.

RELATED: Portland population and income loss, housing and crime woes centered in task force briefing

In order to be eligible for the credit, businesses must either enter a new lease or extend a current lease for four years or more, and they must have at least 15 employees working in the central city on at least a half-time basis.

The credit extends beyond the downtown district, including Old Town/Chinatown, the Lloyd District and Lower Albina. Eligible businesses can waive the full amount of business license taxes owed in a year up to a maximum of $250,000 over four years. The whole program is capped at $25 million in total — lost revenue which Portland will have to eat in hopes that the program makes up for it in other ways.

Sturgeon said that this decision from the city is telling and shows businesses they are serious about revitalization.

“This is a real incentive, in fact we have people who are waiting to see if this happened to decide if they were going to sign a lease," Sturgeon said.

“This is a bold and unprecedented action to achieve significant positive economic impact and revitalize our city’s core," Wheeler said in a statement. "Our central city is our state’s economic engine, our community’s meeting place, our arts and culture hub, and a primary destination for many of our visitors. Alongside our safety and livability efforts to recover our central city, this program will continue to drive urgently needed vibrancy into the core of our community.”

In another recent effort to incentivize business downtown, Portland City Council decided to add that area to an "enterprise zone," which allows businesses with new investments downtown to waive property taxes for five years. Fitzpatrick said the city is looking ahead at other economic opportunities, like creating a tax increment finance district in the central city.

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