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Audit finds thousands ignoring Portland arts tax; city might turn to collection agencies

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PORTLAND, Oregon — Three years after the first arts tax payments arrived in the mail, nearly 200,000 Portlanders either haven't paid their first bill or filed paperwork claiming they are exempt from paying the $35 tax, according to a city audit released Tuesday.

Administrative costs are also higher than projected and expected to stay that way, according to auditors, who looked at the $35 income tax approved by voters in 2012 to pay for arts teachers and programs.

The tax applies to Portland residents who are at least 18 and have at least $1,000 in annual income. Federal and state benefits, such as social security and Oregon's public pension system, don't qualify as taxable income.

The compliance rate was roughly 72 percent for the 2012 tax year, far below the 85 percent originally estimated. Compliance was even lower for 2013, at 68 percent, and 2014, at 61 percent. But auditors said compliance continues to increase for previous years after more efforts at collection.

Revenue climbed to $10.5 million for the 2014 tax year, however, up from $7.2 million for 2013 and $7.8 million for 2012. All three years are still short of the original estimate of $12 million a year.

Revenue from the tax pays for arts and music teachers in Portland elementary schools, and generates millions of dollars for the Regional Arts & Culture Council to make arts programs available in underserved communities.

The city is still collecting the tax for the first three years, and it's ramping up collection efforts and late fees. Next year, the city is expected to refer scofflaws to collection services.

The original ballot measure said administration costs would run no more than 5 percent over five years. Auditors found average administrative costs of 5.9 percent, not including $600,000 in startup costs.

Now, auditors wrote, the City Council must decide whether to increase the 5 percent limit; provide money for the costs from the city's general fund; or cut administrative expenses by doing less.

Drummond Kahn, director of the Audit Services Division, said it's unclear how much the Revenue Bureau spends to collect the tax because the bureau doesn't track it. Bureau Director Thomas Lannom wrote in his formal response that closely tracking the costs would have "limited practical use."

But City Auditor Mary Hull Caballero disagreed. "Voters deserve a better accounting of how arts tax funds are spent and tax collection is managed," she said in a statement.

Of Portland's estimated 482,000 adults, about 75,000 are exempt from the tax, auditors found, but fewer than 8,000 submitted the proper forms.


Information from: The Oregonian, http://www.oregonlive.com

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