Portland Mayor Ted Wheeler plans to propose a $15 million increase in the city's business taxes, multiple City Hall sources say. The increase is meant to bolster the city budget, which is tightening despite record revenues.

A tax increase of that size would represent roughly a 13 percent jump, including an 18 percent increase for the city's highest-grossing businesses. It would be the first increase to the city business tax rate since the 1970s.

Wheeler already has early indications of support for the idea from two key players: Commissioner Chloe Eudaly and the Portland Business Alliance, the city chamber of commerce.

Portland revenue officials expect the business tax to generate at least $114 million this year, making it a cornerstone of the city's approximately $500 million discretionary budget. That fund pays mostly for police officers, firefighters and parks upkeep.

Though city coffers are filling with record-high tax revenues, costs have continued to grow at a breakneck pace. Officials have said that is in part because the city has dedicated substantial sums to a city-county homelessness agency, expensive labor contracts and pension payments. Because of that, bureaus that draw their operating funds from the discretionary fund are facing potential program cuts.

Eudaly and other City Hall officials with knowledge of Wheeler's proposal said the mayor is expected to propose raising the business tax from 2.2 percent to 2.6 percent of businesses' net income made within city limits. Eudaly said an increase of that amount is estimated to add $15 million a year to the city's discretionary fund.

"I'm supportive of that," Eudaly said of the tax increase idea. "We haven't raised the tax in a long time."

Eudaly said she expects the mayor to also propose increasing a deduction to the tax which exempts from a business' taxable city income 75 percent of net income up to $103,500. The mayor's proposal would apparently increase the exemption ceiling to $125,000, a boon to some small businesses.

Commissioner Nick Fish said he also expects Wheeler to propose an increase to the city business tax, though Fish did not confirm what tax rates may be in the mayor's proposal.

Wheeler, who is traveling on city business in China, was unavailable for comment. Spokesman Michael Cox said he cannot confirm what is in the mayor's budget until it is publicly released Monday.

The Oregonian/OregonLive reported last week that Wheeler was in talks with the city chamber of commerce, called the Portland Business Alliance, over the possibility of raising the business tax. That group's president, Sandra McDonough, released a statement Tuesday saying the chamber is "open to a discussion" about business tax increases.

That openness comes with a caveat. McDonough said the chamber may accept the tax increases to fund "specific additional services for the homeless" but "only if we have assurance that we will not face further tax increases." That includes a proposed gross receipts tax ballot measure, McDonough said. She declined to say what specific services for the homeless the chamber would support.

"The talks are far from over and we urge the mayor to bring parties to the table as soon as possible," McDonough said, "to lead the way to an agreement that all will support and that will help us better address our city's top priority: the homelessness crisis."

In 2016, Mayor Charlie Hales attempted to raise the business tax by $8.7 million. McDonough publicly blasted Hales over the proposal, and Commissioner Dan Saltzman called the proposed tax increase "gratuitous." Hales' plan proved disastrous because he had not earned city councilors' support, and they ultimately overrode the mayor to write it out of the city budget.

-- Gordon R. Friedman

503-221-8209