Officials delivered a mixed forecast for Portland’s government and economy Tuesday, applauding the bullish business conditions that have defined the city for years but warning that a mild recession would spell what they characterized as a disaster for the city budget.

Portland is growing quickly, residents’ median incomes are rising and economic conditions are likely to remain strong for the next 12 to 18 months, said city economist Josh Harwood.

Portland’s largest single source of revenue, property taxes, is steady and reliable. But the city’s heavy reliance on hotel taxes and a local business income tax to fund city services leaves it greatly exposed to even a slight economic downturn, Harwood said.

Those taxes comprise 24 percent of the city’s $681 million general fund, a mostly discretionary fund that pays in large part for police, fire and parks services. The total 2018-19 budget, by contrast, is $5.15 billion.

FOREBODING ECONOMIC SIGNS

Whenever the next recession inevitably strikes, revenues will fall, forcing government officials to make significant cuts – constraints that would likely cause the city to eliminate some services altogether. A minor recession, for example, could necessitate upwards of $40 million in cuts to the city budget.

“We’re talking about stopping programs,” Harwood told Mayor Ted Wheeler and the city commissioners. “It’s not going to be picking at edges.”

Though the Portland economy is strong, it is also showing the first signs of slowing down.

The construction boom is expected to subside in the next two years, as indicated by a decrease in building permit applications. Rising interest rates and inflation foretell a cooling housing market, Harwood said. And, he said, landlords are increasingly offering big giveaways to potential renters – such as months of free rent or other subsidies – a signal that Portland’s cutthroat rental housing market is easing.

BUREAU PROGRAMS MEASURED

Budget officials on Tuesday also presented to the mayor and commissioners their performance evaluation for city bureaus during the prior year.

The report, which focused on housing, policing and eco-friendly practices, offered mixed results.

Officials increased the scope of their work to tamp down Portland’s housing emergency, the report said. More people than ever are being served by the city as a result, and there are hundreds more affordable units available than in previous years.

But officials at the Joint Office of Homeless Services and Portland Housing Bureau have struggled to connect all the data necessary to make informed decisions. And the two agencies lack “specific, measurable goals” to help officials know when the homelessness crisis may be considered over, the report said. A spokesman for the Joint Office said it does have specific goals, which have been presented to city and county leaders, and has exceeded them.

The report also found that the rate of property crime in Portland has increased significantly in the last two years, as have the number of calls for police service. Officer response times have slowed during that period and spending on police overtime continues to increase, rising to $11.6 million in 2017, up from $6 million four years prior.

Portland has also “stagnated” on its goals to reduce carbon dioxide gas emissions, the report said. Transportation-related emissions this year increased for the first time in a decade, as slightly fewer people opted to walk, bike or take public transit to work.

-- Gordon R. Friedman

GFriedman@Oregonian.com