Portland’s voter-approved tax on big retailers falls on more companies than initially expected, leading business executives to push back against it at City Hall this week.

Instead of affecting just big-box retailers – as advertised by tax proponents during last November’s campaign – a city legal analysis obtained by The Oregonian/OregonLive concludes the tax may actually be applied to nearly any billion-dollar company with sales in Portland.

The tax, officially called the Clean Energy Surcharge, applies a 1 percent tax on the Portland sales of companies with $1 billion or more in total sales – at least $500,000 of which must take place inside city limits.

Which companies pay hinges on what counts as a “retail sale.” Thomas Lannom, the city’s top tax official, sought clarity in the legal analysis, which he asked for during the typically mundane task of drafting tax administrative rules.

Lannom asked: May the tax be applied to public works projects, construction equipment wholesalers, or financial products such as annuities, disability insurance plans or life insurance policies?

The answer to all, said Kenneth McGair, a senior deputy city attorney: Yes, because the measure adopted by voters applies the tax to nearly all transactions except those for groceries, medicines and health care services.

In essence, unless an industry is carved out from the tax, it pays.

That leaves unexpected liabilities on the ledgers of some of Oregon’s biggest companies. The tax, officials say, would also affect the cost of building affordable housing, schools and other public works projects. Willamette Week first reported concerns over the tax rules.

Disagreement over the broad definition of retail sparked a meeting Thursday afternoon between Lannom, Mayor Ted Wheeler; Commissioner Jo Ann Hardesty; Marshall Runkell, chief of staff to Commissioner Chloe Eudaly; Portland Business Alliance President Andrew Hoan; and representatives of the tax-backing coalition Portland Clean Energy Fund.

One attendee, Alan Hipólito, the executive director of coalition member Verde, said no decisions were made during the confab.

A spokeswoman for Wheeler said in a statement that the mayor wants the tax rules to “reflect the intent of the ballot measure and ensure that administrative rules do not adversely impact schools or affordable housing.”

Curtis Robinhold, director of the Port of Portland, said the city’s interpretation blindsided his agency and will dent its budget.

“When the measure was being discussed – and I voted for it – I didn’t know it would affect our projects,” Robinhold said in an interview.

He cited as an example the Port’s PDXNext initiative, a $2 billion expansion of concourses and dining areas at Portland International Airport. One of the project contractors, Hoffman Construction, stands to pay the city tax under the broad definition of retailer.

Dan Drinkward, Hoffman’s vice president, said no reasonable person would consider his mammoth construction company to be a retailer. Portland’s draft rules incorporate a definition that is “dramatically different” from what was told to voters, he said.

“We are not a retailer,” Drinkward said, “and we should not be subject to this tax.”

The irony, he said, is that it won’t be Hoffman Construction paying the surcharge but the taxpayers who fund public works projects. Hoffman is building the Lincoln High School for $243 million and the city tax hit “will make it difficult to provide the facility the community is hoping for,” according to a school district analysis.

Jordan Papé, president and chief executive of heavy equipment supplier Papé Machinery, said the tax will affect his company’s Portland dealerships. Papé is one of only a few machinery dealers to be affected by the tax and he said the added pressure “will have potential consequences of whether we can stay in Portland.”

Executives at insurance and financial plan provider The Standard feel it would be nonsensical to apply the tax to their products.

“Nobody taxes retirement plans,” said Justin Delaney, the firm’s vice president of corporate and legal affairs. “It’s just bad public policy to tax people’s retirement savings.”

Delaney said the draft tax rules are a far cry from the picture that was sold to voters.

“It seems like there’s some revisionist history going on here,” he said.

To date, 27 companies have prepaid $3.3 million under the tax, said Lannom, the city tax official.

The surcharge is expected to generate up to $71 million a year for companies and nonprofits to provide eco-friendly retrofits for low-income homeowners as well as job training for women, people of color and people with disabilities. No money has been distributed yet.

-- Gordon R. Friedman

GFriedman@Oregonian.com