The City of Portland has a small money problem, a few million or so a year, depending on how you look at it. Maybe you heard about it earlier in the week, and maybe the press made it sound like it was a bigger deal than it is. It isn’t, which we’ll demonstrate shortly!

On Tuesday, Portland’s City Auditor issued a report on the city’s performance on the Arts Tax. The auditor came to two important conclusions. The first was simply that, yes, the money is going where it was intended to go. The public schools in the city hired enough arts teachers so that Portland kids, kindergarten through 5th grade, could receive one arts class per week. And the city’s larger arts organizations are receiving substantially more money than they used to get, in part to improve their outreach efforts to underserved communities. This isn’t the problem part.

Let’s hear it for the Golden Ratio and the Fibonacci Spiral!

Only 72 percent of Portlanders required to pay the tax in 2012, the first year of the tax, have actually paid it. That was the big headline when the report was released Tuesday. In pure dollar terms, collections have averaged around $8.2 million for the first three years of the tax. That’s well short of the $12 million the tax was supposed to bring in originally, but a little closer to the estimated $10.5 million or so it should have generated after City Council eliminated some forms of income from the tax (social security, government pensions, dependents earning less than $1,000 per year).

Because the revenue is missing the target so much, the administrative costs, supposedly capped at 5 percent, have been running a percentage point or two higher than that, which the auditor’s report notes (in the sort of huffy tone that auditors’ reports often take—hey, lose the attitude!). And though kids are getting arts classes and arts groups are getting more public money, the third area the arts tax was supposed to address—grants to nonprofits for special arts programs designed to reach underserved communities in the city—have been drastically reduced from the original projections.

Worrisome to the arts organizations—their grants depended partly on a special $600,000 stopgap from City Council last year, which could evaporate at any time.

The auditor’s report is pretty complicated for something dealing with so little money, in the grander scheme of things, but if you’re interested in how these things work and the recommendations to city council, click the link. The recommendations have mostly to do with transparency, which is a good idea.

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So, a relatively small problem in financial terms, because even if the collections rate stays as it is, kids are getting arts classes and arts organizations are getting more money.

Still, there are a couple of good reasons the City should pursue the money it is owed by those who haven’t paid their fair share of the tax. Because the full amount hasn’t been collected, some thousands of Portland citizens haven’t had access to arts experiences, classes and/or performances and exhibitions, that we hoped they would get when we voted for the tax back in 2012. The second: A tax that’s voluntary, isn’t really a tax, and we really don’t want to set a precedent for a “donation”-based tax system. Maybe in paradise it would work, but Portland is pretty far east of Eden.

How do we raise the compliance rate? Well, first of all, we need to put it into context. I sent a set of questions to the director of the city’s Revenue Division, Thomas Lannom, about that 72 percent compliance rate, and he suggested that we aren’t really 28 percent short. “The Oregon Department of Revenue reports income tax voluntary compliance of about 80-82%, and the IRS about 85%,” Lannom wrote in his email response. “So the compliance gap is around 10-15%, not 28% as some might otherwise conclude.”

It would be nice to do better than the State and the Feds, but maybe that’s unrealistic.

Lannom said the City has the following plan to start pursuing the money it is owed, which I’m quoting in full:

• Soon we will begin sending collection letters to taxpayers who did not pay.
• We will receive Portland taxpayer data directly from the IRS and begin using it to identify non-compliant taxpayers in 2016.
• Seriously delinquent accounts (multiple years of tax and penalty owing more than $200) will receive final billing notices and if they fail to pay, will be referred to a collection agency (again, in late 2016). This can be done at no cost to the City—the agency collects its fees on top of the debt referred.

Well, that sounds serious enough to generate some cash, but I think “soft persuasion” might work better. Voters approved the tax measure in 2012 by a large margin (much to the dismay of Willamette Week and The Oregonian, who both argued dimly and dishonestly against it), around 62 percent to 38 percent, with winning margins in all but a tiny handful of the city’s voting precincts. So, that’s a solid base to start from.

Why not try a marketing campaign, starting a month before the tax deadline day, April (gulp) 15th, that explains the tax, points out some of its successes, and shows taxpayers how easy it is to pay online. The City could conduct this campaign or one of the city’s non-profit arts support organizations could take it on: The Regional Arts and Culture Council would be an obvious choice, for example, or the Cultural Advocacy Coalition.

How can we direct the marketing effort in the best way? Some polling would be useful. Maybe the non-compliers are clustered in various identifiable parts of the city, for example, and te marketing can be geographical. Maybe the numbers are lower in households where English isn’t the first language. Or maybe the non-compliers are showing up at arts events and support the arts, but they haven’t been pitched directly to pay the tax by the arts groups themselves. In any case, once we have some data we could start figuring out how to reach people and talk to them about the benefits of the tax. Coordination with the school districts that receive money from the city (there are six of them, not just Portland Public Schools) would be optimal, too.

I asked Lannom about the softer approach. “I agree that more marketing (we call it outreach) would be useful to increase generally knowledge of the tax,” he wrote. “Unfortunately, there is no budget for that. So our annual outreach includes an e-mail to all taxpayers that have given us one (which explains the benefits of the tax), and a letter that does the same. There is likewise no budget for polling.”

Before I sent lots of Portlanders to collection agencies, I’d try outreach first. In the long run it will be cheaper in many different ways, including, but not limited to, the financial cost.

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Back in 2012, I supported passing the Arts Tax measure, not because it was perfect but because I thought the city’s school districts had failed their students in the worst possible way by eliminating arts instruction. The tax was a good way to tell them they’d erred badly, and that the public was taking the matter into its own hands to make sure kids received arts classes.

I also agreed with tax proponents that the culture was in danger of drifting ever more deeply into “arts haves versus arts have-nots,” and that everyone deserved access to accumulated wisdom and delight of the culture. Existing arts organizations seemed a likely vehicle to provide this access, and the tax, they said, would make it financially possible for them to embrace this important task.

Frankly, I would have doubled or tripled the tax, to make sure every student could take arts classes, not just the kindergarten through fifth grade kids the tax proposed to serve. Plus, I would have started seeding Portland neighborhoods with arts centers, like the Multnomah Arts Center, so that instruction, ongoing artmaking, performances and exhibitions could happen everywhere. That might really have changed the dynamic in the city. At that rate, too, a graduated tax would have been possible, rather than the $35 all eligible taxpayers (those above the federal poverty line) must pay (which is much cheaper to administer than a graduated tax).

We rarely get to vote for exactly what we want, though, and I thought the more modest goals of the arts tax measure the city passed were also worthy ones. After all, Portland is already transforming itself from a small regional city devoted to shipping out the state’s natural resources and agricultural products into a larger global city that depends on its creativity—in design and technology of all sorts, research, consumer businesses, and the arts—for success. One of the best ways to feed that creativity is a culture infused with the arts, because in both making them and contemplating them, we prepare to make the imaginative leaps we need to make to stay competitive, or really, MORE than competitive.

All of this is just to say that I think making the arts tax work better is a good idea, and that’s the underlying assumption of this post. In a democracy, we’re all about making things work effectively and more fairly, or at least we should be.

So, yes, I’m about to slam The Oregonian’s editorial board one more time—it’s so much fun!

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The board has displayed a near-constant disdain for the arts tax from the beginning. I’m asked all the time by “civilians” (those not involved directly in the arts) why The Oregonian is so over the top on this issue. The arts-involved just hate them for it. (You can read the beginning of my disillusion with the board’s feeble intellectual efforts to discredit the tax if you want.)

In the board’s most recent attempt to kill the arts tax, it argued that the tax is “dysfunctional” and “flawed,” based on the auditor’s report. As usual, it was misleading, if not downright dishonest: People “with only a few dollars in income” do NOT actually have to pay the tax, as the board says. (You have to be above the federal poverty line to pay, unless you are a dependent in a household above the federal poverty line AND you make more than $1,000.) This is the editorial’s culminating point. And it’s false. The tax also does more than supply arts teachers to Portland classrooms, which is the only outcome the board mentions—and denigrates.

The board  has only gradually arrived at this false point, though. In many previous iterations, especially the earliest ones, their argument came down to this: 1) the arts aren’t important to students, and 2) the public should never tax itself to ensure the health of its arts sector. Many studies have shown the importance of arts education, of course, especially for children most at-risk for dropping out of school. (Here’s one that came out today on the effect of music lessons on the brains of adolescents.) They stay in school at higher rates and they do better while they are there. The board never cited a study that argued the counter position: They just asserted it. To the Libertarian point on public money for the arts: We live in a democracy, and we can tax ourselves for purposes we think are important. Preserving the culture’s art from the past 2,000 years is just such a purpose.

Of course, the editorial board is not consistent. They argue that we should give developers tax breaks, or lure outside businesses here with tax breaks, or give tax breaks to companies we want to stay here and are threatening to move. But for some reason we shouldn’t support a major and growing business sector with critical connections and influences on the most important financial activity we are pursuing here right now—the arts. Possibly they flunked that art history class back in the day, or maybe the test on the Golden Ratio. I would also point out that they didn’t do the responsible thing: Encourage non-payers to pay the tax. Which is why I said it in the headline of this post.

Willamette Week, another anti-arts tax newspaper, basically on the same grounds, didn’t opine on this auditor’s report, at least not that I saw, though the once-alternative newspaper did continue its experiment in radical transparency (“anything we find out and can type up is news”) by linking to a list of everyone who had paid the tax. They then had to answer questions about their own editor, who wasn’t on the list, but who apparently doesn’t live inside the Portland city limits and therefore doesn’t have to pay it. Which should have been instructive about the issues involved in publishing the list in the first place—just because you are NOT on the list, doesn’t mean you are breaking the law.

Maybe I myself have done what I mocked (obliquely, I hope!): I’ve made a mountain out of a molehill. The amount of money is small, the arts tax is working mostly as hoped, and predictable mischief has come from predictable places. We had a little boomlet of interest in the arts tax from the rest of the media, insofar as they could figure out what was going on. When school opens in the fall, thousands of kids will be taking a music class or some other arts class that they wouldn’t have been able to take before the tax…to which, I say, “Hurray!”

The problems? Pretty sure we can figure them out.