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In November 2018, Portland voters were asked to support a 1 percent gross-receipts tax on large retailers to fund green-energy projects and job training. The tax was promoted as applying to 鈥渓arge retail corporations, such as Wells Fargo, Apple, Comcast and Banana Republic,鈥� according to campaign materials.

Nearly a year later, clients of large construction companies are surprised to find themselves footing the bill. Major institutions such as Oregon Health & Science University have told general contractors to include the tax in projected budgets, and some pending project teams are waiting on further clarity.

鈥淲hat was sold to voters is it was a tax on large retailers,鈥� said Dan Drinkward, vice president of Portland-based Hoffman Construction. 鈥淲e were surprised by the guidance that came out of the city that said it applied to construction firms, and we are working with the city and have had informal conversations with other stakeholders to try to clarify the rules so it would not apply to construction firms.鈥�

Months after the measure’s passage, the city’s Revenue Division in April interpreted the initiative’s wording broadly, issuing guidance that construction firms and other service providers qualify as retailers subject to the tax.

鈥淏asically, construction is a service,鈥� said Scott Karter, spokesman for the Revenue Division.

The city so far has collected about $11 million from the tax, Karter said. The Revenue Division declined to specify how much of that came from the construction industry because, he said, it could lead to identifying individual taxpayers.

The Portland Business Alliance is leading an effort to persuade the City Council to carve out exemptions.

鈥淚’m very hopeful that those conversations will be fruitful and the clarification will come through the city that construction is not affected,鈥� Drinkward said.

It’s not clear what degree of support a construction exemption has among commissioners. A spokesman for Mayor Ted Wheeler, who controls the key bureaus, declined to comment.

With the possibility of a change in city policy uncertain, developers, builders and clients are beginning to take the tax into account.

鈥淭he uncertainty is affecting projects right now,鈥� Drinkward said. 鈥淚t’s a significant impact to project budgets. Schools, hospitals, airports and other important projects are grappling with how to put this into their budgets, adjust their scope, or otherwise plan for this.鈥�

OHSU has directed its general contractors to include the 1 percent tax as a budgeting line item, and to incorporate the tax into the guaranteed maximum price, according to a Sept. 17 email from Jennifer Taylor, OHSU’s director of design and construction, to general contractors.

鈥淥HSU is aware of a potential cost increase associated with the聽city’s clean energy surcharge,鈥� spokeswoman Tracy Brawley stated in an email response to questions. 鈥淯ntil the聽city presents its plans for implementing this program, the specific impact to OHSU is unclear.鈥�

The tax essentially adds 1 percent to the cost of any large project. Drinkward gave the example of the new Lincoln High School, an upcoming Portland Public Schools project with a $200 million price tag. The tax could affect what ends up being included in the project, he said.

鈥淵ou know, it’s $2 million,鈥� he said.

The tax applies to all 鈥渞etailers鈥� with more than $1 billion in annual global revenue, and $500,000 in revenue generated within the city of Portland.

While the revenue data of the privately held major construction firms are not public, industry officials said firms including Hoffman, Fortis, Turner, Skanska, Mortenson, JE Dunn, Kiewit, Howard S. Wright and Knife River are likely subject to the city’s tax.

A representative of a business-backed tax policy group said Portland’s gross-receipts tax, which was passed by initiative rather than the legislative process, was not drafted artfully.

鈥淭hey attempted to create a retail sales tax borne by business, and in doing that, they created a whole bunch of issues,鈥� said Nikki Dobay, Portland-based senior tax counsel for the Council on State Taxation, a policy and advocacy group based in Washington, D.C.

鈥淭here’s no definition out there of a retail service,鈥� she said. 鈥淭hat’s going to be a major issue for many taxpayers.鈥�

Traditional retail sales taxes, of course, are paid at the point of sale. That is not the case for Portland’s gross-receipts tax.

鈥淭hey’re trying to implement it in a manner more similar to an income tax,鈥� Dobay said.

Portland’s construction industry has enjoyed flush years since the Great Recession, riding population and jobs growth that brought expansions in the office, multifamily, hospitality and industrial sectors. Even with warning signs of a slowing global economy, hundreds of millions of dollars in voter-approved school and affordable housing projects should continue to buoy the local construction industry, Drinkward said.

鈥淲hat this tax could do is push some development out of Portland,鈥� he said.

On Sept. 25, the City Council appointed five people to a newly created Clean Energy Fund Benefits Committee that will award grants generated by the tax revenue.