by Eric Shierman
One has to search far and wide to find an area of our local economy where the City of Portland imposes a less burdensome operating environment than its major metropolitan peers. However its benign treatment of food carts is one of them. A cynic might argue this is primarily due to the fact that as Portland’s food cart businesses began to take off earlier last decade, the most outspoken restaurant rent-seeker who opposed them was former Greek Cuisina owner Ted Papas, a bitter enemy of the Portland City Council establishment in general and Randy Leonard in particular. A more connected advocate’s pleas to limit the supply of food services in this city might not have fallen on deaf ears. After all, look at the highly effective political entrepreneurship of Portland’s taxi companies.
Rather than a lack of political entrepreneurship, I prefer to hope that Portland’s relatively fair treatment of food carts comes more from a local appreciation of real entrepreneurship on the part of people trying to make a living serving great food to people at a low price in this vast sea of owner-operators aspiring to be their own little master chefs. Indeed, our very own TV show Portlandia has helped portray food carts as a hip career path perfect for the city where “young people go to retire.”
I think they are on to something. I am a regular customer of several downtown food carts, two of them operated by a thirty-something with an advanced graduate degree (in the humanities). Spending a great deal of my free time at either Powell’s Books or Multnomah County Library’s Central Branch, I have learned that thought both locations are connected by the Portland Streetcar, it is much faster to walk the five blocks between them than to wait around for a mode of transportation that does not travel much faster than a human on foot. Along the way, at southwest 10th and Alder, directly across the street from one of Oregon’s most tony dining establishments, the Governor Hotel’s Jake’s Grill is a parking lot full of food carts offering quality food at a low quantity of dollars. Those that can process a credit card often get my business.
This kind of peaceful coexistence simply does not fly in most other cities:
That was LA; here is Buffalo:
Here is Chicago:
Here is Pittsburg:
The Institute of Justice puts out great Youtube clips to advocate in the court of public opinion, but they are also quite effective in racking up victories in the court of regulatory litigation as well. They have some very promising cases such as Castaneda v City of El Paso and were recently victorious in a similar case representing street vendors in Miller v City of Atlanta.
Portland even stands out when compared to other Oregon cities. It is far more costly to run a food cart in Gresham than Portland. Multnomah County food cart owners outside of Gresham must pay for the same yearly license that restaurants must obtain to finance regular and random county food safety inspections which amounts to a fairly reasonable user fee of around $500, but that is it. Portland imposes no additional fees on food carts simply for being food carts. The City of Gresham, like a few other Oregon municipalities, requires food carts to pay for their own permit fee above that, imposing a fixed cost of $1,440 up front to any entrepreneurs before they make their first sale. Food carts should be required to comply with the same regulations as brick and mortar restaurants but not get penalized above that simply for being a food cart.
In the case of Gresham, this is not just about lobbying for anti-competitive rules by established restaurants; it’s also about the city’s piece of the action. There are calls on the City of Gresham to lower its fees but city planners depend on that revenue. A common refrain is for cities to seek this additional permitting fee from food carts because of the mistaken notion that mobile businesses do not pay property taxes.
Food carts pay property taxes too. When food carts are mobile, they are most often parked in a residential parking lot at night which of course pays property taxes too; the revenue may be smaller, but it is likely proportional to that food cart’s lower output. Many food carts are not mobile at all, paying rent to a land lord who pays property taxes. Since restaurants’ physical buildings serve so many more people, the amount of property taxes they pay per unit of output might actually be lower than food carts.
This is a good example of why it is more economically efficient to tax sales rather than property, income, and investment. We don’t want policy makers incentivized to favor one particular business model over others simply because one yields a higher income or requires more physical capital and real estate.
Many Oregon towns have no food cart regulations at all, but that is primarily due to them lacking the kind of density that spurs the foot traffic food cart start-ups are looking for. The moment that state of affairs begins to change it’s amazing how quickly some small town “business advisory committee” declares “There ought to be a law!” This is what we see in Hermiston where an effort is being made to not only add permitting but to also do something rare in Oregon by actually imposing Chicago-like zoning restrictions to ban food carts from entire areas of even this small eastern Oregon city.
In terms of public policy, this is not small ball. The deregulation of these occupational licensing restrictions across many different types of businesses stands out as the most salient thing we can be doing right now to spur job creation. These regulations simply seek to maintain the barriers to entry blocking smaller, innovative start-ups with lower cost structures, and existing businesses are always conspiring with lawmakers to raise them. When new business models succeed primarily because their costs are lower, that is a good thing, ultimately creating more prosperity and opportunity for all of us. That the City of Portland gets this right in its treatment of food carts is something we should appreciate. Let’s cross apply this basic economic principle to push the city to expand this liberalization to other areas such as transportation services.