In the 1990s, Measures 5 and 50 took away local control of property tax revenue and artificially capped it. The result of these measures is that revenue has not kept pace with inflation and property taxes are not sufficient to support local government expenses. Without additional revenue, the City will have to reduce services to the community, including police and fire services. After considering many options and input, the Salem City Council has proposed two options for new revenues to support essential City of Salem services.
How much revenue is needed?
To maintain essential city services and to meet the needs of the community in the next several years, the City needs to raise $16.2 million. With this funding, the City will invest in the community's needs for public safety, parks, library, and planning and development services to our neighborhoods. With the additional revenue, the City would be able to add fire fighters, police officers, Library hours, or maintain parks. Specifically,
by the 2022 fiscal year, we could have 22 additional police officers, a new fire station, and full funding for the Homeless Rental Assistance Program, and much-needed additional support to our services in the community.
How can the needed funds be raised?
Together, an operating fee and employee-paid payroll tax will help fund needed City services and provide the most flexibility in raising revenue. Revenues generated by the operating fee proposal would support ongoing library, park maintenance, police, fire, emergency and social services, and other essential services. Revenues generated by the employee-paid payroll tax proposal would be dedicated to keep pace with our community's public safety.
Operating fee proposal
On September 23, the City Council agreed to consider the operating fee proposal at future council meetings to support parks, library, and planning and development services to our neighborhoods. A City operating fee is a separate fee to support City services. In Oregon, 50 cities use an operating fee to help pay for city services. The operating fee could be based on the type of use (a single family home could pay a different rate from an apartment building, for example). The operating fee is not based on the property value.
When: As soon as February 2020.
How: The fee would be collected through City of Salem utility bills.
New Revenue: $7.1 million in 2020 at $8/month on single family residences, $6.40/month per unit for multi-family residential accounts, and $38.56/month for public, commercial and institutional accounts.
Employee-paid payroll tax for public safety proposal
On August 12, the Salem City Council held a public hearing to consider employee-paid payroll tax and operating fee options for new revenues to support City of Salem Services. The City Council referred the employee-paid payroll tax option to fund public safety to the voters for the May 2020 ballot.
Based on a percent of total wages paid, an employee-paid payroll tax would be paid by all employees in Salem's private and public sectors. All members of our community, including those who commute to Salem for work, enjoy the benefit of services provided by the City. Residents share in some of the cost to provide public safety services with property taxes; the more than 60,000 commuters who work in Salem do not. By including commuters, the cost of providing service would be shared by everyone who works in Salem. As our economy grows and more jobs are available in Salem, revenue from this source will also grow.
When: The employee-paid payroll tax will be referred to voters for the May 2020 election. If approved by voters, the revenue would be dedicated to public safety and could be available as early as July 2022.
How: The employee-paid payroll tax would be collected by Oregon's Department of Revenue on wages earned in Salem (not retirement income).
New Revenue for public safety: $9.1 million in 2022, using a tiered rate structure with most workers paying a rate of 0.39% on income earned within the City limits. At 0.39%, a person working in Salem earning $50,000 annually would pay $195 per year. Employees earning minimum wage would be exempt and those earning a wage up to and including $15 per hour would pay a lower rate of 0.266%.
Estimate your employee-paid payroll tax using this
Why are we looking at revenue options now?
Meeting the needs of the community has put the City's financial health is at risk. Recurring expenditures exceed recurring revenues. As a result, the City is rapidly reducing our working capital or savings account. This proposal will align revenues and expenditures while maintaining an appropriate level of working capital for City operations.
The City has restored services cut during the recession. Changes in the economy forced us to make big changes in 2009 and 2013 to the services we were able to provide. We closed two fire stations, reduced library hours, recreation services, and support to neighborhoods. Since then, we've re-opened the two fire stations and have made improvements to services the community expects and values.
We have stepped in where our community has asked the City to fill gaps. In the 2017 Strategic Plan, residents looked to the City to do more to provide affordable housing and serve the homeless in our community. For example, launched in 2017 with $1.4 million from the City’s General Fund, the Homeless Rental Assistance Program has led to permanent housing for more than 200 chronically unsheltered in our community. Traditionally, this valuable work has been outside the City's core service areas. This continuing commitment, in addition to costs of ongoing services, outpaces available funding.
We must move to align our services with available funding within the next two years, by fiscal year 2022. Without reducing the services we provide our community or adding to our revenue sources, the City's General Fund working capital will be almost gone by June 30, 2022. We will not have enough resources to fund services for the following year.
Being more efficient helps but is not enough. We are always looking for ways to be more efficient and continue to provide high quality services the community expects. To be good stewards of the resources entrusted to us, we are using technology in new ways and changing the ways we provide services, using more energy efficient products, charging for services that make sense, and engaging volunteers and foundations to support community services.
Revenues are not keeping pace with community need.
As our community continues to grow, the needs for essential City services grows. In the last ten years, our population has grown by more than 9%. City services rely on people. Our staffing today is lower than it was in 2008. We expect 60,000 more people by 2035.
- As an example, one measure of public safety is officers per 1,000 people in a community. In Salem, officers per 1,000 people is 8% less than it was ten years ago. During this same time span crime rates have increased by almost 22%. The nature of criminal activity and the increasing complexity of investigations have added to the workload shared among fewer officers.
- In our parks, Salem has grown park lands by 25% and miles of walkways and trails within our parks by 68%. As of 2018, Salem has 14.13 acres of park land per 1,000 residents. Staffing for needed parks maintenance has not kept pace, increasing by three positions (or 8%) and some of the park land is not yet ready for community use.
- In our community, code enforcement officers respond to neighbor complaints of dangerous properties and trash, junk, and debris and concerns about public health, safety, and welfare. Calls for help are increasing but, there are 27% fewer staff than 12 years ago.