Revenue to Fund Essential City Services

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.

Update

  • On August 12, the Salem City Council held a public hearing to consider an employee-paid payroll tax option for new revenues to support City of Salem services.  The City Council referred this option, to fund public safety, to the voters for the May 2020 ballot.

  • On September 23, the City Council will consider an operating fee proposal to support City 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 can help fund needed City services and provide the most flexibility in raising revenue. Revenues generated by the operating fee proposal would be dedicated to support library, park maintenance, social services and other services. Revenues generated by the employee-paid payroll tax proposal would be dedicated to support public safety.

Operating fee proposal

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: This revenue could be available as soon as February 2020, if enacted by Council.

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 for multi-family residential units, and $38.56/month for public, commercial and institutional accounts.

Employee-paid payroll tax for public safety proposal

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.

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 calculator.

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. 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.

  • These are hard choices. If we are unable to raise money within the next two years, we will not be able to continue doing all we do.

  • City Council, in conversation with our community, would provide direction on options for reducing City services. An $8 million reduction to services in the General Fund would be the equivalent of decreasing services by 65 police officers, or five fire stations, or all park maintenance and all the Library services.

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.

Background 

Revenues are not keeping pace and community needs exceed available resources. This situation has taken time to develop and is rooted in property tax ballot measures from the early 1990s which capped property tax revenues. As a result, money the City receives from property taxes is not keeping pace with inflation, population and development growth, and the increasing costs of City services.  This year (July 1, 2018 to June 30, 2019), expenses are estimated to be about $5.2 million more than the revenues we take into the General Fund. The General Fund supports Police, Fire and emergency medical services, the Library, operating Salem's parks, and supporting Salem's neighborhoods.

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. 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've restored services. 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.

Costs of services are increasing. City services rely on people. Costs to provide service have increased as the cost of public sector retirement escalates and as Salem remains a competitive employer in a robust job market.

Other sources of funding are limited to specific services or projects. For example, a portion of State-collected gas taxes helps pay for streets and bridges. Water fees paid by residents, businesses and other local customers can only be used to pay for new drinking water treatment, equipment, and pipes to get the water to your home and business. Funds from recent voter-approved bonds for a new police station and upgrades to the Salem Public Library can only be used for those projects.

Revenue timeline

 Time period Activity
1990sOregon voters approve permanent property tax rates and limits to annual growth in property tax revenue. Costs of providing City services are separated from revenue for those services.  In Salem, these services include police, fire, library, recreation and parks maintenance, neighborhood support.
2009-2013

Salem cuts more than 80 positions from its General Fund budget in response to economic downturn's effect on revenues.

  • Elimination of the Community Services Department
  • Closed two fire stations
  • Reduced library hours
  • Discontinued City operation of two pools
2017-18Reopen Fire station 8, respond to Strategic Plan priorities with Homeless Rental Assistance Program, discontinue General Fund support for Transportation Services Fund.
2018-19Reopen Fire station 11
Fall 2018Revenue Task Force meets to examine 13 revenue options, recommends two options for the General Fund and one for increased transportation funding.
April 15, 2019City Council and Revenue Task Force hold joint work session
June 17, 2019City Council holds work session on operating fee and employee-paid payroll tax
July 8, 2019City Council directs staff to prepare ordinance for operating fee and for employee-paid payroll tax
August 12, 26First reading, public hearing, and second reading of the operating fee and employee-paid payroll tax
2020City maintains current staffing levels with operating fee ($7.1 million)
2022Employee-paid payroll tax ($9.1 million) allows City to maintain current services to keep pace with increased needs and city growth.  Possible examples include increased Police and Fire service, increased library hours and services, and homeless assistance programs
2035Estimated 60,000 more people live in Salem

 

​A 14-member Sustainable Services Revenue Task Force was asked to identify revenue options to sustain services. After looking at details of 13 options, the Task Force recommended two options for General Fund revenues to the City Council. The General Fund revenue options were recommended as methods to fund City services, share cost of service among Salem residents, commuters and businesses, and provide the most flexibility in raising revenue. The group included representatives from:

  • Salem City Council and Budget Committee
  • Salem 350
  • Straub Environmental Learning Center
  • Salem Fire Foundation
  • Salem Police Foundation
  • Marion and Polk Counties Homebuilders Association
  • SEDCOR
  • Salem Parks and Recreation Advisory Board
  • Oregon Marshallese Community Organization
  • Latino Business Alliance

The City's General Fund supports public safety, planning, code enforcement, public library, social services, municipal court, parks and recreation, and other services that provide a citywide benefit. In recent years, expenditures to fund essential City services have exceeded revenues received. The City has funded the difference from its working capital account, which is like money in a savings or reserve account. The City's financial health is measured by its ability to align its expenditures with its anticipated revenues while maintaining a fiscally responsible level of reserves.

If the City does not align its spending with its anticipated revenues, the City's General Fund working capital will be gone by June 30, 2022. This alignment can occur by increasing revenues and decreasing expenditures.  Without additional revenue, we will not have enough money to pay for all the services we provide today.