On June 24, 2019, the Salem City Council adopted the 2019-2020 budget. The budget goes into effect July 1, 2019.
While the City of Salem is in good fiscal health overall for a $632 million enterprise, it faces some challenges. The challenges are most severe in the City's General Fund. Here's what you need to know.
What is the General Fund?
The General Fund is like a checking account. 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. To pay for these services, Salem is using working capital, which is like money in a savings account. As a result, the City will be unable to pay for these services at current levels. Revenue the City receives from taxes, fees and other sources must be enough to cover the cost of providing the services Salem residents ask for.
One way to measure the City's financial health is how much working capital is left after we pay for services supported by the General Fund. Without changes to the services we provide our community or to our revenue sources, the City's General Fund working capital will be gone by June 30, 2022. This means we will not have enough money to pay for these services. We will not be able to continue doing all we do. There are big decisions ahead for our community.
These changes will have an impact in our community. We continue to make changes inside the organization save money and cut costs. We reduced the number of staff in the General Fund by the equivalent of 6.75 full-time positions. Several currently vacant positions will remain vacant. The Deputy City Manager position is being repurposed to a Chief Financial Officer, who will also assume Budget Officer duties.
How did we get here?
- We have stepped in where our community has asked the City to fill gaps. In the 2017 Strategic Plan, residents told 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. The Great Recession 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.
- 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, the 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 $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.
- 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.
- 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 public money 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.
Our commitment to you is:
- To continue to improve. We will keep looking at our operations across the organization for opportunities to do things more efficiently and to continue to provide the high quality services our community expects.
- To keep the conversation going. We will share how decisions could be made so that we can be more responsive collectively to the changing financial climate.
- To plan and fine-tune changes in services to best meet the needs of our continually growing and changing community.
What's happening next?
2019-2020: Considering choices for raising revenues. Last year, a task force looked at ways we could fill funding gaps with ideas for new revenue. If moved forward, proposed revenue options would help fund community services and programs. On July 8, 2019, the Salem City Council will consider options for new revenues to support City of Salem services.
2021: Updating Salem's Strategic Plan. After conversations about what funding levels are right for our community, we can begin considering a new three-to-five year vision for Salem to guide how we grow and change within our means