In search of general fund dollars, Salem City Council considers possibilities of new tax, fee

Salem City Council held a work session Monday night to discuss ideas to raise money for the city’s general fund. Councilors met with staff and members of the Sustainable Services Revenue Task Force. (Troy Brynelson/Salem Reporter)

Salem residents could soon find a new expense on their water bill or a tax on their wages.

Those would be the practical impacts if Salem City Council moves forward with proposals to bring more money to the city’s general fund, which pays for services like parks and police officers.

But which idea could pass — or both — remains unclear after a work session Monday night. Questions also remain over how much money either idea could raise and whether voters will have a say.

The city of Salem needs to raise between $6 and $8 million annually, budget officials say, to cover rising expenses. If the budget continued as is, by July 2021 the city would start making cuts, according to City Manager Steve Powers.

“The city won’t be able to continue to do what we do at current service levels,” he said. “These would be big impacts on the community.”

Mayor Chuck Bennett called the situation “dire.”

“We need to start closing that gap and there are really two ways to do it: cut, or add revenue,” Bennett said.

The comments came as members of Salem City Council considered two proposals that would kick in extra money to the city’s general funds. Presentations by city budget officials showed the ideas aimed to raise at least $8 million a year.

One proposal is an operating fee and the other is an employee-paid payroll tax. Councilors voted 5 to 1 at the work session to discuss the proposals at an official council meeting, at a date yet to be determined. Councilor Tom Andersen and Mayor Chuck Bennett left the work session early and Jackie Leung was absent.

During the work session, however, councilors acknowledged both ideas need fine-tuning.

“Are they practical? Is it practical to actually collect some of these taxes? That’s a big question right off the top,” said Councilor Chris Hoy.

An operating fee would add a new, monthly charge to utility bills. Single-family homes and small businesses could pay $8.50 per month and apartment-owners could pay $6.80 per unit, while owners of larger industrial or commercial structures could pay $75 per month.

Meanwhile, an employee-paid payroll tax could cull half of a percentage point or less from paychecks of people who work in Salem.

The ideas came out of the Sustainable Services Revenue Task Force, tasked with finding money for the city. The 14-member task force met four times from September to November. Thirteen members voted yes to recommend the operating fee, while seven voted yes to recommend the payroll tax.

Councilors questioned the logistics of either proposal. Some did not like the flat fee on a utility bill because of concerns that some would be charged more than the water they actually used while others paid less.

For the payroll tax, Councilor Cara Kaser wondered what defined a Salem employee — whether it’s someone who works for a Salem-headquartered business, even if they work remotely, or someone actually working in Salem.

With a target to raise $8 million annually, councilors will have several questions to consider when they meet officially to discuss the proposals.

Council could support one proposal or both, council could try to raise more than $8 million, and council will have to decide whether it wants to put the proposals up for a vote or if it wants to enact the proposals on its own.

Mayor Chuck Bennett has endorsed letting voters decide whether to pursue the proposals. Hoy, the council president, said a citywide vote is an “open question,” but that council will have to make it clear to Salem residents why more money is needed.

“We’ve got to be able to tell a compelling story,” he said.

Hoy floated the idea that if the city raised more than $8 million per year, the extra money could be invested in ways to help the city’s homeless.

“If we can come up with one of these solutions to really address the homeless situation, that’s the kind of compelling story people are really willing to invest in,” he said. “If we can carve something out of that, that’s something I’d be interested in.”

There was a third option proposed by the task force: a gas tax. A gas tax, however, would have to be passed by voters and the revenues could only help pay for transportation funds like bridge and road maintenance.

Have a tip? Contact reporter Troy Brynelson at 503-575-9930, [email protected] or @TroyWB.