Salem is nearing a “budget cliff” where the cost of providing residents with basic services like firefighting and building inspections is outpacing the city’s ability to collect taxes and other revenue.
That’s according to Josh Eggleston, the city’s chief financial officer, and Kristin Retherford, interim city manager, who are presenting the city’s proposed budget for the 2022-23 year to the city’s budget committee over the coming weeks.
Both city leaders said Salem is in decent shape for the upcoming year thanks largely to federal Covid relief funds which are still being spent to pay for city operations and create a number of new programs intended to get Salem’s homeless residents off the streets.
But Retherford said city government faces an uncertain future because the cost of providing public services to a growing city rises faster than the city’s ability to collect new taxes under Oregon law.
“We are at a tipping point. We are as lean as we can be as an organization without significant investment in further automating some of our processes and services,” she told budget committee members during an April 20 presentation. “Because we are so lean and having challenges filling vacancies … response times and serving the public are becoming slower.”
The upcoming budget
The city’s proposed budget for the upcoming year calls for spending a total of $736 million, an increase of about 5% from this year. Of that, $165 million is budgeted for the general fund, which pays for most routine city services including police, fire, municipal court and library and parks operations. That’s a 1.7% increase over this year.
Most of the remaining money is tied to specific funds that can only be spent on specific services or items. The largest are the utility fund, budgeted at $137 million, which pays for services like drinking water, and the capital improvements fund, budgeted at $150 million, which pays for improvements at city parks and the construction of a new center to connect homeless people with needed services.
Retherford said the budget neither eliminates positions nor provides new services, though it does add 27 full-time staff positions to keep up with growing need in some city departments, she said. It also does not include new revenue for the city.
The budget adds jobs including five human resources employees to help with hiring, four park operations staff and three firefighters. Eggleston told Salem Reporter those fire positions are intended to be budget neutral since they will allow the department to spend less money on overtime for existing firefighters.
Retherford said that currently, the city spends $8 to $9 million more per year on its general fund than it collects in taxes to provide basic services at the current level. That doesn’t account for the fact that department leaders say both the fire and police departments are severely understaffed, and demand for services like code enforcement and building inspections are growing as Salem adds more people and buildings.
A recent police department staffing analysis called for 60 additional officers, and the budget summary says Salem needs 10 additional fire companies to meet its goals for emergency response times citywide. The budget doesn’t outline what those additional services would cost.
Homeless services uncertain
City councilors have established programs to address homelessness over the past two years that don’t have long-term funding.
Those include funds for a micro shelter village run by nonprofit Church at the Park in northeast Salem, and a sanitation response team created to help clean up encampments. That program includes seven employees across three departments and is funded in the proposed 2022-23 budget at $939,360, paid mostly with federal relief funds.
Eggleston said there’s currently no plan to sustain those services when federal funding runs out, which is expected to happen in 2024.
“Right now they’re being funded with one-time revenues. We don’t have a funding source,” he said.
The city also received state grants to fund construction and the first two years of operations for a navigation center, a place homeless residents can go to get connected to services to get them off the streets. But sustaining that would need a new source of money once that grant expires.
One-time funds bridge gaps
In an interview with Salem Reporter, Retherford and Eggleston said the city can provide services without new revenue this year in large part because of federal relief funds that haven’t been fully spent.
But over the next few years, the gap between operating costs and tax revenues is expected to grow, and Eggleston said city councilors will likely need to identify new ways for the city to raise money.
Salem’s tax revenue, like other local governments in Oregon, is limited by two ballot measures Oregon voters passed in the 1990s to limit property taxes. The first, Measure 5, passed in 1990 and capped the total amount of non-school property taxes local governments could charge.
Measure 50, approved in 1997, capped cities and other taxing districts at their 1997 levy rates, and said the value of assessed property couldn’t grow more than 3% per year.
Eggleston said that rule can limit city losses during recessions, but when home values are growing quickly and inflation is high, it makes it difficult to keep up.
City councilors in 2019 approved a utility fee of $8 per customer per month as one way to shore up the general fund.
Councilors also intended to ask voters to approve a payroll tax in the May 2020 election, but scrapped the plan after the pandemic hit.
Councilor Virginia Stapleton, who chairs the budget committee this year, told Salem Reporter she expects councilors will look for additional ways to raise revenue once they wrap up several longer-term projects later this year, including an overhaul of the city’s zoning code.
Councilor Chris Hoy, who is also a state representative, has previously suggested passing a law that would require state government to pay the city annually as a way of offsetting the additional fire and police expenses associated with being the state capital, including responding to protests at the Capitol and calls at Oregon State Hospital and state prisons.
The city’s budget committee will meet to consider the budget Wednesday, May 11 at 6 p.m. after hearing several presentations about it. Another meeting may be held May 18 if needed. Meetings are held virtually and live-streamed on the CC:Media YouTube channel. View the May 11 meeting here.
Once the budget committee makes a recommendation, the budget is presented to the city council for a public hearing and adoption in June.
Residents may provide written testimony by sending an email to the Budget Committee at [email protected]
BUDGET COMMITTEE MEMBERS:
Mayor Chuck Bennett, city councilors Virginia Stapleton (chair), Tom Andersen, Trevor Phillips, Jackie Leung, Jose Gonzalez Chris Hoy, Vanessa Nordyke and Micki Varney.
Citizen representatives Andrew Cohen, Derik Milton, Irvin Brown, Evan Sorce, Paul Tigan, Roz Shirack, Stavey Vieyra-Braendle and William Andersen.
Contact reporter Rachel Alexander: [email protected] or 503-575-1241.
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