Councilor Julie Hoy seeks council repeal of payroll tax

Councilor Julie Hoy is proposing the Salem City Council repeal the new payroll tax, a move councilors will consider Monday, Aug. 28.

She made the move after county officials certified that petitioners had gathered enough signatures to force a city vote on the tax in November.

But whether a repeal of the tax would stop the vote isn’t clear.

That’s a matter of dispute between the city officials, who said the city recorder has until Sept. 7 to pull the measure off the ballot, and Marion County Clerk Bill Burgess, who said he’s obligated to conduct an election regardless.

The tax, which the city council approved on a 5-4 vote on July 10, would tax 0.814% of wages earned within Salem, about $42 per month for a Salem worker earning the city’s average wage of $29.90 an hour. Minimum wage earners are exempt.

The council’s decision would have started tax collections in July 2024 and would not subject the practice to a public vote for up to seven years. Oregon Business & Industry, a Salem-based business group, filed a petition to refer the tax to voters this November which earlier this month gathered enough signatures to qualify.

If the city council repeals the tax, it would render the outcome of the election moot and no tax would take effect even if voters approve it, said Ben Morris, spokesman for the Secretary of State’s office.

But he said whether the council can prevent an election from being held is unclear in election law. The process for a city government to put measures on the ballot is spelled out under city code and varies between Oregon cities.

“This is one of the areas where I don’t think there is explicit guidance in any of the manuals about this,” he said.

Morris said, ultimately, it’s Burgess’ decision and neither Marion County elections nor the city of Salem has so far sought formal guidance from the Secretary of State’s office.

Hoy said in an interview that she was told by the city’s legal team that a repeal, if approved by the council, would pull the issue from the ballot and would save the city the cost of the election.

Burgess, the county clerk, told Salem Reporter in a Monday email that to his understanding of referendum law, the payroll tax would still go to the November ballot, even if council were to repeal it. He cited the Oregon Secretary of State County, City and District Initiative and Referendum manual.

If the city council itself put the measure on the ballot, councilors would have until Sept. 7 to withdraw it, he said. But since voters referred it to the ballot, he said the election is likely set.

“At this point, I believe we are obligated to go forward with this measure on the November ballot. Petitioners have met their requirements to have their voices heard by submitting the requisite number of valid signatures. Of course, there may be legal arguments, procedures and actions that might bring a different result,” Burgess said in an email.

Courtney Knox Busch, city spokeswoman, said the Secretary of State’s office notified the city that Sept. 7 was the deadline for removing a measure. She wouldn’t answer Salem Reporter’s questions about the ordinance repeal process or the scope of Hoy’s proposed ordinance.

“The city will rely on our legal counsel, pending city council decision on this matter. It is too early to speculate about what happens next, without council’s deliberation and decision on the motion Monday night to repeal the ordinance,” Knox Busch wrote.

Busch and Hoy declined to provide a copy of Hoy’s ordinance, saying it would be disclosed publicly with publication of the city council agenda. Such proposed ordinances are public records.

Oregon Business and Industry said in a Tuesday email that it plans to prepare for the next phase of the election.

“The tax remains convoluted, will cost employees significantly, and will create an administrative nightmare for employers and the city itself. It is, simply, bad public policy. We are confident that voters will reject it,” Angela Wilhelms, president of Oregon Business and Industry said in a statement to Salem Reporter.

Taking the measure to the ballot would cost the city an estimated $220,000. Hoy said she hopes to avoid that expense by repealing the tax.

“Stop spending money ($220,000.00 more of the taxpayers money for a special election) on a tax you have said yourselves the voters will not pass,” Hoy said in a statement to her fellow councilors that she shared with Salem Reporter.

A June 12 report from the city estimated the tax would bring in $27.9 million per year, funds that aim to close a city budget shortfall and would pay for additional police and firefighters, as well as funding operations for several homeless shelters after federal money for the programs runs out. Councilors in favor said the tax would prevent impactful cuts to community services.

Council President Virginia Stapleton, who is leading the campaign in support of the tax, on Tuesday sent Salem Reporter a statement from the committee opposing any council repeal of the tax.

“Every Budget Committee member, including Councilor Hoy, understands that the only way to keep city services fully intact in next year’s budget is through additional revenue,” she said.

“The Committee to Save Salem believes that the best course of action now is to let voters decide this November whether or not they want to sustainably support the most basic services provided by our city, including police, fire, emergency response, parks, Center 50+, and the library as well as services for our unhoused neighbors. To say we should wait is just a polite way of saying we should cut services.”

Hoy said Monday that she didn’t have specific cuts or revenue alternatives to propose. She wants the city to dig into the budget’s structural issues and priorities. Last week, Hoy did not answer Salem Reporter’s questions addressed to councilors who voted no on the tax about revenue alternatives and specific cuts.

“I’m looking at it going, ‘what are we doing here?’ if things are not going well. It’s just simply not okay to ask for more money rather than look at how you’re spending,” Hoy said. “To me there’s no greater priority for government and city council than public safety.”

The payroll tax was presented as half of a two-part solution to address the city’s budget issues, paired with an increase to the city operations fee. That increase began in July, adding $5.50 per month for residential homes, $4.40 per month for multi-family units and $26.51 for industrial, institutional and commercial properties. In January, there will be a second 6.25% increase.

The payroll option was first suggested by the budget committee in 2018, and was set for the 2020 ballot before the city council opted to pull it due to the pandemic.

The budget committee, which includes all city councilors, met in April and May to consider the proposed budget. In a May 10 meeting, members voted 13-5 to recommend the council adopt the tax without a citizen vote.

Hoy said she felt this year’s budget process did not give her enough time to process the content of the proposed budget and to address questions. One example, she said, is the topic of staff vacancies which was brought up during the meetings but she felt was not fully explored.

“I’ve heard over and over again that there’s nowhere to cut. But I just don’t believe that,” she said. 

Managing Editor Rachel Alexander contributed reporting.

Contact reporter Abbey McDonald: [email protected] or 503-704-0355.

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