Salem could receive about $5 million per year from the state of Oregon to plug a budget deficit under a bill proposed by a former Salem city councilor.
The payment, which could come as soon as this year, is intended to compensate the city for the high amount of state-owned land in the capital.
State land is exempt from paying the property taxes that cover city fire, police and medical services. That means Salem collects less in property taxes than similarly-sized cities which have more privately-owned land.
Rep. Tom Andersen, a Salem Democrat, introduced HB 4072 ahead of the start of the 2024 legislative session starting Monday, Feb. 5.
It’s the latest iteration of an idea Salem leaders have pushed for years that failed to gain much traction in the Legislature or with state leaders. A similar effort from Salem Mayor Chris Hoy, who briefly served as a state representative in 2022, did not make it out of committee.
A city council effort to impose a payroll tax last year and its resounding defeat by Salem voters brought the issue to the forefront, with Gov. Tina Kotek saying in November that she’d sign a measure to compensate Salem if it reached her desk.
Andersen said Salem bears a unique burden as the home of the state Capitol. State facilities draw large protests which sometimes require police response, and city fire and emergency medical services respond to institutions like the Oregon State Hospital and Oregon State Penitentiary.
“That problem became clear to me in my eight years on the city council,” Andersen said. “We had to provide services for the state, and we weren’t getting any help with that.”
The city faces a $14.2 million budget shortfall in the next year, which would grow to $22.9 million in the next five years if city leaders don’t find a new revenue option, make cuts or both.
An annual payment from the state wouldn’t fill that gap, but would mean Salem needs to cut fewer services like fire stations or librarians.
During funding discussions last year, the city council opted to assemble another revenue task force to seek funding options. The group had its first meeting on Jan. 30.
Andersen’s bill calls for an annual payment to the city calculated by applying a fee rate to the total acreage of state-owned land in the capital. It would come from a new state fund, separate from the state’s general fund, which would start with $10 million.
If the bill passes during the 2024 session, Andersen said Salem would see payments later this year of between $5 and $6 million.
That’s less than the roughly $7.25 million he said the state would pay Salem if its land were subjected to property taxes.
It’s set up as a pilot program for Salem that other Oregon cities could later opt into. Any city could request the state send them calculations of how much money they could get by applying the same fee to state-owned land.
That’s a measure intended to draw broader support for the bill. Andersen said it’s drawn particular interest from legislators representing cities like Monmouth and Eugene which have state universities that occupy a significant real estate footprint.
A bipartisan group of Salem-area legislators have signed on to sponsor the measure, including Sen. Deb Patterson and Reps. Paul Evans and Kevin Mannix.
Kotek’s office is also supportive, Andersen said, and other affected parties are either supportive or neutral.
But getting bills passed during the short 35-day legislative session is a challenge, even when those bills have broad support, because there’s often not enough time for every bill to move forward. Kotek has called for a focus on housing during the session, and walkouts by Republican senators have brought sessions to a halt in recent years.
Andersen said he has faith he can push the bill through in 2024. But he hopes by introducing it now, he can at least ensure it’s passed in 2025 during the longer legislative session.
“I would be ecstatic if it would pass now and there is a chance because of the broad support I have. But in any event we need to start this conversation right now,” he said.
Reporter Abbey McDonald contributed reporting.
Contact reporter Rachel Alexander: [email protected] or 503-575-1241.
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Rachel Alexander is Salem Reporter’s managing editor. She joined Salem Reporter when it was founded in 2018 and covers city news, education, nonprofits and a little bit of everything else. She’s been a journalist in Oregon and Washington for a decade. Outside of work, she’s a skater and board member with Salem’s Cherry City Roller Derby and can often be found with her nose buried in a book.