City News

Revenue task force recommends boosting city property, income taxes

Salem’s revenue task force is recommending the city cover its costs by raising property taxes and creating a new income tax. The money would fund the library, emergency services and other city operations.

The city-appointed group was  tasked with finding ways to bring money into the city as it faces a multi-million dollar gap between its costs and revenue. Task force members worked while incorporating conflicting community feedback and accompanied by the specter of the failed payroll tax.

The group’s final meeting took over two hours on Wednesday, June 26, and focused on finishing touches to the recommendation to make their priorities clear to councilors and the public. They have been at work for five months.

The task force also recommended raising the fees charged to businesses operating in the city.

The task force will present its recommendations to the Salem City Council July 15. The recommendations don’t include extensive strategies to establish the new revenue or specific numbers.

Bill Smaldone, a task force member who was a councilor from 1999 to 2002, said during the meeting that he’s been hearing all the same arguments about the city needing to restrict spending for the past 20 years rather than raise new revenue, despite the evidence of revenue issues.

He said the task force put together a good package of options.

“For the first time in a really long time, the city councilors that get elected in this city can vote for things – can vote to improve the quality of life in this city by raising the level of services so that we’re not always faced every year, over and over, with what’s going to be cut,” he said.

The task force was not assigned to consider budget reductions, which the city council finalized on Monday for the fiscal year that starts July 1.

The group of 29 community members on the task force included business owners, former city councilors, state employees, community organizers, budget experts and more. Here’s what’s in their eight recommendations.

New property tax

The task force recommended a levy that would add a new property tax to be used for specific city services. The levy, which would take city voter approval, would be in place for five years. 

The task force suggested a levy could be crafted in two ways. One would be a “livability levy” to fund the library, parks, recreation and Center 50+. Another option would be a “public safety levy” to fund police and fire.

Such a levy could bring in up to $55 million a year, according to the recommendation packet prepared by consultant group Moss Adams. That would be from the highest potential tax rate of $6 per $1,000 of assessed value.

Noting that city leadership tends to favor funding police and fire, members of the task force leaned toward the “livability levy,” saying they wanted to make their support for those services clear, but ultimately voted to include both options.

Ahead of the meeting, library advocates said they’d like to see the “livability levy” on the ballot next May. Commenters included Jim Scheppke, former state librarian, and David Levy, who chairs the Salem Public Library Advisory Board but spoke as an individual. 

“I guarantee you library enthusiasts, parks enthusiasts, Center 50+ enthusiasts, we would work so hard to pass that. We would run the best campaign this city has ever seen,” Scheppke said.

Walter Perry and Christine Chute, who bought their Salem home because it was so close to the library, pose with their signs at a rally in support of the service on Sunday, April 7 (Abbey McDonald/ Salem Reporter)

Personal Income Tax

The recommended personal income tax would apply to people who file their income taxes within the city of Salem, not including workers living outside Salem. The committee encouraged the council to put such a new tax before voters.

The recommendation is tied to the task force’s long-term goal that the city adopt a more progressive tax structure by revising current city taxes, such as the operation fee now assessed through utility bills.

The task force narrowed language for the new income tax, eliminating phrasing that it could apply to those who live outside the city. The city’s payroll tax proposal last year drew heated opposition in part because it taxed every worker within the city limits regardless of where they lived.

“I think upon initial blush, the public could actually look at this and say ‘here we go again’ instead of what our intention really is,” said member Raquel Moore-Green, who works for the Oregon Senate Republican office.

The task force indicated it wanted high earners to pay more, and that members don’t want any additional taxes on low-income residents. The task force opted to not include a minimum income it would apply to, saying they wanted more public input before defining who should pay. 

Member Becky Beaman was apprehensive about not including a minimum salary, but ultimately voted for the more generic phrasing.

“It was clear from (the city council’s) approach to the wage tax that they are geared toward a regressive, flat fee,” she said during the meeting. “I don’t want to leave it up to them and expect them to be compassionate about the lower income folks.”

In the recommendation packet, Moss Adams said a new income tax could generate up to $92 million a year for the city.

The recommendation acknowledged  that the tax will likely face significant political opposition.

Other options

Business license fees

The recommended use of business license fees could happen several different ways, including a fixed amount per business or tiers based on size. It would likely be paid by businesses annually. It is estimated to bring up to $4 million a year.

Task force members discussed potential impacts, and business owners on the team made a final effort to have it removed from consideration. They lost that vote 7-15.

Bill Riecke, president of Bark Boys Landscaping Supplies, said he wanted to see more limitations on the business fees, noting that it was the business community that rallied against the payroll tax.

“I don’t know that the city wants to take on the business community again for something that’s not going to net a whole heck of a lot,” he said. 

Beaman said that a major factor will be the amount businesses pay, which will be defined in later city processes. She also noted that some businesses already pay a fee for their licenses to operate in Salem.

“I find it difficult to believe that a food truck can pay for a business license, and other businesses can’t,” Beaman said. 

Franchise fee increase

The city’s existing franchise fee is 5% for utilities using Salem-owned rights-of-way, and a 7% fee for telecommunications and solid waste. The proposed increase would bring in up to $6.8 million.

Increasing the frozen base of Urban Renewal Areas

The task force recommended reforming the city’s process for urban renewal districts to send more money to the city for general expenses, diverting money that otherwise would be spent on economic projects in the districts.

An opponent of Salem’s payroll tax tables at Salem Reporter’s Town Hall Meeting on Oct. 11, 2023 at the Elsinore Theatre (Laura Tesler/Special to the Salem Reporter)

Long-term options

The task force also recommended three long-term options,:

-Seek an annual payment in lieu of taxes from the state of Oregon. 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. 

-Form a new government organization that would include existing governments to then provide shared services such as homeless needs. An example would be 911 emergency services which answer calls outside city limits.

-Reform existing taxes and fees if the city moves ahead with a new income tax. A new city group should tackle that issue, the task force recommended.

Contact reporter Abbey McDonald: [email protected] or 503-575-1251

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Abbey McDonald joined the Salem Reporter in 2022. She previously worked as the business reporter at The Astorian, where she covered labor issues, health care and social services. A University of Oregon grad, she has also reported for the Malheur Enterprise, The News-Review and Willamette Week.