As the city’s general fund deficit persists and costs increase, the city is looking to change its operations fee to help pay for services like police and fire.

On Tuesday, Feb. 17, Salem city councilors met to discuss restructuring the city’s operations fee to be fairer for local taxpayers. It’s a conversation that has been ongoing since the fee’s creation in 2020, given that a small coffee shop is charged the same monthly rate as a major manufacturing facility. 

The fee, which is tacked on to utility bills, uses a three-tier system that charges a flat rate of $16.28 for residential properties, $13.02 for multifamily properties and $78.47 for commercial, industrial, institutional and public properties.

The work session was the start of the Salem City Council’s conversation about restructuring the operations fee, a conversation that is expected to continue as city staff develop potential options for changing how the fee is calculated. 

During the Tuesday meeting, councilors expressed interest in connecting the charges to a property’s usage of city services.

One option is an algorithm that assesses an individual property’s reliance on city services, using metrics like how much traffic a particular property gets or how often police and fire respond, and charging the fee accordingly, said Salem Chief Financial Officer Josh Eggleston during the meeting. 

Eggleston said that while the money generated by the fee goes into the general fund and helps pay for general city services, it mostly goes toward supporting the police and fire departments. 

Councilors also considered whether any added revenue from the fee should go toward future costs, such as staffing a new fire station, an ongoing project funded by the 2022 Salem Safety and Livability Bond, or to continue the city’s Safe, Clean and Healthy Salem initiative’s temporary expansion.

The city’s pilot program expanded police and cleaning crews downtown and in northeast Salem, and stood up a pilot program for a mental health crisis response team run by the fire department. The pilot program is funded using a mix of resources from the general fund, including money the city earns from providing ambulance service, and downtown paid parking revenue. Some private and county resources also support the program. 

Continuing the pilot program would cost the city $2.7 million annually. Expanding the program to other parts of Salem would double that cost. 

City Councilor Paul Tigan brought the motion to reevaluate the operations fee to council in December, and said Tuesday that as things currently stand, generating more revenue to pay for future services is aspirational at best. 

“Even these things identified in the staff report are, to be honest, aspirational. Like the thing that an adjustment to the operation fee might do is help us balance the budget in 2029, without any additional services to the community,” Tigan said. “That is a reality we have to face as a council. We might not like increasing it, we might not like differentiating it, and making it larger for some people, but we also know that we can’t go below our staffing levels for our police and fire, and this might be one of the few levers that we have the ability to pull just to maintain the services we have.” 

Tigan suggested creating a fee system that varies by business type.

“It might be more understandable, digestible if the algorithm put these properties into one of five bands where you have a very small business, it’s like a shop or a barber shop with a toilet… and then a slightly larger commercial account, a medium commercial account and a large commercial, and then perhaps an institutional account,” Tigan said. 

Councilor Vanessa Nordyke brought up charging the state government a higher operations fee given the large amount of state-owned property in Salem and the state’s heavy reliance on police and fire resources. 

“The state doesn’t pay for its usage of our public safety services. It has never adequately compensated us for the millions of dollars that our firefighters, our police officers and others spend in response to services needed,” Nordyke said. “I feel that that would be a way that we could get closer to them paying their fair share.” 

Tigan said as the conversation about restructuring the fee continues, it should focus on making things fairer.

Tigan urged his colleagues to steer clear of any perception that the operations fee is akin to another property tax. He said it is crucial to maintain why the restructuring is necessary to address the system’s issues.

During the meeting, City Attorney Dan Atchison explained the difference between the two. 

“The operations fee is intended at least to use different factors as a proxy for impact on city services. So, what type of use, how many trips are generated, those sorts of things. We are trying to create metrics so we can assess the rate properly,” Atchison said. “Property tax is really all about valuation and what creates value for the property, it’s the improvements on the property, the square footage, so in my mind it is a very different consideration.” 

Eggleston reiterated three future considerations for the council when it comes to restructuring the fee: bringing the rate down for smaller accounts and up for larger accounts, setting a minimum rate and then adjusting the fee accordingly or to focus on generating more revenue to cover future costs. 

He said city staff will now focus on developing a process for managing its data, getting community input on the matter and figuring out administrative processes. 

Councilor Shane Matthews said increasing the fee on businesses will translate into higher bills for everyone else, though he recognized it’s one of few revenue options for the city. 

“I admit there are very few levers but it also seems a little unjust that it is always the same community we are going to, the same people,” Matthews said. “It rolls downhill. If you increase it on the businesses, you still are going to increase it on the consumer in the end.” 

Salem City Manager Krishna Namburi agreed that being able to fund new services in the future is aspirational, and it should be a priority to balance the budget. 

“The other piece of it is also, as we are trying these pilot programs, I think it is important that before we ask the community to pay for more, or whether it is cost neutrality … before we ask for more money from this community, we need to show the community what we can do with that dollar amount,” Namburi said. 

Contact reporter Joe Siess: [email protected]. 

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