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Salem residents will likely vote on a property tax levy to offset a multimillion dollar deficit in the city budget next year.
The details of the plan, including what the levy would fund and when it would go to vote, remain to be decided.
Salem leaders met Monday for a work session to discuss different funding scenarios — and the layoffs, fire station and library closures and service reductions the city would face if no new revenue is generated.
The decision before them seemed to weigh heavy on the group.
“Tonight is the most important conversation that we’re going to have this year, maybe for the next few years even,” City Manager Keith Stahley said. “This is the start of a conversation that will shape the future of the city for decades to come. We have big questions ahead of us, and we need to start down the path towards answering them this evening.”
Hundreds in the community have pushed for a “livability levy” to fund the library, parks and Center 50+. Dozens sent in testimony in favor of the levy. During the meeting, leaders referenced the possibility of a public safety levy to fund police and fire services. One proposed rate would mean an owner of a $300,000 house would pay an additional $500 a year in property taxes.
Stahley outlined three possibilities for the timeline of such a levy.
Option 1: Salem levy put to voters in May 2025 election
Option 1 would be to put the property tax levy up for a public vote in the May 2025 election. If passed, the 2026 budget would face limited reductions and the city would begin receiving money by November 2025.
The council would need to vote by the end of February to put the issue on the ballot. The benefits of voting on the issue in May include limited cuts and the opportunity to vote again in November if the measure fails.
On the downside, the May election allows for only a limited time for education and public outreach.
Option 2: Salem levy put to voters in November 2025 election
Option 2 would be to vote on the measure in November 2025 and make significant budget cuts in the meantime. If passed, funds would be received by November 2026 and would first need to be used to restore services.
Option 3: Salem levy put to voters in November 2025 election, limit cuts by using city’s fund balance
Option 3 would be to vote on the measure in November 2025 and limit cuts by using the city’s fund balance. This option means services could remain continuous, but depleting the fund balance negatively impacts the city’s bond rating. If the measure fails, the city would have to immediately layoff a big portion of staff.
Salem taxes, levy recommended by task force
Monday was the second work session following the conclusion of the city’s Revenue Task Force.
The group was convened in January to consider ways to increase revenue and address the multimillion dollar budget shortfall. The group met seven times, considered feedback from eight focus groups, three town halls and a statistically valid poll, and deliberated on revenue recommendations to the City Council.
The meetings happened in parallel to the Citizen Budget Committee, which deliberated various cuts and service reductions to contend with the disparities between revenue and expected services. Several key items such as library jobs and hours, park events, splash fountains and drinking fountains were on the chopping block until being saved by reallocating one-time funds.
A property tax levy, personal income tax, business license fees and tax reform were among the recommendations the Revenue Task Force made during their first work session in July. The recommendations require a council vote before any can move forward.
Stahley honed in on two recommendations: a franchise fee increase and a local option property tax levy. He said the city would also work to support the state Legislature passing a payment-in-lieu-of-taxes due to the large number of state-owned land in the city.
City Councilor Trevor Phillips said he supports putting the levy on the May ballot.
“Time is of the essence, and we just don’t have the time,” he said. “No matter what we try to do stretch things, eventually, the wall that we hit is just a draconian cut in life-saving, essential services.”
Salem payroll tax failure weighs heavy on City Council
It became clear throughout Monday’s conversation the process would not be concluded before the end of the year, when four councilors and the mayor will leave office. Councilors Phillips, Virginia Stapleton and Jose Gonzalez opted to not seek reelection. Councilor Julie Hoy will replace Mayor Chris Hoy, leaving her seat vacant until a May special election.
City leaders stressed they wanted to get as much work done as possible to help councilors hit the ground running next year.
The failure of the payroll tax also loomed heavy over the evening. The council voted to pass the 0.814% tax on wages for all work done in Salem last year to address the budget shortfall.
The tax would have generated $27.9 million annually and cost a person earning the average hourly rate of $29.90 the equivalent of $506.24 a year. It was set to fund police, fire and homeless services.
Oregon Business & Industry, a statewide chamber of commerce and trade association, launched an effort to refer the tax to voters. The payroll tax was resoundingly defeated in the November special election.
“It has been tumultuous, and it’s been difficult,” Stahley said. “It’s been challenging, and it has been impactful, to say the least. It feels like we’ve been continuously engaged in a conversation about our budget and our revenue needs for the past two years. I think it’s left all of us just a bit exhausted. During this time, the payroll tax was soundly rejected, and we learned that our community wants to be involved.”
Community will be key for passing measure in Salem
Community and council buy-in will be vital for any decision going forward, Stahley said.
Salem leaders agreed to conduct polling to see what kind of levy voters would support.
“I think we have to do polling,” Mayor Chris Hoy said. “I think it’s important to find out what the community is ready to prioritize and pay for. I think it’s important that we look at a combination of services and not just single issues.”
Stahley pointed to the success Gresham recently had in passing its first property tax levy in its 119-year history.
Gresham voters in May passed the levy to retain and add new fire and police positions. A previous measure to fund homelessness and public safety failed when it was put to voters in 2023.
“Gresham did the work,” Stahley said. “They shared a vision and told the community.”
He said city leaders informed their community with mailers and grassroots engagement.
They went out to fire stations and held open houses. They built support across the board from the chamber of commerce, home builders, realtors, neighborhood associations and social service agencies.
“They were successful by pulling together in the same direction for the same well-defined purpose,” Stahley said. “If we choose to go in this direction, we will need to do the same.”
For questions, comments and news tips, email reporter Whitney Woodworth at wmwoodworth@statesmanjournal.com, call 503-910-6616 or follow on X at @wmwoodworth.
