As vote on payroll tax looms, Salem outlines drastic budget cuts

With the threat of the payroll tax not passing in the November election, Salem officials are reckoning with the likelihood of no new revenue coming in to balance the budget — and considering major cuts in the coming years.

Among the possible cuts outlined ahead of a Salem City Council work session scheduled for Monday are:

• Eliminating new positions for the homeless camp response team.

• Closing the West Salem library branch.

• Stopping the ability for Salem Police to investigate high-level drug trafficking cases.

• Cutting funding to the city's 180 temporary microshelter beds and navigation center.

• Cutting library hours.

• Closing splash pads, drinking fountains and bathrooms at city parks.

• Closing two fire stations.

The Salem City Council adopted the Fiscal Year 2024 budget in June with the understanding that if new revenue wasn't found, the budget would need to be amended.

An increase to the city operations fee closed some of the gap, but plans for a payroll tax designed to cover the remaining shortfall and fund fire, police and homelessness services could be on the chopping block.

Tax approved by council, then referred to ballot

In a 5-4 split, the council voted in July to impose a .814% tax on wages for people working in Salem, regardless of where they live, as early as July 2024.

It is expected to generate $27.9 million annually and cost a person earning the average hourly rate of $29.90 the equivalent of $506.24 a year.

Councilors Julie Hoy, Vanessa Nordyke, Deanna Gwyn and Jose Gonzalez voted against the payroll tax. Mayor Chris Hoy and councilors Virginia Stapleton, Linda Nishioka, Trevor Phillips and Micki Varney voted in favor.

Within days, Oregon Business & Industry, a statewide chamber of commerce and trade association, launched an effort to refer the tax to voters.

Officials with Let Salem Vote said the proposal was vague, the tax was too high, the administrative burden was significant and there was little assurance as to how the funds would be spent.

The group successfully got the more than 3,986 verified signatures needed to qualify for the ballot. Voters will now decide on the tax's future during a Nov. 7 special election.

Stapleton joined with residents and volunteer planning and budget committee members to start a Save Salem campaign to promote a "yes" vote on the measure and, they said, prevent cuts on critical city services.

Michael Slater, a Salem Planning Commission member, parks advocate and member of the Save Salem campaign, said the cuts would be disastrous for residents and would set the city back years.

"We've got a huge homelessness issue," he said. "Climate change is going to be a big deal. We've got to accommodate a lot of new people. We are looking at rebuilding our infrastructure and how our neighborhoods operate. At the same time, we're cutting back on all the resources that we need to accommodate those changes. I think it's very frightening."

What could be cut?

With the potential revenue source now unsure, the city is beginning discussions on how and when to recraft the budget.

The City Council will decide when and if to reconvene the budget committee, and a public hearing and vote would take place before the proposed changes for fiscal year 2024 go into effect.

If the city follows the cuts proposed in the Sept. 18 information report, some major cuts would be seen in 2024.

"It hits every program the city offers," City Manager Keith Stahley said.

The new positions funded by the Operations Fee increase, like an expanded SOS Team to clean up unmanaged homeless camps, two more park rangers and two code compliance officers, would be eliminated.

Other new positions for the library, police and fire departments would also be cut.

The city might be able to avert layoffs in the next year by not filling vacancies. But without new revenue, it could turn to layoffs at the library, fire stations and police department, officials said.

As soon as 2024, the West Salem branch of the library could be closed, the city funding for the microshelters and the emergency warming network shelters could be pulled, and drinking fountains, splash pads and irrigation throughout the parks system could be turned off.

Slater said, as a parks volunteer, he's horrified by the loss of parks maintenance workers, drinking fountains, splash pads and trash cleanup. Parks are vital to residents' health and a reflection of the city, he said.

"With these cuts, our parks risk becoming a wilderness of overgrown weeds, trash, illegal behavior and unregulated homeless camps," he said.

Ward 8 councilor Micki Varney said the complete closure of the West Salem Branch Library would be a huge loss to the community.

"Our library provides local access to library cards, physical and electronic books and documents, research databases, meeting rooms and a place for community members to safely connect and engage in a wide range of learning and cultural activities," she said. "The library is an asset our West Salem community cannot afford to lose.”

The Navigation Center, which just opened earlier this year, could have $2.4 million in city funding pulled in 2025. Absent any new funding source, the 75-bed emergency low-barrier shelter would close.

Fire stations could close

Two fire stations could also be closed from 2025 to 2028 to deal with the budget shortfall.

Phillips, a councilor for Ward 3 and an emergency room physician, said the loss of firefighters and reduced response times would put the lives of community members at greater risk of injury and death.

A bond Salem voters passed last year is set to fund $300 million in infrastructure improvements, like new fire stations and libraries, but the bond cannot fund wages and operating costs.

Some of those new positions, like more firefighters and new police officers, were set to be funded by the payroll tax. Without funding for staffing, the city would put a pause on building projects like the two new bond-funded fire stations and two library branches, Salem chief financial officer Josh Eggleston said.

'Scare tactics' or math?

The city has known for years it would be facing a shortfall, but the pandemic and related federal funding put a pause on the previous push for a payroll tax.

"Cities across Oregon are facing similar structural imbalances between revenues and expenditures," Stahley said, pointing to state property tax measures from the 1990s that cap tax revenues as one the reasons behind the deficit.

As a result, the money the city receives from property taxes is not keeping up with inflation and population growth. In the Fiscal Year 2024 budget, property tax revenue only covered 77% of the expenses for the fire and police departments paid from the general fund.

As the issue heads to the ballot, the group Defeat the Tax on Salem Workers emerged to campaign against the payroll tax.

The group has garnered $145,447 in cash and in-kind contributions from organizations like the Oregon Business & Industry Issues PAC, Marion+Polk First, the Salem Area Chamber of Commerce and Americans for Prosperity, a conservative committee tied to the Koch brothers.

The pro-payroll tax Committee to Save Salem has gotten $3,335 in cash and in-kind contributions, with most funding coming from councilors and residents associated with the campaign, including Stapleton and Nishioka.

Salem resident and OBI political affairs director Preston Mann said OBI will be leading the Defeat the Tax on Salem Workers campaign and expects to see the campaign ramping up in the weeks ahead.

He said it was curious to see the City Council engaging in the budget discussion just 50 days before election day.

Stahley stressed that the proposed cuts were not a comment on the payroll tax vote but rather a discussion that needs to happen to address the budget.

Mann argued that voters are smart enough to know when they are being presented with a false choice.

"Proponents of the tax continue to lean into rhetoric that suggests 'pass this tax, or else...'," Mann said. "Rather than attempting to scare voters into voting for a convoluted and costly tax increase, I would encourage the council to go back to the drawing board and develop a community-supported approach to the city's budget challenges."

Slater said he has heard the complaints about how the city rolled out the payroll tax without a public vote. But he said residents now have a choice about whether they want services like parks, police, homeless shelters and fire response funded.

"The other thing I hear a lot is 'This is just scare tactics,'" he added. "I would say no, this is just math and what the math tells us is that we're in a very scary situation."

Stapleton said the service cuts are consistent with everything the City Council and Citizen Budget Committee discussed during the budget crafting process earlier this year.

"The immediate and catastrophic effect these cuts will have on the health, safety and livability of our community is exactly why a majority of councilors voted for the one option we had to avert this disaster," she said.

What's next?

The Salem City Council will meet for a work session Monday. The meeting can be viewed online. The council will later decide the next step in the budget process, which will include public hearings and a vote.

For questions, comments and news tips, email reporter Whitney Woodworth at wmwoodworth@statesmanjournal.com, call 503-910-6616 or follow on Twitter at @wmwoodworth

This article originally appeared on Salem Statesman Journal: Salem outlines drastic budget cuts as vote on payroll tax looms