TO: Mayor and City Council
THROUGH: Keith Stahley, City Manager
FROM: Josh Eggleston, Chief Financial Officer
SUBJECT:
title
Consideration of a five-year operating levy to fund the Library, Parks and Center 50+.
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Good Governance; Natural Environment Stewardship; Safe and Healthy Community; Safe, Reliable and Efficient Infrastructure; Strong and Diverse Economy; Welcoming and Livable Community.
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SUMMARY:
summary
In the fall of 2024, the Salem Budget Committee approved a motion directing staff to bring information to the City Council regarding a five-year operating levy to fund the Library, Parks and Center 50+ on the May 2025 ballot. At their November 25, 2024 meeting, the City Council discussed the motion and approved staff to prepare a levy scenario for discussion at a future work session.
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ISSUE:
Information Only.
RECOMMENDATION:
recommendation
Information Only.
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FACTS AND FINDINGS:
Pertinent information regarding a potential local option levy is as follows:
Levy Rate
Table 1 displays potential levy rates per thousand of assessed value (AV) and the estimated revenue for each of the five fiscal years. Depending on the number of specific services Council plans to have funded with the operating levy, the levy rate selected would likely be able to cover the cost of services throughout the term of the five-year levy. The annual household average is displayed in the far-right column. This amount is based on the median assessed value for residential properties in Salem. This table has been updated with property tax information from the fall of 2024 and corrects an error on the estimated revenue for the information presented on November 25, 2024.
Table 1
Service Costs
The below service costs (Table 2) display the forecasted services cost for FY 2026 - FY 2030. These service costs have been updated based on the final General Fund Five-Year Forecast. These costs consider any program revenue and represent the current general revenues allocated to each program. The Library includes an option for restored / enhanced services.
Table 2
Levy Rate Scenario
To demonstrate the potential impact of a local option levy, the below scenario uses $.98 levy rate to fund the costs of the current services at the Library, restoration / enhancement of Library services, current services at Center 50+, the current Parks maintenance costs, and current recreation services. Under this scenario, the amount generated by the levy at $.98 per $1,000 of assessed value is estimated to be less than the full estimated cost of those services. The balance of the cost would continue to be an obligation of the City’s General Fund.
Table 3
Impact to the General Fund Five-Year Forecast
The impact to the City’s General Fund Five-Year forecast would be positive if the local option levy covered existing services and programs. All the costs in Table 2 (excluding Library enhancements) were included in the Five-Year forecast. With the implementation of a local option levy, those services would be funded with the revenues from that local option levy rather than General Fund revenues. A local option levy at the amounts included in Table 1 would not totally eliminate the General Fund deficit for the next five years. The balance of the deficit would have to managed with either additional revenue or further reductions in services (spending).
Accountability Measures
With a local option levy the City is bound by the ballot language for the use of the funds. In addition to the regular annual financial audit that the City is required to complete, other accountability measures could be considered:
• Specific audit of levy funds for compliance with ballot language.
• Forming an oversight committee.
Election Timing - May 2025 Key Dates
February 10 or 24, 2025 - Last City Council meetings to approve a resolution authorizing ballot submission.
February 28, 2025 - Last day for governing body to file referral text or prepared ballot title to complete challenge period deadline to file notice of measure election.
March 20, 2025 - Last day to file or withdraw notice of measure election and explanatory statement with the County elections official.
Election Costs
$35,000 - Estimated district election cost paid to the counties (Marion and Polk), as estimated by the Marion and Polk County elections officials. This estimated cost assumes that the Counties total election costs will be shared with other jurisdictions who are expected to have measures on the May ballot. If the City is the only jurisdiction to have a measure on the May ballot, the City’s costs may be up to four times higher.
BACKGROUND:
In 2023, the City Council held multiple work sessions on continuing General Fund services and forming a Revenue Task Force. On January 22, 2024, Salem City Council 25 members and two alternates for the Revenue Task Force. The Task Force met seven times; considered feedback from eight focus groups, three town halls, and a statistically valid survey; and advanced recommendations to the City Council concerning revenue options to support City services funded by the General Fund. The Task Force recommendations to sustain vital City services were presented at the City Council Work Session on, July 15, 2024. A local option levy was one of the Task Force Recommendations. On November 13, 2024 the Budget Committee further recommended that additional information regarding a local option levy be provided to the City Council.
Local Option Levies (Operating Levies) Generally
A local option levy, also called an operating levy, is a special type of property tax that local governments in Oregon, like cities, counties, or school districts, can ask voters to approve. Local option levies are a methodology for jurisdictions to gain revenue from property taxes over the thresholds set by Measure 5. The levy is only temporary, usually lasting up to five years, and residents must continuously vote to decide if they want to add it to their property taxes every five years.
Property Tax Compression
In Oregon, Measure 5 and Measure 50 are laws that limit how much property tax people can be charged through the assessed value of a property and tax rates. These rules can create a problem called compression, which happens when those limits are reached.
Here’s how it works:
• Measure 5 caps property taxes in two categories: one for schools and another for local services like police, fire, and libraries.
• Measure 50 controls how a property's taxable value grows at 3%, which is usually slower than its real market value.
When local governments ask voters to approve extra operating taxes, like local option levies for things like parks or schools, these taxes are added on top of what’s already being charged for operations. If the total taxes go over the Measure 5 limit, which is $10/$1000 of assessed value, the government must reduce-or "compress"-the amount collected, starting with optional taxes like local option levies.
This means even if voters approve a local option levy, not all the money may be collected, which can cause funding shortfalls for important community services.
Attachments:
1. Public Comments received by January 14, 2025