TO: Mayor and City Council
THROUGH: Keith Stahley, City Manager
FROM: Josh Eggleston, Chief Financial Officer
SUBJECT:
title
Revenue options to sustain City services
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Good Governance; Natural Environment Stewardship; Safe Community; Safe, Reliable and Efficient Infrastructure; Strong and Diverse Economy; Welcoming and Livable Community.
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SUMMARY:
summary
The City Council held a work session on February 21, 2023 to discuss revenue options to sustain City services. Based on feedback from that work session, staff are returning with additional information to continue discussion of new revenues.
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ISSUE:
Review of revenue options to sustain City services.
RECOMMENDATION:
recommendation
Information and discussion.
body
FACTS AND FINDINGS:
Without adding new revenue sources or reducing the services we provide our community, the City's General Fund working capital will be almost gone by June 30, 2025. We will not have enough resources to fund services for the following year. Salem is not alone in experiencing a projected deficit in its General Fund, see attachment 1 for Salem peer city financial research that was compiled by Moss Adams.
Staff are looking for feedback and options to:
• Address the gap between cost of services and available revenues.
• Avoid cuts to critical community services.
• Create a sustainable funding source for some of the public safety services to meet the community needs that the City is unable to provide today.
• Provide funding for day-to-day operations of new Bond-funded facilities.
Safe and Secure Community Funding Proposal
To ensure continued safety and security of our community, Staff have prepared three options to continue funding for some existing services, and begin adding some new services.
Option
• City Operations Fee Monthly Increase (beginning July 1, 2023)
o Revenue Generated: $5.13 million
o Added fee:
§ $5.50 - Residential
§ $4.40 - Multi-Family Unit
§ $26.51 - Industrial/Institutional/Commercial
• Employee-Paid and Self Employment Tax (beginning January 1, 205)
o revenue generated: $20.39 million
§ 0.49% on wages for services performed in Salem.
Option B
• City Operations Fee Monthly increase (noted above)
• Employee-Paid and Self Employment Tax
o revenue generated: $23.45 million
§ 0.56% on wages for services performed in Salem.
Option C
• City Operations Fee Monthly increase (noted above)
• Employee-Paid Self Employment Tax
o revenue generated: $27.55 million
§ 0.66% on wages for services performed in Salem.
Increased City Operations Fee
An increase to the City Operations Fee is included in each of the three options. The increased City Operations fee could provide additional security services to parking structures, more capacity to Code Enforcement response and Park Rangers, and funds SOS Team 7 days/week. The breakdown of existing and new services is included in table 1. The impact to City utility accounts is included in table 2.
Equity concerns have been raised by Councilors and community members regarding the Operations Fee and differentiation among commercial account holders.
• Currently, the City offers a discount to low income customers that are either senior of disabled. There are currently 625 customers that receive this discount and that wouldn’t pay the increased City Operations Fee.
• In addition to this program, the City is exploring options to break out commercial accounts differently. The current Utility Billing system is being replaced and the new system (implemented by mid-2024) will have more flexibility to use a different set of data applied to commercial accounts.
Table 1
|
Program Funded |
Existing Services* |
New Services |
Total |
|
Security Services |
$300,000 |
$700,000 |
$1,000,000 |
|
Code Enforcement (2 new FTE) |
$300,000 |
$310,610 |
$610,610 |
|
Park Ranger Program (2 new FTE) |
$200,000 |
$310,610 |
$510,610 |
|
Fund and Expand SOS Team |
$0 |
$1,348,095 |
$1,348,095 |
|
Support Services** |
$764,270 |
$896,415 |
$1,660,685 |
|
Total |
$1,564,270 |
$3,565,730 |
$5,130,000 |
* This new funding source protects these existing services through future budget challenges.
** Maintains current ratio of support (HR, IT, Legal, Finance) to front-line, community-focused services
Table 2
|
Customers |
Total Accounts/ Units |
Ratio to Residential |
Increase to Monthly Rate |
Total Proposed Rate 7/1/2024 |
CPI Adjusted 1/1/2025 |
|
Residential |
39,998 |
1.00 |
$5.50 |
$14.43 |
$15.33 |
|
Storm/Streetlight Only |
378 |
1.00 |
$5.50 |
$14.43 |
$15.33 |
|
Multifamily Units |
25,897 |
0.80 |
$4.40 |
$11.54 |
$12.26 |
|
Commercial/Public/ Industrial/Institutional |
3,039 |
4.82 |
$26.51 |
$69.55 |
$73.90 |
|
Total |
69,312 |
|
|
|
|
New Employee-Paid and Self-Employment Payroll Tax
Staff have looked at three different payroll tax rates. Each rate provides the same base funding for some new and existing services but allows for different levels of funding to the City’s sheltering services. All options provide more community policing; funds Homeless Outreach Team 7 days/week; adds fire crew/station for new Bond-funded station; funds Airport safety and security. The three options are broken down in tables 3,4, and 5.
Table 3 - Option A, .49% (.0049)