Think Out Loud

Salem City Council approves payroll tax to fund critical services

By Rolando Hernandez (OPB)
July 12, 2023 3:56 p.m. Updated: July 19, 2023 8:17 p.m.

Broadcast: Wednesday, July 12

After hours of public testimony, Salem City Council voted to approve a payroll tax to help fund police, fire and homelessness services. The ordinance passed by a single vote, taxing wages for anyone who works in Salem, regardless of their home address. The policy could go as early as next summer. Chris Hoy is the mayor of Salem. He joins us to share why this tax is needed and how it will work going forward.


Note: This transcript was computer generated and edited by a volunteer.

Geoff Norcross: This is Think Out Loud on OPB. I’m Geoff Norcross, in for Dave Miller. The city of Salem says it just doesn’t have enough money to fund public safety. We’re talking police, fire, and services for people experiencing homelessness. To close the gap, the Salem City Council voted this week to move ahead with a payroll tax on anybody working in the city and making above a certain income. The vote was 5 to 4. Salem Mayor Chris Hoy voted in the majority. He joins us now to talk about the tax and how it will work if it’s implemented. Mayor Hoy, welcome to Think Out Loud.

Mayor Chris Hoy: Well, thank you.

Norcross: Let’s get the scope of the problem first. How big of a shortfall are you looking at?

Hoy: The shortfall we were looking at was upwards of $19 million.

Norcross: And what would that mean in terms of services? What could be cut?

Hoy: When we’re looking at our general fund, those are services like police, fire, library, parks, our senior center, and homeless services, really the core of what we do as a city. Other services, water, sewer, those kinds of things are funded differently, so they wouldn’t be subject to the shortfall. Any cuts that would have had to have been made would be made from those core services like police, fire, homeless services, library, etc.

Norcross: I’m sure Salem has dealt with budget shortfalls before and you’ve had to move things around. Is it not possible to cut somewhere else to fund these basic city services?

Hoy: We have been cutting for decades. Our property tax system has been broken for a long time, since Measures 5 and 47. We’ve been cutting and cutting and thinning the soup for a long time. Right before the pandemic we were looking at a payroll tax at that time, and because of the pandemic we ended up uh tabling that. Those shortfalls have been a long time in the making, just like every other city in Oregon. And we just got to the point where there was nothing else left to cut. We could close our library, close our senior center, and stop delivering service in our parks, and still not close that gap. We would still have to eliminate police and fire positions.

Norcross: As you mentioned, a similar tax was scheduled to go before voters in the spring of 2020, but it was shelved because of COVID. Why is now a better time to try this?

Hoy: Well, I don’t know that it’s a better time. But it’s at that critical place where it’s literally we either do it now or we essentially shut down basic services here in the city.

Norcross: I read that you’ve been expecting this shortfall for a while, and many other communities are on the same boat. You touched on this a little bit earlier, but how did that happen?

Hoy: Well, we’ve had decades of property tax limitation measures. That’s how cities and local governments are funded in Oregon. Our revenues have been more and more limited as time goes on, and growth does not keep up. We are still at the same staffing levels here in the city that we were out in 2008/2009, and we’ve since that time added 26,000 residents. So we’re responding to 26,000 residents’ more fire calls, police calls, all of those things, with the same number of staff that we had 15 years ago.

Norcross: You mentioned a couple of ballot measures there, Ballot 5, Ballot 50, others that were enacted mainly in the early 90s that changed the way cities can raise revenue from property taxes. And you can point to that as kind of the root of the problem?

Hoy: Absolutely. It capped our permanent rate at whatever level it was at that point. And people often say “isn’t this new growth helping to fund the needs of more residents?” And it’s just not. There was also a mechanism put in place where when new properties come online, new homes come in at about 50% of their value, and commercial properties come in at about 70%. So you can have a new home and an old home that have the same valuation, but they pay drastically different tax rates. It’s really a huge equity issue, and there’s nothing that a city can do to change that.

Norcross: Let’s get some details about the tax. Who would pay it and how much would they pay?

Hoy: Everybody who works within the city of Salem would pay the tax, and it’s 0.814%. Less than 1%.

Norcross: And what would that translate to for the average Salem worker? What would they pay?

Hoy: The average Salem worker will pay about $1.39 per day.

Norcross: And that adds up to about $500 a year, correct?


Hoy: That’s right.

Norcross: One of the big objections people have is over the fact that they will have to pay this tax regardless of where they live. You work in Salem, you’re on the hook. And Salem is the home of Oregon state government, and many people commute there to work, and they don’t get a vote about this. It’s literal taxation without representation. How do you respond to that?

Hoy: Well, taxation without representation is sort of a bigger concept on the federal level. But think about when you go to the state of Washington. Did you vote on their sales tax? I didn’t, but I pay it. When you go to California or Idaho, you pay a sales tax, you pay gas taxes, there are local gas taxes all over our state. There are things that we don’t get to vote on, but yet we’re subject to. I understand that people want to have a say in that, and we do have a say in that we elect our representatives on our city council and so forth. But we don’t get to vote on every single item. That’s just not the way a representative democracy works.

Norcross: It’s expected that this tax will generate nearly $28 million a year in revenue. What are some of the key things that money would go toward?

Hoy: It’s gonna stabilize our funding for our police and our fire first and foremost. It’ll prevent us from having to cut those positions. It’ll also provide funding for our homeless services, that includes three microshelter communities and a navigation center. But it also is going to add about 13 new community policing staff, 12 new firefighters which will allow us to open a new fire station, and also three homeless outreach team members.

Norcross: Businesses that operate in Salem also expressed some concern over this tax and about their ability to recruit workers if the tax was implemented. What are your thoughts about that?

Hoy: I understand those concerns. Nobody likes to pay more taxes, certainly. I think that they would have a more difficult time recruiting workers if we weren’t addressing our homeless situation, if we weren’t providing shelter for people who don’t have a place to live, if we didn’t have police who could respond to calls or fire, when you have a medical emergency, if we didn’t have a fire department that could respond in a timely manner. I think that would make it an even more difficult ability to recruit workers. I really don’t see this as a big impediment to worker recruitment.

Norcross: The city of Eugene implemented a payroll tax in 2021 to pay for new police officers among other things. Is that an example that you’re following here?

Hoy: We did look to the city of Eugene as an example. Ours isn’t the same as theirs, there are some differences. But sure, we knew that it was possible because of the work that the city of Eugene had done, and we did look for their guidance and the lessons learned and those sorts of things when we formulated this plan.

Norcross: What needs to happen before this payroll tax actually goes into effect?

Hoy: There’s going to be a rule making process where we’re gonna have an engagement process with the community, with the business community, with people who are going to be charged with implementing it. And so we will have an outreach program and engagement rule making process over the course of the next year. It won’t be implemented until next July, so we’ll have a year to sort of work out those details and figure out all of the different nuances and things.

Norcross: I know there was a motion at the council meeting this week to refer this tax to the voters, but it didn’t go anywhere. Should Salem voters have a chance to weigh in?

Hoy: Well, this actually does include a referral to the voters. It implements it now, and then refers it to the voter to the voters seven years after implementation. So there is an automatic review on it. It gives us a chance to get it implemented, get the kinks worked out, and then the voters can decide if they want to continue it, if they value those services that it’s providing or not. And there will be an automatic review at the latest seven years from implementation.

Norcross: Could there be a referral before that? I don’t know the procedure here.

Hoy: Yes there could be, the city council could refer earlier than that.

Norcross: There of course is this bigger issue that just sort of hangs over everything, the method by which cities in Oregon can raise revenue. Is it just outdated?

Hoy: Well, we’re trying to find every band aid we can to fix our revenue system, and you see that all over Oregon, whether it’s people implementing fees on top of their utility bills or doing levies or all sorts of different things. There isn’t a city in Oregon that isn’t facing some kind of challenge because of our broken system.

And here in the city of Salem, we’re unique. People often forget we’re the second largest city in Oregon, but we’re also the state capital. So we have over $2 billion worth of real market value property in our city that’s owned by the state, and they don’t pay any taxes. We have thousands of workers who commute to our city every day but don’t help share the burden of those services. Yet we have to provide services to the state hospital, to the prisons, to the capital, and so on. We just need some help paying for those vital services.

Norcross: So for other communities around the state that are seeing holes in their budgets and maybe considering the same move that you made there in Salem, what’s your advice?

Hoy: I think that this is a viable option. I would love [if] we were able to change our property tax system, and fix this broken structure that no longer meets the needs of our communities. That’s really what needs to happen. In the meantime, I urge cities to do what they need to do, to be creative, to meet the demands of their residents. Our residents are demanding that we deal with homelessness, and we go deal with unsheltered folks, and that we have a viable police response and fire response. That’s why we’re doing this. This is in response to community demand. And until the law changes, this is really the only option we have left.

Norcross: Mayor Hoy, thanks so much for this.

Hoy: Thank you. I appreciate the opportunity.

Norcross: Chris Hoy is the mayor of the city of Salem.

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