Sean C. Morgan
City Budget Committee members last week rejected a budget proposal that would decrease property taxes by 30 cents per $1,000 of assessed value.
The Budget Committee met Tuesday, May 5, as part of its ongoing review of the proposed budget. It is scheduled to meet next at 6 p.m. on Tuesday, May 14. Meetings are held in a combination of physical attendance, while meeting physical distancing requirements, and video conferencing.
Finance Director Brandon Neish explained the proposed 30-cent reduction in the local option levy funding police services. In keeping with a “sort of promise” made in 2015 when the city sought and voters approved an increase of $1.45 per $1,000 for police services and 35 cents per $1,000 of valuation.
The increase was meant to shift funding back from other taxing districts that had in previous years increased their property tax rates, according to discussion between staff and City Council in 2015. Under the effect of property tax compression, and nearly all of the property in Sweet Home was under compression, property owners would not pay higher taxes as a result of the rate increase. Rather, Sweet Home would collect a larger share of property taxes more commensurate with the share it was receiving in 2007.
Councilors and staff in 2015 explained that the increase in the tax rate would not increase taxes for most property owners in Sweet Home. They also discussed reducing the levy if compression, which is the property tax limitations imposed by voters in 1997, if compression decreased. While properties are under compression, the tax rate approved in 2015 would not cause property taxes to increase.
As of November, according to tax data provided by the city, Sweet Home had 4,668 tax lots. Of those, 3,130, 67 percent, remain in compression. Some 1,538, 33 percent, are no longer in compression and receive no reduction from the property tax limitation compression effect. Under the tax rates in 2015, prior to the voter-approved increase of $1.80 total, just 1,819 tax lots, 39 percent, would remain in compression today.
During last week’s meeting, Neish said, “What we want to highlight here is, kind of, in keeping with a statement or almost a promise that the city made that if we don’t need to take all of either levy, the public safety levy or library services levy, then we would try not to. In this coming fiscal year, what we have proposed is not taking the full public safety levy.
“We are proposing to take 30 cents off of that levy. The levy would be $7.55 per $1,000 of assessed value.”
The city’s goal with all funds is to maintain a balance that will cover operations for five to six months, he said. Given the current economic picture and the department’s future budget forecasts, the city can do that and weather the reduction.
“Part of the consideration is two-fold,” Neish said. “We don’t know what the economy is going to do next year. We do actually anticipate that real-market value will kind of peak and just level off. That means we won’t see any change in compression. We anticipate the same level of compression that we have currently (about 19 percent of taxes levied on assessed value, down from a 38 percent in 2015), which means the Police Department will not generate additional revenue as it does with its current levy.”
The city also built in a lower collection rate as well, anticipating an increase in the number of property owners who will be delinquent with property taxes next fall, he said.
“We have budgeted for a downturn in actual property tax receipts that we get from individuals, but we’re trying to mitigate a financial issue for households, while at the same time being cognizant of making sure that five years from now we can still maintain the same level of service that we have.”
The 30-cent reduction is a reduction of approximately $230,000 in revenue, Neish said.
On the library side, the city proposes taking the full levy amount, he said. “The reason for us asking for the full amount there is that there have been discussions and plans and community input sessions surrounding what are we going to do with our current library. So far, the consensus has been based on a consultant putting together kind of a needs assessment. That assessment revealed that the best thing for the city would be to build a new library. We are proposing to take the full levy and begin to set aside some money in order to pay for that down the road if the city and the council so desire to move forward with the building process.”
City Manager Ray Towry said the community feedback to the city about the library is that the current building does not and will not meet the community’s needs.
Like with the Wastewater Treatment Plant, by contributing cash to the project, the city may be able to leverage additional funding from other sources, Neish said.
Regarding the proposed reduction, City Councilor Diane Gerson said, “before we agreed to that, I would want to know that the taxpayers would actually get the money or whether it’s going to go back into paying for the Sheriff’s Department, etc., etc. Is the public really going to see a difference?”
As it stands right now, 25 percent of commercial and residential land is not under some kind of compression and would see a benefit, Neish said. For the additional 75 percent, he could not say for sure. It’s possible some homes could come out of compression, but it’s also possible that money would shift to other taxing districts instead of going back to to property owners.
“What would that mean to each individual household?” asked Budget Committee Member Garritt Schaffer. “I mean $230,000 doesn’t seem like a whole lot, spread across everything, and then if there’s a possibility of losing some of this, that looks like some more officers or something.”
For a property valued at $235,000, a property owner would see a $70 savings in property taxes if the property is not in compression, Neish said.
Thirty cents represents $30 annually, $2.50 per month, on an assessed value of $100,000 or $60 annually, $5 per month, on an assessed value of $200,000. Assessed values are typically lower than real-market values.
“That doesn’t seem like a whole lot to me,” Schaffer said. “I’d rather just pay the 70 bucks and have a couple more officers out there keeping our streets safe.”
“That’s why we bring this to the Budget Committee, to your attention,” Neish said. “We really felt like this was something that deserved public input because this is a levy that, one, is voted on every five years by the citizens of this community, and two, has kind of those community representatives who kind of get the ability to weigh in on that, whether that $70 savings for some residents is beneficial or whether that $70 is better spent in the Police Department.”
“They don’t like doing this with levies,” said Councilor Lisa Gourley. “Somehow, (this) is going to come back on you that you’re trying to take advantage of them even if they get $70 per year back.”
“What we’re really weighing here are what do we think the community values more,” Towry said. “A comment was made, if we don’t need it, we shouldn’t take it. We’re proposing something to you, we don’t think we need it, should we not take it? But in that time frame, the community has spoken on many occasions about how much they value the services the Police Department gives to our community.”
That discussion is what the budget process is designed to do in Oregon, Towry said, to give the public its chance to give input on what it values.
“You’re playing with a double-edged sword,” said Mayor Greg Mahler. “You take away, you may not get back.”
“I like the idea of keeping it only because you can’t see what the future’s going to hold,” said David Lowman. “If we don’t use all that money, the money that you actually keep, hopefully it’s going into another surplus fund.”
In the future, the city can pull out of it if expenses increase, he said.
“Plus I like the extra security,” he said. “I can sleep at night, without having to keep one eye open.”
Having a potential carryover is not a bad thing, Mahler said.
“If you’re going to give the $70 back to the people, then in two years or so, five years, then some of those people are going to forget in five years, is it going to increase,” Lowman said.
This is a voting year, Towry said. The levy renewal comes up again in November. For the levy, the voters approve a cap, but the council and committee can always take less.
“There’s something to be said, whether it was formally said or offhand, there’s a contingency of people out there who have said you said if you don’t need it, give it back, or you wouldn’t take it,” Towry said. “Again that’s something to consider because in November people are going to make a decision on whether they want to approve that levy again or not.”
“Those also probably are going to be the people that are going to scream when it goes up,” Lowman said.
“What we do need is a new library,” Gourley said. She suggested not reducing the tax levy and moving marijuana tax revenue, about $135,000 to the library to help build a new library.
“This is a tough one,” said Councilor Dave Trask. “I can say 100 percent, I’m sure, that if we don’t take it, somebody else is going to.”
“When the public’s perception of the Police Department is very favorable, they have no problem passing a levy because they feel comfortable at night; they’re being protected,” Mahler said. “If the public feels, ‘Well, I’m not getting my dollar’s worth,’ that’s when you struggle with your levies. I don’t see that with our Police Department. I think our Police Department does a phenomenal job. I personally don’t think you’re going to have a problem with your levy.”
Towry said statistics support that view: People will support something where they feel they are getting a return on their investment when it’s guaranteed toward a singular cause, like this levy.
The Budget Committee, which includes city councilors and citizen members, reached a consensus to maintain the level of the police levy. City staff will return later with adjustments to reflect the full rate and proposal to use marijuana tax funding for a new library building.
Under the proposed budget, the Police Department reduced two police officer positions, which had been added within the past two years. One of them, a detective, has moved back to patrol. Under the proposal, three shifts have two officers and one sergeant on. The fourth shift has one sergeant and one patrol officer.
One position was removed from the budget proposal. Funding for the second position was proposed in the contingency fund to be returned depending on what direction the economy takes in the next year.
Present at the meeting were City Councilors Mahler Gerson, Trask, James Goble, Gourley and Susan Coleman and citizens Bob Briana, Derek Dix, Lowman, Schaffer, Chairman Kenneth Hamlin and Lisa Willson. Absent were Dave Jurney and Councilor Cortney Nash.
To access the next meeting, 6 p.m. on May 14, visit http://www.sweethomeor.gov/community/page/live-stream on the web or call (541) 367-5128.
Last week’s meeting may also be viewed at the same web address.