Suppose you need some cash to do some necessary home repairs. You talk your benevolent Aunt Sue, who is inclined to be generous, into helping you out. She agrees to write a check, but when it arrives, the amount is more than you actually asked for.
Turns out, it’s enough to not only repair the faulty whatever, but to pay off that nagging debt that’s been dogging you for the past five years. What do you do? Aunt Sue gave you that money. You can argue there were no strings attached.
That’s the kind of situation city officials and Budget Committee members have wrestled with a bit in the last couple of weeks as they ponder transferring funds away from the police department and library to cover what they say is going to be red ink in other areas.
The city’s General Fund spending is on the rise. That’s the real story behind the debate over the proposal to transfer nearly a quarter of a million dollars from police and library levy funds, approved by voters to pay for operations in those departments. The city wants to use the money to pay for administrative and financial services provided by other city departments for, they say, police and the library.
There are several things happening here. One, as we said, is that General Fund spending has increased by nearly 20 percent from last year to this year, which includes the new City Hall remodel, and by more than 30 percent during the past five years, 2015 to 2019.
General Fund revenues can’t keep up, but the city projected moving forward with similar spending levels in the following years. That means it’s reaching into the police and library levies to supplement the General Fund.
To make it work, the city is creating an Internal Services Fund to accept the transfers. But that fund will still just bolster the same services the old General Fund did.
We see a spending problem here. The city has created this situation and now says it’s looking at red ink.
What voters are going to have to decide is how they feel about this. Sweet Home residents voted for the police and library levies to help fund law enforcement and the library. The word “help” is key here. The expectation, when voters approve these levies, is that they don’t cover run-of-the-mill City Hall expenses. Those are supposed to be covered by General Fund taxes and franchise fees, which are ultimately paid by city residents too.
Growing real market values have created a windfall in police and library revenues. That was anticipated when the City Council and staff in 2015 went to voters seeking a tax increase of $1.45 per $1,000 of valuation for police services and 35 cents per $1,000 for library services – an increase voters agreed to pay on a sort of handshake with the city.
The tax increase was specifically aimed at answering a property tax limitation effect called compression. Increasing tax rates for the Linn County Sheriff’s Office and new levies for 4-H and the veterans home were increasing compression, which led to Sweet Home receiving an increasingly smaller portion of the countywide tax pie.
Without going into the weeds to explain compression, the higher local rate shifted funds back to Sweet Home and was meant to remain in place until compression decreased. Compression has decreased significantly in the past couple of years, from 35 percent to 23 percent, a rate that previous city councils and city staff would have rejoiced over.
Compression decreases when real market values (RMV) grow faster than assessed values. It’s happened here, which shouldn’t come as a shock to anyone has been paying attention to housing prices in Sweet Home. Tax bills increase at higher rates when RMV increases. That lasts until a property comes out of compression. At that point, according to state law, tax growth is essentially limited to 3 percent per year.
In the past couple of years, RMV has radically increased, while assessed value plugs along with 3-percent increases, radically reducing compression and fulfilling the hopes of the city when it requested that large levy increase in 2015.
Compression continues to fall, creating a continuing windfall for local entities funded by our taxes. Even under the old rates, there would have been a funding increase, but the higher rates approved in 2015 increase compression, meaning that it takes longer for a property to exit compression. That means even more tax money is flowing to the police department and library.
Some properties have exited compression under the current highest rates, and additional properties would have been out of compression under the previous tax rate as well. More will reach the edges of, or pass compression, again this fall.
For all of those, the current tax rate represents a tax increase we don’t think the council intended to impose in 2015, and reducing the rate would reflect a tax cut.
During discussion about the rates in 2015, city officials said they intended to reduce the rate if compression decreased substantially. The council should do that this year and live up to the terms of its argument. Combined with the county, it would further reduce compression.
Instead, the city’s Budget Committee has approved a plan to appropriate funds for its General Fund needs – administration and finance – for those spending increases we mentioned earlier.
The proposed budget now goes to the City Council for adoption prior to the end of the fiscal year, June 30.
We agree with those who have objected to the proposed budget. The transfers from the police and library levies to City Hall functions violate what voters understood they were approving in the levy and the council’s failure to even discuss publicly reducing the police and library rates violate the trust of the voters. Hitherto, voters have accepted and supported the city’s funding strategy as stated in the levy proposals.
Back in 2015, Councilor Dave Trask worried that voters wouldn’t support the proposed tax increase. During a budget meeting, he said he was “shocked” when it did pass. It did so because voters trusted the city.
We supported it then, on this page, for the reasons the council said it needed that rate increase. We did not support it to supplement City Hall or to create additional windfalls in police and library funding.
While Sweet Home taxpayers had the protection of compression, local taxpayers also paid the highest combined tax rate in Linn County.
The Oregonian newspaper reported last fall that Linn County taxpayers pay the highest percentage of property taxes, compared to their property values, in the state – certainly an oddity since Sweet Home and Linn County residents, including many on the council and the Budget Committee, tend to be more conservative and Republican, supposedly in favor of small government, cutting spending and cutting taxes.
This funding strategy might be considered “best practice” by some, but that doesn’t mean it’s best for Sweet Home. Thanks to nasty quirks in state law, our city is forced to use this levy mechanism to fund our police and library and these auxiliary taxes we agree to pay should go specifically to those uses.
In recent years, our city government has been quite circumspect in its spending of public money. There’s always been a cushion and the city hasn’t make it a practice to spend more than it receives from taxpayers.
That nearly a quarter of a million dollars being proposed for other non-police or non-library uses, could pay for two additional police officers, plus another librarian – which could expand hours for our library, which is closed Wednesdays.
City Council members should reject these transfers. The city should keep its word and reduce property tax rates in keeping with its original argument for increasing them in the first place. If it wishes to start charging the library and Police Department for administration costs, it should make that case to voters in the next election.
We love progress – improvements to parks, a new City Hall, better infrastructure. But if it means going into the red to get there, we question what kind of “best practice” that is for Sweet Home.
We wonder how Aunt Sue – or local voters – will feel if money they committed to a specific designated purpose is used otherwise.
We’ll find out.
A public hearing on the budget is scheduled for 6:30 p.m. on May 14 at the Sweet Home Police Department conference room.