NEWPORT — With the possibility of sending gas and prepared food tax ballot measures to city voters as soon as November, the city of Newport is seeking a consultant to conduct public outreach regarding the city’s financial status.
In 2018, city council created a Finance Work Group, which determined that slower growth in revenue compared with expenditures would result in a million-dollar structural deficit in the General Fund by 2023-24.
The group’s five-year sustainability plan attributed the deficit to statutory limitations on increasing property taxes, the need to add staff to meet service demands, payments to the state retirement fund, and increasing costs in health care and technology.
The plan also notes that the projected deficit does not include chronically underfunded capital needs — construction and maintenance of city facilities, typically paid for out of the General Fund.
The plan recommends several avenues to bridge the deficit by reducing expenditures and adding revenue sources, including a transient room tax increase from 9.5 percent to 12 percent that city council approved June 7 and is accounted for in the 2021-22 budget. Council will vote on adoption of that budget June 21.
The plan recommended two more sources of future revenue — a wholesale gas tax increase to 5 cents per gallon from its current variable rate of 1 cent a gallon during seven off-season months and 3 cents during the summer. Based on 2019 collections of $183,386, the increase could result in $200,000 in additional revenue.
That’s important, according to the plan, considering that a 2019 study found that keeping Newport’s roads in good-to-fair condition, which the gas tax helps pay for, requires a $2 million annual investment.
The plan also recommends considering a prepared food tax, as has been adopted in Yachats and Ashland. A 5 percent tax could bring in as much as $2 million the first year.
While the law only requires that the gas tax be approved by voters, council would also seek approval of the prepared food tax through a ballot measure, following Yachats’ and Ashland’s lead. Both measures could appear together on the Nov. 2 or May 17, 2022 ballots, or they could appear separately, and the city has issued a request for quotations from a consultant to develop “factual and impartial” public messaging in advance of the vote.
“A major component of the story the city wants to tell is that both these potential taxes, if ultimately approved by voters, would result in sharing the burden of funding city services with the visitors to the city,” the request for quotations reads. The impact of tourists on city services and infrastructure is a repeated theme in the Finance Work Group’s plan, which notes that Newport regularly hosts more than double its full-time population during the summer.
The prospective consultant would need to present the city with materials by July 12 if the measures are to appear on the Nov. 2 ballot. Those materials must be “factually balanced,” cannot explicitly urge a yes or no vote, and if the ballot question mentions what would be paid for by the tax, it must describe the cost.
The consultant would also need to prepare materials with enough lead time that they can be reviewed by the Oregon Secretary of State’s Office for compliance with state law restricting political campaigning for public employees.
Both of the proposed taxes are likely to draw opposition from industry groups, such as the Oregon Fuels Association and Oregon Restaurant and Lodging Association.