NEWPORT — Newport City Council will hold a public hearing on a plan to place a gas tax increase and a new prepared food tax on the ballot.

The measures are among others recommended by the Newport’s Finance Work Group in its five-year financial sustainability plan approved by city council in March. The plan includes both spending cuts and new revenue sources intended to address a structural deficit the group identified in the city’s General Fund, and to pay for infrastructure repairs and improvements, public safety and facilities.

The group recommended three primary sources of new revenue — an increase in the transient room tax from 9.5 to 12 percent; an increase in the local gas tax from a variable rate of 1 cent per gallon seven months out of the year and 3 cents during peak season to 5 cents year round; and a new, 5 percent tax on prepared food and drinks.

City council already adopted the transient room tax increase, and it goes into effect Sept. 1. The city could raise an additional $1 million during the first year, which would be split between funds for tourism-related expenditures and general operations.

The other two measures it plans to send to voters, though it is only required to do so for the gas tax increase.

The city hired a consultant, Blue Ridge Strategies, of North Bend, to make its case to the public, conduct polling and research, and make a recommendation to council on whether to place both measures on the November or May 2022 ballot, or perhaps one on each. That recommendation has been forwarded to the city and will be presented at the council’s regular meeting on Monday, July 19, during which it will hold public hearings on the proposed taxes.

According to the financial sustainability plan, all three measures were selected to help correct an imbalance between the city’s tax base and the actual number of people to whom it provides services. Though Newport has about 10,000 full-time residents, the real-time population often swells to 30,000 or more during the busiest parts of tourist season.

The transient room tax directly targets visitors, and the two consumption-based taxes would at least be shared alike with locals, as opposed to a levy or assessment that would only impact residents and businesses.

The increase to 5 cents of tax per gallon of gas could generate almost $400,000 the first year. According to the financial sustainability report, maintaining the city’s transit system in good condition for the next 10 years will require a $2 million investment. Gas tax revenues must be used for street repairs and construction, bike trails and other transit related expenditures.

Prepared food tax

The city intends to use some proceeds from a prepared food and drink tax, which could be $2 million the first year, to pay for maintenance and major repair work at its 48 facilities, including the performing arts center, visual arts center, recreation center, library, the Bayfront boardwalk, airport, parks and public restrooms, fire stations and others.

Many of those facilities were built with urban renewal funds, and their maintenance and repair have never really been funded, Mayor Dean Sawyer said. The city recently replaced the library roof at a cost of more than $100,000, and other facilities also need new roofs or other major repairs soon to extend their lifespans.

A prepared food tax (as well as the increase in the transient room tax) was the finance work group’s alternative to placing more of the burden on locals only or shutting those facilities down.

The tax would be levied directly to consumers at the time of sale — a $20 meal would produce a $21 check at the table or drive-thru window. The details about what products would be taxed and how the process would work are not yet clear.

Oregon is one of five states with no sales tax and four that do not allow municipalities to levy general sales taxes. There are only two cities in Oregon that collect a prepared food sales tax, Ashland and Yachats.

Yachats voters approved the tax more than a decade ago to fund an upgrade to the water treatment plant, and funds from the tax continue to be dedicated to improvements to sanitary and stormwater sewers and the drinking water system.

Restaurants in Yachats collect a 5 percent tax at the time of sale — it can but need not be stated separately on the receipt — and business owners are allowed to keep 5 percent of the tax to defray the costs of collection and remittance. Taxes are remitted to the city four times a year.

Taxed are all restaurant foods, catered food, dispensed soft drinks and coffee, sandwiches and hot prepared foods at grocery stores, all bakery products sold for consumption on premises, and bakery items sold to go, other than whole cakes, pies or loaves of bread.

Yachats provides certain exemptions, such as food sold by schools and colleges, hospitals, vending machines and food stands operated by nonprofit or community organizations.

Other municipalities have sent prepared food tax measures to the voters that failed, including Grants Pass and Hood River. Cannon Beach City Council had its first reading — July 14 of a resolution to place a prepared food tax on the November ballot, drawing the ire of the Oregon Restaurant and Lodging Association.

Greg Astley, ORLA’s director of government affairs, wrote in a blog post July 12 that restaurateurs could expect to pay more than $10,000 to upgrade their systems in order to collect the tax, and the 5 percent tax would give the city a greater profit margin on sales than the restaurants themselves.

The association has not made a statement regarding Newport’s proposal, but the plan has already generated backlash from local restaurant owners, many of whom have pledged to attend the public hearing. Janell Goplen, owner of Clearwater Restaurant and Barge Inn Tavern, is circulating an online survey asking, “Do you want to pay 5 percent more at restaurants?” and “Do you support the city’s proposed 5 percent restaurant tax?”

Survey results showed about 500 against versus about 75 in favor as of 9 p.m. Monday. The survey did permit News-Times staff to vote more than once.

Newport City Council’s July 19 meeting starts at 6 p.m. in City Hall. The meeting is open to the public, and there is time allotted at the beginning and end for comments from the audience. Comments can also be submitted to publiccomment@newportoregon.gov.

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