Salem’s multimillion dollar budget deficit is less dire than city leaders predicted last year, but will likely still require deep cuts to close. A new city forecast released Friday afternoon shows an expected $13.8 million budget shortfall in the next year — $4 million less than the figure Chief Financial Officer Josh Eggleston presented to the city’s budget committee in October. “We still have a problem, it’s still significant, but it’s a little better,” Eggleston said in an interview Friday. READ IT: Updated city of Salem budget forecast The improved financial forecast comes from a city team’s updated, more optimistic read of expected property tax income and savings from services, according to a city statement on Friday. It is not the result of any city budget cuts, changes in policy or new taxes being levied. The result is that a new Salem City Council and the appointed budget committee will have more flexibility, and less to cut, as they consider a budget proposal this year. The city council typically adopts a budget in June. The new forecast is the result of a more detailed review City Manager Keith Stahley convened in November. Over five meetings, a forecast review team that included budget committee members reviewed the city’s data and recommended adjustments.  The team reviewing the forecast included Mayor-elect Julie Hoy, Councilor-elect Shane Matthews and budget committee members Andrea Cohen, Julie Curtis and Russell Allen. It also included three community volunteers — Scott Cantowine, president and CEO of Cascade Warehouse Company; Bill Riecke, president of Bark Boys Landscaping Supplies and Jim Vu, a small business development adviser. Cantonwine and Riecke both previously served on a city revenue task force last year. Under the new forecast, the city expects to collect $4.6 million more in property taxes over the next five years. That model assumes the city will collect 4.35% more in property taxes each year, up from an earlier estimate of 4.1%. The city’s property tax collections rise when the value of existing homes and businesses rise, though that increase is capped at 3% per year. Tax collections also rise when new homes and businesses are built and enter the tax rolls. The model also reflects the fact that city departments tend to spend less than their budgets over the course of a year because some jobs are always vacant as employees leave and new ones are hired. The new forecast accounts for those savings, assuming city departments will spend about 5% less than their budgets for employees and supplies each year. The city’s general fund is now expected to bring in $180 million next year, primarily from local property taxes, and spend $193.5 million. That fund pays for most city services including police, fire, the library, the city court, parks and recreation and urban development.  That gap is still expected to grow each year, with the city budget deficit reaching $24 million in five years. The budget deficit reflects the fact that the city’s costs continue to rise faster than tax collections, which are capped by state law. Inflation and higher wages are primary drivers, the forecast said. Police and fire account for the bulk of general fund spending. Next year, those departments are expected to cost about $125 million — a 10% increase over this year’s budget, according to the forecast. In June, Salem city councilors unanimously approved a three-year contract for police union members that gave officers a 9% raise in July.  The city budget committee, which includes all city councilors, will meet on Wednesday, Jan. 15, to discuss the five-year forecast, and then will have three meetings in April and another in May. The budget meetings will address the cuts necessary to balance the city’s budgetary shortfall which would result in the closure of a fire station, the library and layoffs of police officers.  “The forecast continues to show a difficult financial path ahead for Salem’s general fund. While we still have a lot of work to do, I’m grateful for the community interest, time, input and care as we consider our options to bring spending in-line with available revenue,” Stahley said in a statement. “While we work to set the priorities of the budget, all city employees continue to be ’at your service‘ to the residents of Salem.”The forecast review team also recommended looking into ways to save city money, like contracting services and collaborating with the state and counties to respond to shared issues like homelessness.They also encouraged the idea of having the state make an annual payment to compensate Salem for public safety costs associated with being the state capital, something Gov. Tina Kotek says she supports. A proposal in the Legislature last year would have generated about $5 million annually for Salem but failed to advance. Rep. Tom Andersen, a Salem Democrat and former city councilor, and Rep. Kevin Mannix, a Salem Republican, have indicated they will make such a payment a priority during this year’s legislative session. The team also recommended that the city consider closing the Mill Creek and North Gateway Urban Renewal Areas, which would send property taxes from those areas back to the city’s general fund. A portion of property taxes collected in urban renewal areas are earmarked for redevelopment projects. They also recommended looking for savings in the fire department’s budget as they prepare to take over ambulance service from Falck in July.  The committee began discussing budget priorities in November. In April, Stahley will propose a budget for the upcoming year. The budget committee will work on refining the budget over the series of spring meetings. In November, Salem city councilors voted to look further into asking voters for a new property tax to pay for parks, the library, and Center 50+. They’re scheduled to discuss putting a measure on the ballot during a Jan. 21 meeting. If approved, the levy would likely be on the May 2025 ballot. Joe Siess contributed reporting. Contact reporter Rachel Alexander: [email protected] or 503-575-1241. Contact reporter Abbey McDonald: [email protected] or 503-575-1251. A MOMENT MORE, PLEASE– If you found this story useful, consider subscribing to Salem Reporter if you don’t already. Work such as this, done by local professionals, depends on community support from subscribers. Please take a moment and sign up now – easy and secure: SUBSCRIBE. The post New forecast shows smaller Salem budget deficit, but deep cuts still likely appeared first on Salem Reporter.