In a recent government meeting, officials addressed the growing financial challenges facing the city, highlighting a significant budget gap that has escalated from $8.3 million to $13.9 million since the beginning of the biennium in July 2023. This increase is attributed to rising expenditure pressures, particularly in the service system, despite previous efforts to implement budget strategies and repurpose funds for critical programs.

The adopted budget for the 2023-2025 biennium initially included $25 million in budget strategies and an additional $5 million allocated to downtown investments, unhoused support, and alternative response programs. However, the ongoing financial strain has necessitated further examination of revenue sources and budget strategies as officials prepare for the next fiscal year.

Key revenue sources for the city’s general fund—property taxes, service charges, and E WebSilt—account for approximately 85% of total revenues, with property taxes alone representing 71%. Over the past five years, revenue growth has averaged 2.6%, while expenditures have increased at a rate of 3%, indicating a concerning trend where expenses are outpacing revenue growth.

Inflation and personnel costs are major contributors to the rising expenditures. Recent forecasts from the Oregon Office of Economic Analysis indicate that inflation peaked at 7.2% in fiscal year 2022 but is projected to stabilize around the Federal Reserve's target of 2% in the coming years. However, any sustained increase in inflation could add significant costs to the city’s budget.

Another critical factor discussed was the Public Employees Retirement System (PERS), which has seen steep rate increases due to legislative changes and court rulings. The city anticipates a $5.3 million increase in PERS costs for fiscal year 2026, representing a 23% rise over the previous year. This increase is nearly equivalent to the anticipated growth in property tax revenue, further complicating the city’s financial landscape.

Officials emphasized the need for ongoing monitoring of various financial drivers, including property tax assessments and labor contract negotiations, which could significantly impact future budgets. As the city grapples with these challenges, discussions around potential property tax reform and economic development initiatives are expected to continue as part of a broader strategy to address the budget gap.