McMinnville council split over restoring final 50¢ property tax levy as service fee’s future is debated

Finance Director Katie Henry told a joint McMinnville City Council and budget committee work session that FY2025 revenues came in roughly on budget and that the city ended the year with multiple fund balances (ARPA about $3.3 million with roughly $500,000 uncommitted; an operating fund balance of about $6.7 million). Looking ahead, Henry said the single largest unknown for the FY2027 budget is the operating tax levy and presented models that assume a 50¢ property tax increment (bringing the permanent operating rate from $4.52 to $5.02 per $1,000 assessed value).

Why it matters: staff models that include the 50¢ increment showed a modest shortfall for 2027 that becomes manageable in later years. Henry said, without the added 50¢ and without substantial cuts, the model shows a roughly $2.3 million gap in 2027 and larger deficits in ensuing years. She emphasized the model’s assumptions — 3% annual cost‑of‑living adjustments, insurance cost increases (medical/dental at 10%), limited increases to materials and services and the retention of the city service charge — and warned those assumptions materially affect the outcome.

Council debate and positions: Councilor Chris Chenoweth pressed staff about core assumptions (PERS, property tax growth) and proposed eliminating the city service fee while restoring the final 50¢ to the property tax levy. Several councilors, including Councilor Tokalski and Councilor Stephani, also recommended placing the city service fee on the ballot or phasing it out over time.

Other councilors cautioned that removing the service fee now would create a budget cliff. Council President David Peralta and others argued the 50¢ increment is the most prudent way to preserve current service levels and address a significant deferred maintenance backlog, saying cuts would otherwise be required to police, parks and other services. Interim City Manager Adam Garvin summarized the tradeoffs: "You have to decide whether you want to prepare a budget with the $5.02 coming online or make $2.3 million in cuts instead of $300,000 in cuts." (paraphrase of staff guidance during the meeting)

Next steps and constraints: Garvin told the committee that, with the mix of opinions at the work session, staff will prepare a proposed budget that includes the 50¢ increase for the formal budget hearings and that the budget committee will be responsible for any later decisions to reduce the levy. Staff also reported vacancy savings—notably in the police department—are helping near‑term payroll costs but stressed vacancy savings are not a reliable long‑term funding source.

Numbers and clarifications: Staff reported the city’s ARPA balance at approximately $3.3 million with about $500,000 uncommitted; the operating fund balance used for the two‑month reserve policy was about $6.7 million. Henry said fiscal policy requires a two‑month operating reserve (personnel and materials/services, excluding capital outlay). The forecast model that excludes the 50¢ levy shows a $2.3 million shortfall in 2027 unless the city cuts programming, postpones deferred maintenance, or reduces reserves.

What comes next: The conversation ended as staff said it would prepare budget materials assuming the 50¢ levy for the formal budget committee process; councilors will continue to weigh whether to ask voters to approve levies or a dedicated fee to replace the city service charge or to pursue phased alternatives. Any formal decision about placing measures on a ballot or changing policy will come during the budget committee and future council meetings.