Depoe Bay facing budget crisis without precedent

The Depoe Bay Budget Committee gathers April 30 in the Neighbors for Kids building for its first meeting on the proposed 2020-21 city budget. Committee members elected Councilor Kathy Short, on left, as chair and navigated the first few pages of the 27-page budget before recessing to May 7. (Photo by Kenneth Lipp)

DEPOE BAY — The city on the world’s smallest navigable harbor faces a budget crisis without recent precedent, as two of its main sources of revenue have been substantially reduced by the advent of the coronavirus pandemic.

The Depoe Bay Budget Committee met April 30 for its first discussion on the 2020-21 fiscal year budget, and in her introduction to the 27-page document, City Recorder Barbara Chestler wrote that she did not envy the committee its task.

Chestler has already made downward adjustments to the current budget’s anticipated revenues for three line items — the transient room tax, and water and sewer revenues. The room tax has all but been cut off since March 23, when the city cosigned an order banning most short-term rentals in the county. The lack of room occupancy, as well as closure of some local shops and the suspension of on-site food service at restaurants, means a substantial reduction in use of water and sewer services.

Unique among all cities in Lincoln County and most in the state, Depoe Bay does not collect a permanent property tax (it does levy 0.66 for a sewer bond). Current state law prevents it creating a permanent levy, so it relies on enterprise revenue to fill its coffers, and the loss of income from room tax and utilities billings, projected to be close to $450,000 through June 30, is already eating away at its reserves.

In the 2019-20 budget, $700,000 of the $1.7 million General Fund is from the transient room tax alone. That’s been reduced to $525,000 in the proposed budget, but if the rental moratorium continues into the summer, that might not yet be enough of a cut. The tax’s most profitable quarter in the calendar year begins in July — last year it brought in $315,668 of the $924,940 yearly total during July, August and September.

Although a fraction of the room tax, several thousand dollars more in potential revenue was foregone this year with the city council’s decision not to raise moorage fees by 3 percent. In consideration of pandemic-related hardship, those will stay at 2019-20 levels, as will the after-hours fuel surcharge, per a council vote on Tuesday, May 5.

During its meeting April 30, the committee took its first stab at trimming wherever possible. Committee member Rick Beasley proposed cutting the contribution to the Depoe Bay Chamber of Commerce in half, by $2,500, a recommendation the committee passed on a closely split vote. Beasley told the News-Times he’s less interested in pushing cuts than he is in seeing council pass more means of revenue generation. Also discussed in the meeting was the need for the city to begin charging processing fees for credit card transactions, for which it is currently paying around $30,000 annually. Any such measure, as well as the final proposed budget forwarded by the committee, would need ratification by the city council.

City Councilor Kathy Short, who was elected to chair the committee, recessed the body until 5:30 p.m. on May 7, when they were scheduled to meet again in the Neighbors for Kids building next to city hall. Chestler said she would there present a figure for the city’s average monthly operating expenses to aid the committee’s considerations.

In a 2016 report from the Oregon League of Cities, Depoe Bay was named as one of five incorporated cities in the state without a permanent property tax (230 cities did have a permanent property tax, and eight cities were not listed in the data examined by the report). Two of those are in the southern Portland metro area of Clackamas County, and two are in eastern Oregon. None of them are really comparable to Depoe Bay.

The largest of the four, Johnson City, a mobile home park with a population of 566 and no commercial property, gets most of its income from federal and state grants, marijuana tax and franchise fees. City Manager Judy Davis, its sole employee, said the annual budget was around $350,000, but a large portion of that was a contingency dedicated to substantial road repairs or other emergency projects. The second largest, Rivergrove, has a population of 370, two city-owned roads and gets most of its income from development permits and franchise fees, according to City Manager Heather Kibbey, who said she could not give an annual budget amount until she prepared it for the city council next month. The other two, Adrian and Shaniko, from which representatives could not be reached by press time, have populations of 177 and 36, respectively.

One city missing from the league’s report, Lakeside, home to about 1,700 people, also has no permanent property tax and might serve as a more apt basis for comparison, although not to scale financially. Lakeside is in Coos County, which had a rental moratorium during April but allowed it to lapse May 1. Mayor James Edwards said the city received about $60,000 a year from the room tax and had made adjustments to its $3.2 million 2020-21 budget proposal accordingly. Lakeside has seven part-time and seven full-time employees. Depoe Bay has slightly fewer residents, about 1,500, and 11 full employees, but its proposed budget is about $10.2 million this year across all funds.

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