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City revenue hits bottom, officials hopeful for upturn next year

For cities, the effect of economic recessions are recognized and resolved later than it does for its residents, at least according to Newberg City Manager Lee Elliott.

“I think right now you’re starting to see local economies finally getting out of the recession,” Elliott said. “You’re seeing people reinvesting, you’re starting to see local economies coming out of the challenges we face pretty much like every city in the state right now.”

He said the slow return to normalcy is due to the way cities’ revenue streams are structured.

“We’re beginning to start coming out of our economic recession as far as revenue, but we’re having challenges because our revenue isn’t keeping up,” he said.

That is partially due to the year delay in property tax proceeds, which make up 60 percent of the city’s revenue.

“The Newberg Bakery just opened (March 5), it won’t show as improvements until next November, so it’s a whole year from now because (the country has) already done evaluations in January before it opened,” said Janelle Nordyke, finance director.

Delayed property tax proceeds are compounded by inflation.

“Local inflation is at 2.5 percent, but revenue is coming in at 2 percent, so we’re still below inflation and that’s the challenge to keep up with,” Elliott said. “We’ve tightened our belt. We’re very fiscally conservative, but when you’re below inflation it gets hard. Our hope is that over the next couple of years we can start catching up.”

A tightened belt has meant cutting programs and holding over any fixed costs, hoping revenue will increase.

“We’ve grown (as well), which is one of the challenges we face,” he said. “We’ve grown a couple thousand in population. The benchmark is one (police) officer per 500 people. Well that’s four more officers. We’re not able to add more officers. Fortunately, we’ve not been able to keep up with inflation, but we haven’t reduced.”

Elliott said the city seems to just now really hitting its bottom.

“I think next year we’ll see an increase,” Elliott said.

This hope for an increase in property tax proceeds is partially based on new housing starts, which provide revenue in more than one way.

Last fiscal year, there were 36 new houses constructed. So far this year, there are 30, with four months remaining in the fiscal year. Housing starts mean building permit fees, as well as new utility payments and additional property taxes once construction is completed.

While Elliott said new residential housing helps the economy, adding industrial land will help more in the long run.

“That’s very important to our future,” he said. “Houses are great and that helps a lot and right now we have a very good, diverse economy, but we need to add to it. (Adding industrial land) will help the economy in the future.”

Looking at a shorter field of view, Elliott said there are a couple of things the city could do to increase revenue.

“There is the transient lodging tax. It’s where people stay in our hotels and pay a 6-percent tax right now,” he said. “One option to look at is the state average is 9 percent. We’re looking to go to that in the near future.”

But it will only help so much and Elliott said Newberg is still one or two years away from being able to return services to pre-recession levels, and at least that far out before looking at expanding services — extra police officers included.

“We would like to expand some of the quantity, but our goal is to hold the line,” he said. “We’re trying to be good stewards of (the budget) and we don’t want to expand too quickly. We’re trying to keep it at a moderate level.”

Despite the seemingly bad news, City Engineer Jay Harris said there is a silver lining.

“The good news is it’s manageable,” Harris said. “We caught it early. It’s very manageable. We just need to manage it and be a little conservative.”

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