Less than a year ago, Salem’s financial forecast showed the city headed for a $17.7 million shortfall in its General Fund for the 2026 fiscal year. City staff warned that the gap would force tough decisions on services and staffing.
City leaders said the gap has been closed. Instead of a deficit, the current forecast shows a $3.9 million increase to reserves. And it happened without the payroll tax that dominated political debate last year.
The change comes from a mix of new revenue, voter support, and internal cost controls.
The most significant piece is the Local Option Levy, approved earlier this year. It moved funding for parks, libraries, recreation, and Center 50+ into a separate levy fund. That freed up millions from the General Fund, easing the pressure that drove the earlier forecast into the red.
Inside City Hall, departments were asked to spend less. Hiring slowed. Some vacant positions were left open. A handful of contracts were adjusted. Interim City Manager Krishna Namburi described these steps as efficiency measures, designed to bring spending in line without cutting core services.
Other changes added new dollars. Paid on-street parking began in July. Early numbers show $156,000 in revenue that month and more than $209,000 in August. That money is now covering downtown cleaning, security, and maintenance — expenses that had been leaning on the General Fund.
The city also launched its own ambulance transport service in July. Crews handled more than 3,400 transports in the first two months. Gross revenue is reported at $9.3 million, with costs estimated at $8.38 million. While it will take months to confirm how much of that revenue is collected, the program is already meeting response goals and reducing reliance on outside providers.
There’s also more money on the horizon. Two urban renewal districts — North Gateway and Mill Creek — are nearing the end of their tax collection periods. When they expire, property tax revenue once earmarked for projects in those areas will flow back to the city’s General Fund. The first-year estimate is more than $3 million.
Together, these shifts flipped the budget picture. What looked like a deep shortfall last fall is now projected as a modest surplus.
Still, staff caution that the long-term challenges remain. Police, fire, and employee benefit costs continue to grow faster than property tax revenue. Current projections show the General Fund dipping back into reserves again by 2027 if no new revenue is identified. And the Local Option Levy will expire in 2031 unless voters renew it or approve another funding source.
For now, though, Salem leaders can say the $17.7 million gap that once threatened city services has been closed. The city is on more stable ground — at least for the next few years.
