Dunes City finds possible solution
City still faces upcoming legal issues, financial troubles
May 15, 2019 — Dunes City's fear of losing state shared revenue appeared to be tempered last Wednesday, as city staff and councilors discussed and passed a resolution to certify five official services the city offers its residents.
The issue of shared revenue has been a topic of debate in Dunes City over the past year, as city officials feared that the city would stop receiving shared revenue from the state through gas, cigarette and liquor taxes. If that were to occur, Dunes City could lose up to $100,000 annually in revenue which would then put the already cash-strapped municipality deep in the red.
There were two issues that the city looked at to save the shared revenue, the first being the institution of a minimal city-wide tax. This was based on ORS 221.770, which states that a city must levy "a property tax for the year preceding the year in which sharing is due."
However, Dunes City Administrator/Recorder Jamie Mills, after speaking at length with the city's attorney, told Dunes City Council last Wednesday that a city tax was not needed due to ORS 221.760.
That code "allows cities and counties with over 100,000 people to just declare that they're able to receive state revenues because they provide at least four of a list of services," Mills said.
"Is it my understanding that because we can be lumped into Lane County's population, therefore over 100,000, we don't need a tax?" Councilor Tom Mallen asked Mills.
"That's Jamie's [and the attorney's] interpretation of that," said Mayor Robert Forsythe, who was still unsure whether or not the city could receive revenue without a tax base. "I haven't seen anything about a city not being taxed. The interpretation they're using is that we don't have to. I'd like to look at more details."
Instead of focusing on instituting a tax, Mills stated the city should instead focus on ORS 221.760, which states the state can only disburse funds to a city that "provides four or more of the following services: 'Police protection,' 'fire protection,' 'street construction, maintenance, and lighting,' 'sanitary sewer,' 'storm sewers,' 'planning, zoning and subdivision control,' or 'one or more utility services.'
In the past, the city had listed "Fire protection," "storm sewers," "planning" and "street maintenance" as its four services, thus allowing the city to receive shared revenue. However, there was an issue with "fire protection." When the fire department became a special district, Dunes City residents paid for fire protection directly to Siuslaw Valley Fire and Rescue through taxes, cutting Dunes City out of the equation.
To counteract that, Mills put forth a resolution before the council that would certify the service of "enhanced fire protection" because of the city's inclusion in the Western Lane Emergency Operations Group (WLEOG).
WLEOG, which the city pays an annual fee of $2,000 for membership, is a collaborative group effort between governmental entities and associated private citizen groups to identify, proactively plan for, and react to and recover from natural or man-made disasters in Western Lane County, such as tsunamis or large-scale fires. The overall goal of WLEOG is to effectively utilize all of the community's resources in all facets of disaster preparation training and emergency response to protect life and property.
"By being a member of WLEOG, it's 'enhanced' because it goes beyond just fire into other emergencies," Mills said.
While the city was only required to list four services, it added a fifth for safe measure: "water utility service."
"A utility is not defined like most of us would think of utilities, where you're paying your electric bill or water bill or something like," Mills said. "It is merely defined as providing a mechanism by which your residents receive a utility item. In this case, we do provide a mechanism by which some residents can receive water," which would be Dunes City's water rights, Mills said.
While the two services may not be considered traditional utilities, the interpretations of the rules should give Dunes City enough leeway to continue collecting shared revenue.
"Does the water system actually qualify as a utility, or does throwing a couple thousand dollars to WLEOG every year actually qualify?" Mills asked in an interview with the Siuslaw News after the council meeting. "It's up to the interpretation of the state treasurer, who is the officer to make that decision. Historically, whoever was the state treasurer agreed that we should receive those funds and I don't want to argue with them."
Because the city has continued to receive shared revenue without issue, and because the city was able to add two additional municipal services, Mills argued to the council that the city should be able to continue to receive funds without issue.
"It's good that we have that work around," Mallen said before the council unanimously approved the new service language. "I was not aware of that, and it makes me feel better about this whole issue, because we would have a huge budget revision if we did not. … This resolves that in my mind."
"I think it should be of some comfort, yes," Forsythe said, stating that he would review the attorney's interpretation on taxation to ensure that the city was on sure footing.
While the issue of losing shared revenue appears to be resolved for now, city financials are anything but solid, as was revealed in the budget meeting that preceded the city council meeting. While the city budget is balanced and there are no immediate threats, the city is still just getting by.
"We used to get a lot of timber money from the money when the industry was still big," Mills said. "We had about $400,000 in reserve in the road fund, just for roadways."
In the newly proposed budget, only $50,000 is set aside for road maintenance.
"Big projects aren't going to happen," Mills said. "We'll do the best we can to spot-fix. If you have a pothole, we'll go out and take care of it. But if a road slides off into a drainage gorge, I don't know. It's getting down to where we don't have reserves anymore."
While the city can apply for grants for projects, they are not guaranteed.
Budget committee member Rory Hammond asked if there was any way the city could raise more money for roads.
"The expense is astronomical, it just boggles the mind," Forsythe said about the cost to repair a full street.
If the city decided to repave an entire street, instead of just fixing pot holes, the costs could rise into the tens of thousands of dollars.
"How do we get more revenue for our streets?" Hammond asked.
Forsythe shook his head, replying, "When we find out, we'll share it with you."
Hammond also asked about other issues the city could be investing in, such as the continuing algae problems facing residents face.
"We worry about algae blooms in the summer," he said. "From a tactical level, what can we do? Do we raise money to research blocking technology and figure out if it's appropriate?"
Hammond was reminded that the technology was expensive, and the city could not afford it.
"But we can do a study to let them know if they want to pay for it," Hammond said. "We try and find solutions for them, instead of having them individually find solutions."
Currently, the city cannot afford a professional study to discover algae solutions, though it could create an ad-hoc committee to look at the issue. However, as has been the case with many committees in Dunes City, it's difficult to find participants from the community. The budget committee that Hammond sits on only has three members, with four seats vacant.
And while the issue of losing shared revenue could be tempered, there are other financial threats facing the city, such as the new state requirement for cities to hire building inspectors, instead of city's contracting them out on a case-by-case basis.
If the city is required to hire a full-time inspector, with costs reaching $100,000 yearly, "that could be the domino" that collapses the city, Mills said.
That issue is currently being looked at by the state legislature, but Dunes City is prepared to fight it through the courts if it does end up being required to hire an inspector. The building inspector issue, along with other issues such as the possibility of losing water rights, has led the city to budget over $50,000 just in legal fees for the 2019/2020 budget cycle.
And there are other budgetary threats from the state that cannot be fought in courts, such as PERS.
"Given that the city's PERS allocation jumped from 26.24 percent in 2018 to 30.16 percent in 2019, the total additional expense to the city will be approximately $27,000," Mills reported in the budget meeting.
Despite the city's continuing financial difficulties, Mills stated that the city does its best to get by.
"We're figuring out the day to day, every day," she said after the council meeting. "I think of the volunteers of this city, and they'll go out and clean up the roadways. We do the best we can to keep the roads clear and open. Not everybody agrees that we do a good job. We just do the best we can."
In other news from the meetings, the council ruled against accepting a piece of land offered to the city through donations. While the council had hoped the land could be used for a new cell tower, the property was deemed too small for that purpose. The land did not have any driving access built on it, and there were concerns about maintaining the property and liability issues.
"It's not something we have eyes on all the time," Councilor Susan Snow said.
Mills did mention that Camp Baker, which is managed by the Boys Scouts of America, expressed an interest in the property.
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