In June the City of Salem raised the tax some downtown tenants pay by more than 100%, upsetting many and causing some merchants to leave the area.
The Downtown Parking Tax helps pay for downtown, and the change affects 63% of downtown businesses. Those affected are the smallest tenants, people with small offices or storage spaces and businesses, who previously paid either the previous minimum, $197/year, or at least below $400/year.
The change in law raised the minimum tax paid to $400/year, meaning a hike of more than 100% for many.
Roger Yost, a prominent downtown landlord, objects to the burden the new tax places on his tenants, saying the tax “picks on the people who can least afford it,” and that it “causes people not to want to rent downtown.”
Yost has already lost three tenants in one of his buildings “all of whom indicated that the doubling of the tax” was the reason.
“And,” he says, “I don’t know that we won’t lose more.”
Ariadna Sanchez, owner of Dreamface Studio, says the tax hike hit her small business hard. “Increasing parking taxes on small business owners and tenants by a significant amount, places us in a disadvantage,” she says, noting that small enterprises like hers are already facing “a fragile economy.”
The tax hike will bring $50,000 more per year to the city to pay for downtown services, and the idea for it came from the City Manager’s Office.
City Manager Linda Norris says that funding was direly needed for the downtown Parking District. “The parking fund has struggled for many years to generate enough revenue to support the operations costs of the Parking District,” she says, citing the two traditional funding sources, parking permits and the Downtown Parking Tax, as inadequate.
Norris says the district had to get funds from other city agencies to help pay expenses and that “these subsidies are not sustainable over time.” Those funds, “Urban Renewal funds and Leasehold funds, are needed for the purposes for which they were intended.”
As for the tenants who have left, or will leave, Norris says, “Every year, businesses make decisions to move from one location to another based on their business needs and goals. While I understand a few businesses have moved out of downtown, to date the movement of businesses into or out of downtown seems consistent with movement in prior years.”
Critics say there might have been a fairer way. They point to the inequality of implementation. For example, the largest payer in the Parking District is Kohls, which contributes $46,392.00 parking tax annually. At 102,143 square feet, Kohls pay 42¢ per square foot. On the small-business end, the OK Barber Shop now pays $400/year for their 450 square feet. At 89¢ per square foot, OK Barber Shop pays twice the tax of the larger business.
The reality of funding shortages and a city that has expenses that range from police services to library maintainance, however, means city officials need to make hard decisions. “Just as is the case for all businesses,” Norris says, “parking district revenue has to cover costs.