Before even starting, yes, the City Council can impose citywide payroll and income taxes without voter approval. Scuttlebutt is they probably won’t. After all, the public could, of course, reverse that with their own ballot measure, and the Council knows this.
It’s more likely they will formulate a proposal and then ask the voting public to approve it. A big step towards that comes this Thursday. Council will meet for a work session and consider scenarios City staffers are recommending. After that, a resolution and ballot measure language will form, the end goal being $18.4 million in new revenues.
So, let’s get into it.
WHAT THE MONEY IS FOR
City Finance Director James Inglis lays out the combined challenge in a May 26 staff report attached to the packet for this Thursday’s Council work session.
There is a budget gap. The City’s revenues grow at approximately 6.4% each biennium while recurring expenses grow at 10.3%, creating a compounding gap in the General Fund projected at $8.1 million for the 2027-29 biennium. This gap persists despite Council’s forecasted increase in Public Safety Fees, without which the gap would be larger.
Officials also believe it’s past time to replace the city hall and police station. When the City moved into the present city hall in 1956, Corvallis’ population was somewhere in the range of 16,000 to 20,000. Today, Corvallis has approximately 61,087 residents, that’s roughly three times the population.
The police station is considerably newer but still aging out. It was built in the mid-1970s as a shared facility with the Benton County Sheriff’s Office. At that time, Corvallis’ population was approximately 37,000 to 40,000. Today’s city is roughly 65% larger than the one the building was designed to serve, and officials describe it as “functionally obsolete.” There have been reports of the basement flooding, which is a space that is used for emergency operations and evidence storage.
In a memo to Council in the Thursday work session packet, City Manager Mark Shepard summarizes the situation, writing about an assessment the City had conducted, “Across the portfolio, square footage would need to increase by 77% to appropriately accommodate the staff/equipment at the time and increase by another 8% to meet future operations to the year 2040.” He also goes on to say the assessment identified general deficiencies across the portfolio and specific shortcomings at each location.
Many of those general deficiencies include massive energy usage per square foot compared to newer and more efficient buildings, lacking ADA compliance, and a real possibility that the buildings, even renovated, would not be usable after an earthquake.
Shepard also says the assessment found that 47% of the facilities studied are already older than the average useful life of a building — nearly half the city’s portfolio has outlived its design lifespan.
Breaking it down by specific project, the city hall that currently houses city administrative functions — needs a 60% increase in square footage. The Law Enforcement Building is in worse shape, with the assessment recommending a 115% increase in area to meet current public safety staffing, storage, operations, and training needs.
In December 2024, the Council settled on how to site new buildings to replace the city hall and police station on either side of Madison Avenue between 5th and 6th Streets.
The total estimated construction cost to build both buildings simultaneously was $211.5 million. Inflation plays into this, with each elapsing month, inflation adds about $1.05 million.
Inglis says addressing the police building and civic campus, which would replace the current city hall, will require approximately $14.5 million in annual debt service if constructed together, or $17.5 million annually if phased over time (a $3 million annual premium for delay). Additionally, between $1.5 and $3 million per year will be needed to lease space for City operations while awaiting facility completion.
When taken together, it would take $18.4 million in new annual revenues to cover the existing budget gap and to pay for both a new police station and city hall.
Officials are advocating to build both those facilities at the same time because a single project has less startup, mobilization and shutdown costs, and larger projects have a greater economy of scale. This means cost saving efficiencies with procuring and managing and the ability to stagger subcontractors across a single project. Onsite equipment can be shared, and duplicate costs for utility and street right-of-way work can be avoided.
A single project also has greater efficiency in general contractor supervision, temporary safety and security infrastructure. And there would be the ability to share equipment and material staging space. Also, bonus; only one disruption to downtown neighborhoods.
CITY STAFF RECOMMENDS FLAT RATE TAXES
So, how to pay for all this. City staff are recommending an income tax of 0.43% and a payroll tax of 0.46% per employer and employee. These would be flat rates, regardless of a taxpayer’s income level. They are also recommending Council retain the current Public Safety Fee and Local Option Levy rates and planned increases. The Inglis memo says this will produce the necessary revenue to bridge the budget gap and get a new police station and city hall built.
Staff also mention a contingent alternative; sweeten the proposition for voters with a Public Safety Fee freeze for five years. But that would mean increasing the income tax to 0.73% and the payroll tax to 0.78% per employer and employee.
The income taxes would apply to earned income, investment income and retirement distributions for anyone living in Corvallis. The payroll tax would apply to jobs in Corvallis.
Oregon State University employees would pay their side of the tax, but OSU, as a public entity, would be exempt from the employer’s side. The same situation would apply across any other public entities as well.
Because these income and payroll taxes would be flat taxes, they would be regressive, having a greater impact on lower income individuals than higher income earners. The new taxes are arguably less regressive than the current property taxes and property tax levies, but they are still regressive. And then, obviously, the Public Safety Fees are highly regressive.
THE PROGRESSIVE TAX OPTIONS PRESENTED, BUT NO LONGER BEING CONSIDERED
At a May 7 work session, city staff and economic consultancy firm ECONorthwest walked the council through a landscape of prospective new revenue tools. The two primary options emerged. A payroll tax and a personal income tax.
At the time, the council also considered a general obligation bond but narrowed its focus. Repaying those bonds would mean something that looks like a property tax, which, like we said, can be regressive.
So, how would these newer revenue options work. A payroll tax is levied on wages earned within the city. It can be split between employers and employees or fall on just one side. ECONorthwest estimates a 1% flat payroll tax — split evenly at 0.5% each — could generate between $10 million in 2027, as compliance ramps up, and roughly $16.7 million annually by 2033. A version with an exemption for workers earning below minimum wage would generate slightly less — around $9.3 million rising to $15.4 million over the same period.
Notably, a payroll tax would reach the roughly 20,000 people who commute into Corvallis for work but live elsewhere — a significant broadening of the tax base beyond city residents. The rationale includes that those workers are using city services like roads and police and first responders on some level as they spend their workdays in town.
The personal income tax would work differently. It would be levied on the taxable income of Corvallis residents and filers. It would capture not only wages but also investment income, retirement distributions, and capital gains. A flat 0.68% rate could generate between $10.3 million and $16.1 million annually. A graduated version could bring in between $11.1 million and $18.4 million, concentrating the burden on higher earners.
The graduated structure ECONorthwest modeled has two tiers and a meaningful zero-tax floor. Single filers earning under $125,000 and married filers earning under $200,000 would pay no local income tax. Above those floors, a 1% rate would apply on income between $125,000 and $250,000 for single filers, or $200,000 to $400,000 for married filing jointly. A 2% rate would kick in above $250,000 for single filers, or above $400,000 for married couples.
The graduated tax is modeled on Portland-area precedents: the Metro Supportive Housing Services Tax and Multnomah County’s Preschool for All Tax both use similar high-income bracket structures.
So, here’s what that all means practically. Based on 2023 filer data, approximately one-third of Corvallis taxable income comes from filers earning over $200,000 per year, and that is where the graduated tax would draw most of its revenue. The average Corvallis filer earned about $85,000 in 2023 — roughly $93,000 in today’s dollars — well below the threshold where any tax would be owed under the graduated model.
But, like we said, these more progressive taxes options are not being considered at present.
WHAT HAPPENS NEXT
Whatever direction the council gives Thursday, staff will return June 15 with a resolution formalizing the choice and launching what is being called being called a community education and participation effort.
The June 4 work session begins at 4 pm. at the Madison Avenue Meeting Room, 500 SW Madison Avenue. It is also available via Zoom. Written community comments may be submitted by noon on the day of the session at corvallisoregon.gov/publicinput or by mail to City Recorder, P.O. Box 1083, Corvallis, OR 97333.
MORE FLAT TAX OPTIONS OFFERED BY CITY STAFF
City staff also developed a series of alternative options. All of them are flat taxes with no exemptions for lower income earners, but they are otherwise complete strategic scenarios.
Each scenario represents a comprehensive approach to addressing the City’s fiscal challenges with clear tradeoffs. Staff is asking Council to select one scenario, after which, they would then refine based on Council feedback and community engagement.
Each scenario below includes addressing the estimated $8.1 million operating gap. What distinguishes them is which tax tools and facility builds are applied. Note: PSF stands for Public Safety Fees, LOL stands for Local Option Levy.
The first two options will look familiar as they have been recommended to Council by City staff.
A. Both Facilities + Both Tools
This scenario would fund facility investments at a level that will allow construction of both facilities and implement both a payroll tax and a local income tax to equally cover the cost of the operating gap and facility needs. The total revenue target would be $18.4 million. The income tax would need to be set at 0.43% and the payroll tax would be set at 0.46% per employer and employee. This scenario assumes that both PSF and the LOL continue with no changes to structure or planned increases. Scenario A allows for a higher level of revenue diversity, but also a higher level of complexity in implementation as staff would be implementing both types of new taxes simultaneously.
A1. Both Facilities + Both Taxes + PSF Freeze
This scenario would fund facility investments at a level that will allow construction of both facilities and implement both a payroll tax and a local income tax to equally cover the cost of the operating gap and facility needs as in Scenario A. However, this scenario would also freeze the PSF for at least the next 5 years. The total revenue target would increase to $31.4 million. The income tax would need to be set at 0.73% and the payroll tax would be set at 0.78% per employer and employee. This scenario holds the PSFs at current levels but makes no changes to the plans for other City Service fees. It also assumes that the LOL continues with no changes to structure or planned increases. Scenario A1 results in a high level of revenue diversity as it implements two new revenues sources and maintains the PSF. Scenario A1 also results in a higher level of complexity in implementation as staff would be implementing both types of new taxes simultaneously.
A2. Both Facilities + Both Taxes + Replace PSF
This scenario would fund facility investments at a level that will allow construction of both facilities and implement both a payroll tax and a local income tax to equally cover the cost of the operating gap and facility needs as in Scenario A. However, this scenario would replace the need for a PSF for at least the next 5 years. The total revenue target would increase to $41.4 million. The income tax would need to be set at 0.96% and the payroll tax would be set at 1.0% per employer and employee. This scenario assumes that both PSF are replaced, but that the LOL continues with no changes to structure or planned increases. Scenario A2 results in a medium level of revenue diversity as it implements two new revenues sources but replaces the PSF. Scenario A2 also results in a higher level of complexity in implementation as staff would be implementing both types of new taxes simultaneously.
A3. Both Facilities + Both Taxes + Replace LOL
This scenario would fund facility investments at a level that will allow construction of both facilities and implement both a payroll tax and a local income tax to equally cover the cost of the operating gap and facility needs as in Scenario A. However, this scenario would replace the LOL. The total revenue target would increase to $26.4 million. The income tax would need to be set at 0.61% and the payroll tax would be set at 0.66% per employer and employee. This scenario assumes that the PSFs continue with planned increases, but that the LOL would be replaced. Scenario A3 results in a medium level of revenue diversity as it implements two new revenues sources but replaces the LOL. Scenario A3 also results in a higher level of complexity in implementation as staff would be implementing both types of new taxes simultaneously.
B. Both Facilities + Payroll Tax
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a Payroll tax to cover the cost of the operating gap and facility needs. The total revenue target remains at $18.4 million. In Scenario B, the income tax would not be levied, and the payroll tax would need to be set at 0.92% per employer and employee. This scenario assumes that both PSFs and the LOL continue with no changes to structure or planned increases. Scenario B allows for a medium level of revenue diversity as it would maintain existing revenue and generate a new revenue source. Scenario B results in a lower level of complexity in implementation.
B1. Both Facilities + Payroll Tax + PSF Freeze
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a payroll tax to cover the cost of the operating gap and facility needs. However, this scenario would also freeze the PSF for at least the next 5 years. The total revenue target would increase to $31.4 million. In Scenario B1, the income tax would not be levied, and the payroll tax would need to be set at 1.57% per employer and employee. This scenario holds the PSFs at current levels but makes no changes to the plans for other City Service fees. It also assumes that the LOL continues with no changes to structure or planned increases. Scenario B1 results in a medium level of revenue diversity as it implements a new revenue source and maintains the PSF. Scenario B1 results in a lower level of complexity in implementation.
B2. Both Facilities + Payroll Tax + Eliminate PSF
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a payroll tax to cover the cost of the operating gap and facility needs. However, this scenario would also eliminate the need for a PSFfor at least the next 5 years. The total revenue target would increase to $41.4 million. In Scenario B2, the income tax would not be levied, and the payroll tax would need to be set at 2.10% per employer and employee. This scenario assumes that both PSF are eliminated, but that the LOL continue with no changes to structure or planned increases. Scenario B2 results in a low level of revenue diversity as it implements a new revenue source but eliminates the PSF. Scenario B2 also results in a low level of complexity in implementation.
B3. Both Facilities + Payroll Tax + Replace LOL
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a payroll tax to cover the cost of the operating gap and facility needs. However, this scenario would also replace the LOL. The total revenue target would increase to $26.4 million. In Scenario B3, the income tax would not be levied, and the payroll tax would need to be set at 1.31% per employer and employee. This scenario assumes that the PSFs continue with planned increases, but that the LOL would be eliminated. Scenario B3 results in a low level of revenue diversity as it implements a new revenue source but eliminates the LOL. Scenario B3 also results in a lower level of complexity in implementation.
C. Both Facilities + Income Tax Only
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a local income tax to cover the cost of the operating gap and facility needs. The total revenue target remains at $18.4 million. In Scenario C, the income tax would need to be set at 0.85% and the payroll tax would not be levied. This scenario assumes that both PSFs and the LOL continue with no changes to structure or planned increases. Scenario C allows for a medium level of revenue diversity as it would maintain existing revenue and generate a new revenue source and would result in a lower level of complexity in implementation.
C1. Both Facilities + Income Tax + PSF Freeze
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a local income tax to cover the cost of the operating gap and facility needs. However, this scenario would also freeze the PSF for at least the next 5 years. The total revenue target would increase to $31.4 million. In Scenario C1, the income tax would need to be set at 1.45% and the payroll tax would not be levied. This scenario holds the PSFs at current levels but makes no changes to the plans for other City Service fees. It also assumes that the LOL continues with no changes to structure or planned increases. Scenario C1 results in a medium level of revenue diversity as it implements a new revenue source and maintains the PSF. Scenario C1 results in a lower level of complexity in implementation.
C2. Both Facilities + Income Tax + Replace PSF
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a local income tax to cover the cost of the operating gap and facility needs. However, this scenario would also eliminate the need for a PSF for at least the next 5 years. The total revenue target would increase to $41.4 million. In Scenario C2, the income tax would need to be set at 1.92% and the payroll tax would not be levied. This scenario assumes that both PSF are replaced, but that the LOL continues with no changes to structure or planned increases. Scenario C2 results in a low level of revenue diversity as it implements a new revenue source but eliminates the PSF. Scenario C2 also results in a lower level of complexity in implementation.
C3. Both Facilities + Income Tax + Replace LOL
This scenario would fund facility investments at a level that will allow construction of both facilities and implement only a local income tax to cover the cost of the operating gap and facility needs. However, this scenario would also replace the LOL. The total revenue target would increase to $26.4 million. In Scenario C3, the income tax would need to be set at 1.22% and the payroll tax would not be levied. This scenario assumes that the PSFs continue with planned increases, but that the LOL would be replaced. Scenario C3 results in a low level of revenue diversity as it implements a new revenue source but eliminates the LOL. Scenario C3 also results in a lower level of complexity in implementation.
D. One Facility + Both Tools
This scenario would fund facility investments at a level that will allow construction of only one facility and implement both a personal income tax and a payroll tax to cover the cost of the operational gap and a portion of the facility needs. The total revenue target would decrease to $11.8 million. In Scenario D, the income tax would need to be set at 0.27% and the payroll tax would need to be set at 0.30% per employer and employee. This scenario assumes that both PSFs and the LOL continue with no changes to structure or planned increases. Scenario D allows for a high level of revenue diversity but would also result in a higher level of complexity in implementation as staff would be implementing both types of new taxes simultaneously.
D1. One Facility + Both Tools + PSF Freeze
This scenario would fund facility investments at a level that will allow construction of only one facility and implement both a personal income tax and a payroll tax to cover the cost of the operational gap and a portion of the facility needs. However, this scenario would also freeze the PSF for at least the next 5 years. The total revenue target would increase to $24.8 million. The income tax would need to be set at 0.57% and the payroll tax would be set at 0.62% per employer and employee. This scenario holds the PSFs at current levels but makes no changes to the plans for other City Service fees. It also assumes that the LOL continues with no changes to structure or planned increases. Scenario D1 results in a high level of revenue diversity as it implements two new revenue sources and maintains the PSF. Scenario D1 also results in a high level of complexity in implementation.
D2. One Facility + Both Tools + Replace PSF
This scenario would fund facility investments at a level that will allow construction of only one facility and implement both a personal income tax and a payroll tax to cover the cost of the operational gap and a portion of the facility needs. However, this scenario would also eliminate the need for a PSF for at least the next 5 years. The total revenue target would increase to $34.8 million. The income tax would need to be set at 0.81% and the payroll tax would be set at .87% per employer and employee. This scenario assumes that both PSFs are replaced, but that the LOL continues with no changes to structure or planned increases. Scenario D2 results in a medium level of revenue diversity as it implements two new revenue sources but replaces the PSF. Scenario D2 also results in a high level of complexity in implementation.
D3. One Facility + Both Tools + Replace LOL
This scenario would fund facility investments at a level that will allow construction of only one facility and implement both a personal income tax and a payroll tax to cover the cost of the operational gap and a portion of the facility needs. However, this scenario would also replace the LOL. The total revenue target would increase to $19.8 million. The income tax would need to be set at 0.46% and the payroll tax would be set at .50% per employer and employee. This scenario assumes that the PSFs continue with planned increases, but that the LOL would be eliminated. Scenario D3 results in a medium level of revenue diversity as it implements two new revenue sources but replaces the LOL. Scenario D3 also results in a high level of complexity in implementation.
E. One Facility + Payroll Tax Only
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only a payroll tax to cover the cost of the operating gap, and a portion of the facility needs. The total revenue target would decrease to $11.8 million. In Scenario E, the income tax would not be levied, and the payroll tax would need to be set at 0.59% per employer and employee. This scenario assumes that both PSFs and the LOL continue with no changes to structure or planned increases. Scenario E allows for a medium level of revenue diversity as it would maintain existing revenue and generate a new revenue source. Scenario E would result in a lower level of complexity in implementation.
E1. One Facility + Payroll Tax + PSF Freeze
This scenario would fund only one facility and implement only a payroll tax to cover the cost of the operating gap, and a portion of the facility needs. However, this scenario would also freeze the PSF for at least the next 5 years. The total revenue target would increase to $24.8 million. In Scenario E1, the income tax would not be levied, and the payroll tax would need to be set at 1.23% per employer and employee. This scenario holds the PSFs at current levels but makes no changes to the plans for other City Service fees. It also assumes that the LOL continues with no changes to structure or planned increases. Scenario E1 results in a medium level of revenue diversity as it implements a new revenue source and maintains the PSF. Scenario E1 results in a lower level of complexity in implementation.
E2. One Facility + Payroll Tax + Replace PSF
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only a payroll tax to cover the cost of the operating gap, and a portion of the facility needs. However, this scenario would also replace the need for a PSF for at least the next 5 years. The total revenue target would increase to $34.8 million. In Scenario E2, the income tax would not be levied, and the payroll tax would need to be set at 1.73% per employer and employee. This scenario assumes that both PSF are replaced, but that the LOL continues with no changes to structure or planned increases. Scenario E2 results in a low level of revenue diversity as it implements a new revenue source but replaces the PSF. Scenario E2 also results in a low level of complexity in implementation.
E3. One Facility + Payroll Tax + Replace LOL
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only a payroll tax to cover the cost of the operating gap, and a portion of the facility needs. However, this scenario would also replace the LOL. The total revenue target would increase to $19.8 million. In Scenario E3, the income tax would not be levied, and the payroll tax would need to be set at 0.99% per employer and employee. This scenario assumes that the PSFs continue with planned increases, but that the LOL would be replaced. Scenario E3 results in a low level of revenue diversity as it implements a new revenue source but replaces the LOL. Scenario B3 also results in a low level of complexity in implementation.
F. One Facility + Income Tax
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only an income tax to cover the cost of the operating gap, and a portion of the facility needs. The total revenue target would decrease to $11.8 million. In Scenario F, the income tax would need to be set at 0.55% and the payroll tax would not be levied. This scenario assumes that both PSFs and the LOL continue with no changes to structure or planned increases. Scenario F results in a medium level of revenue diversity as it would maintain existing revenue and generate a new revenue source and would result in a lower level of complexity in implementation.
F1. One Facility + Income Tax + PSF Freeze
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only an income tax to cover the cost of the operating gap, and a portion of the facility needs. However, this scenario would also freeze the PSF for at least the next 5 years. The total revenue target would increase to $24.8 million. In Scenario F1, the income tax would need to be set at 1.15% and the payroll tax would not be levied. This scenario holds the PSFs at current levels but makes no changes to the plans for other City Service fees. It also assumes that the LOL continues with no changes to structure or planned increases. Scenario F1 results in a medium level of revenue diversity as it implements a new revenue source and maintains the PSF. Scenario F1 results in a lower level of complexity in implementation.
F2. One Facility + Income Tax + Replace PSF
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only an income tax to cover the cost of the operating gap, and a portion of the facility needs. However, this scenario would also replace the need for a PSF for at least the next 5 years. The total revenue target would increase to $34.8 million. In Scenario F2, the income tax would need to be set at 1.61% and the payroll tax would not be levied. This scenario assumes that both PSF are replaced, but that the LOL continues with no changes to structure or planned increases. Scenario F2 results in a low level of revenue diversity as it implements a new revenue source but replaces the PSF. Scenario F2 also results in a low level of complexity in implementation.
F3 One Facility + Income Tax + Replace LOL
This scenario would fund facility investments at a level that will allow construction of only one facility and implement only an income tax to cover the cost of the operating gap, and a portion of the facility needs. However, this scenario would also replace the LOL. The total revenue target would increase to $19.8 million. In Scenario F3, the income tax would need to be set at .92% and the payroll tax would not be levied. This scenario assumes that the PSF continue with planned increases, but that the LOL would be replaced. Scenario F3 results in a low level of revenue diversity as it implements a new revenue source but replaces the LOL. Scenario F3 also results in a low level of complexity in implementation.
To contact Chris Evenson about this story, email office@corvallisadvocate.com
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