Cherriots considers payroll tax on employers without asking voters

Cherriots is proposing to assess a .7% payroll tax on employers in Salem, Keizer and the rest of its taxing district in the Salem-Keizer urban growth boundary.

If the seven-member board of the Salem Area Mass Transit District, which operates as Cherriots, votes to approve the tax, it will take effect on January 1, 2026.

Cherriots says it would use the projected $39.4 million it raises each year from the tax to expand service. Cherriots provided about 3.2 million rides in 2024, down from its peak ridership of about 5.5 million in 2004.

“The service we provide is excellent, the level needs to grow,” Cherriots' general manager Allan Pollock said.

What is the payroll tax that Cherriots is proposing?

The tax would be paid by businesses and not employees like some payroll taxes. It would be collected by the state Department of Revenue. The tax would be on salaries, commissions, tips, bonuses and deferred compensation by employers in the district.

A company with an average annual payroll of $500,000 would pay $3,500 per year, according to Cherriots' figures.

Cherriots has a budget of $154.7 million for the 2025-2026 fiscal year. The largest share of that, $32.5 million, comes from federal funds. Oregon contributes $16.3 million from employees' pay, a .1% payroll tax, collected for transit districts across the state.

The Salem Area Mass Transit District estimates the proposed payroll tax would have raised $39.4 million in 2025.

Don’t bus riders pay enough to cover costs for Cherriots?

Cherriots riders pay $1.60 for a one-way ride, with people age 18 and under riding for free. That’s the same it’s been for over a decade.

The district earned approximately $2.2 million in fares for the 2024-2025 budget years, according to Cherriot's figures.

The Eugene-based Lane Transit District charges $1.75, and Portland-based Tri-Met charges $2.80. Businesses in the Lane Transit District pay an .8% payroll tax, and in Tri-Met’s district, they pay a .8237% payroll tax.

Lane is projecting to receive $61.2 million in payroll tax this year.

“We also want the same local investment that Tri-Met and Lane are getting,” Cherriots board president Maria Hinojos Pressey said.

Cherriots says it would raise approximately $39.4 million per year from its proposed payroll tax on employers in Salem and Keizer.

Didn't voters turn down a payroll tax for transit?

The Salem Area Mass Transit District asked voters in 2015 to support a .21% payroll tax on employers to pay for Saturday and Sunday service and extend weekday evening service.

The proposal was rejected with 42% approving and 58% of voters saying no, but the district still expanded service to weekends and for more hours.

The Salem city council in July 2023 passed a .814% payroll tax on employees that was decisively repealed by voters before it was enacted.

Who would and wouldn’t pay the payroll tax?

All businesses within the Salem-Keizer Urban Growth Boundary would be subject to the payroll tax. That includes self-employed and gig workers.

Entities that would be exempt include federal credit unions, public school districts, 501(c)(3) non-profits and tax-exempt institutions except hospitals, insurance companies, domestic insurers and those who provide domestic service in private homes.

The state of Oregon would not pay the tax, but would pay $11 million in lieu of the tax, according to Cherriots.

How can Cherriots enact a tax without it being voted on?

Senate Bill 1536, which the Oregon Legislature passed in 2018, changed the seven-member board of the Salem Area Mass Transit District from being appointed by the governor to being voted on by residents.

That bill also repealed a state law that will prevent the board from taxing residents without approval in an election. That repeal takes effect Jan. 1, 2026.

That’s why the district is discussing the payroll tax now.

“What this repeal basically does is places Cherriots on equal footing with the other two mass transit districts in Oregon who have had access to funding by board action since their inception,” Pollock said.

Cherriots chief operations officer Tom Dietz talks about a charging station at the Keizer Transit Center in 2024.

What impact could the upcoming special session of the Oregon Legislature have?

Gov. Tina Kotek has called the Oregon Legislature into special session on Aug. 29 to vote on a transporation funding bill that includes doubling the current state payroll transit tax on employees to .2%.

If passed, Cherriots could potentially collect more than $32 million every two years, about double what it now gets.

“It’s something that we are keenly aware of, and we hope that it does that, but … the investment that would actually go to Cherriots, and specifically Cherriots within the urban growth area, is significantly less than you might imagine,” board member Ian Davidson said.

What does Cherriots plan to do with the money from the proposed payroll tax?

Cherriots says it would use the money from a local payroll tax to purchase buses and hire more drivers to increase the frequency of service and provide service more hours, including weekends and holidays.

It also would use technology to enhance traffic signals, improve bus stop safety and accessibility, add a unified payment system like a phone app, provide a downtown Salem circulator, launch a new on-demand transit service, and reinstate rides to special events such as the Oregon State Fair.

Cherriots says it also would use the money to help fund its planned South Salem and Chemeketa transit centers. Those would be similar to the Keizer Transit Center, which opened in 2013.

Cherriots provided an estimated 3.2 million rides in 2024.

Salem-area business leaders push back against Cherriots' payroll tax proposal

At a July 31 forum at the Salem Area Chamber of Commerce, business leaders questioned why they should have to pay more for a transit agency that is already highly rated by customers for its service, and does so with less money than comparable transit districts.

Some of the business leaders likened enacting the payroll tax to a power grab.

“I think this is really irresponsible,” said Ryan Allbritton, a past chamber president.

One person estimated that each ride provided by Cherriots costs $42, based on publicly available financial documents.

Another asked if the district would be better off giving people certificates for Uber and Lyft and retaining the ability to move disabled people with Cherriots-provided vehicles.

“Uber provided in 2024 three million rides for the entire state of Oregon. They cannot replace what we do,” Hinojos Pressey said.

Salem Area Chamber of Commerce Executive Director Tom Hoffert urged the Cherriots board to send the tax to voters, although the district is not required to do so.

What’s next for the payroll tax?

Cherriots' general manager Allan Pollock said the district board would consider imposing the tax “in the fall.”