An Act authorizing the city of Salem to increase the short-term rental community impact fee for the purpose of school and municipal facilities

194th Legislature (2025-2026) Introduced by Manny Cruz

Salem may raise the STR fee to 6% to fund school and municipal facilities through a dedicated special revenue fund for capital, maintenance, and debt service.

Overview

This bill would authorize the City of Salem to increase its short-term rental (STR) community impact fee from 3% to up to 6% of the total rent charged for each occupancy. The incremental revenue generated by this increase would be dedicated to a special revenue fund and used exclusively for the planning, design, acquisition, construction, renovation, operation, maintenance, and debt service related to Salem’s school and municipal buildings and facilities. The measure explicitly preserves Salem’s ability to seek and use outside grants or assistance. The act would take effect upon passage.

Main purpose and intent

Enable Salem to raise the STR community impact fee to fund school and municipal facilities.

Create a dedicated funding stream to support capital projects, ongoing maintenance, and related debt service for these facilities.

Ensure that additional revenue from the higher fee is reinvested in local needs and does not revert to the general fund.

Key provisions and changes

New authority: Salem may impose a STR community impact fee on professionally managed units and owner-adjacent units used for short-term rentals.

Fee cap: The fee may be set at up to 6% of the total rent for each occupancy (an increase of up to 3 percentage points over the current 3% cap).

Revenue use: Additional revenue attributed to the 3-point increase (i.e., the amount above the current 3% rate) must be deposited into Salem’s special revenue fund.

Fund purpose: Funds in the special revenue fund may be used exclusively for:

Planning, design, acquisition, construction, reconstruction, renovation, repair, improvement, furnishing, and equipping of school or municipal buildings and facilities.
Maintenance and extraordinary maintenance of those facilities.
Debt service on bonds or notes issued for these purposes.

Grants and external funding: The act does not limit Salem’s ability to obtain or expend grants or other financial assistance from state, federal, or local sources for the described purposes.

Fund balance:** Any remaining balance in the fund at the end of a fiscal year remains available for expenditure for the intended purposes (i.e., it does not revert to the general fund).

Who is affected

Primary: City of Salem and its short-term rental market participants, including:

Professionally managed STR units.
Owner-adjacent STR units.

Secondary: Salem residents and stakeholders relying on school and municipal facilities, who may benefit from improved facilities funded by the increased fee.

State and federal funding partners: Potentially affected insofar as the city may pursue grants; the act affirms compatibility with such funding.

Procedural and timeline aspects

Enactment: The act becomes effective upon passage.

Oversight: The increased fee would be implemented under the city’s administration, subject to local permitting and revenue collection processes.

Fiscal management: A dedicated special revenue fund is established to track and restrict use of the incremental revenue.

Summary of impact

Financial impact: Allows Salem to raise up to 6% of STR rent per occupancy, with the incremental 3% collecting into a dedicated fund.

Public impact: Provides a targeted funding mechanism for capital and maintenance needs of schools and municipal facilities.

Flexibility: Maintains ability to secure external funding; ensures unspent funds carry over for ongoing or future facility needs.