AN OVERVIEW OF OREGON’S PROPERTY TAX SYSTEM League of Oregon Cities
Feb 26, 2016
AN OVERVIEW OF OREGON’S PROPERTY TAX SYSTEM
League of Oregon Cities
Where the Money Goes –
Property Taxes in Oregon
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Counties; 18%
Cities; 22%K-12 & ESDs;
42%
Community Colleges; 4%
Special Districts;
14%
Based on Oregon Department of Revenue FY2013-14 Property Tax Statistics report
Communities around Oregon are Struggling
Eugene: Has cut over 100 employees and now has fewer city staff per capita than at any time in the last 35 years.
Grants Pass: Police service calls were up 20 percent from 2011 to 2012, and a lack of jail space means the city gives citations to appear in court which many offenders simply ignore.
Portland: Eliminated $21.5 million from the General Fund, cutting 55 FTE positions in the Police Bureau and 52 FTE in Portland Fire and Rescue.
St. Helens: Cut police department to 16 sworn officers, a staffing level last seen in 1978. Also drawing down reserves, eliminated a code enforcement officer, and reduced library hours.
Albany: Revenue lost to statewide property tax limitations has grown 882% since 2007, from $97,682 to $901,070. 3FTE = Full Time Equivalent
Property Tax Fact #1:
Oregon’s property taxes are below the national average.
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25thOregon’s rank in
property tax collections per capita.
25thOregon’s rank in mean
property taxes on owner-occupied housing as a percentage of home
value.
Source: Tax Foundation’s 2014 Facts and Figures Report
Property Tax Fact #2:
For many communities, property taxes don’t cover the costs of public safety
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Property Tax Fact #3:
Oregonians pay more in state income taxes than in property taxes
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$1,500Oregon per capita state
income taxes
$1,312Oregon per capita local
property taxes
Source: Tax Foundation’s 2014 Facts and Figures Report
Property Tax Fact #4:
Statewide property tax caps handcuff local voters
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Percentage of voter approved temporary taxes lost to statewide limits, FY2012-13
8
Property Tax Fact #5:
Major property tax inequities exist between homeowners
Data obtained from county assessor records
Ratio of AV to RMV in Multnomah County
9Source: Tualatin Valley Fire & Rescue
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Property Tax Fact #5:
Inequities are not confined to the metro region
Data obtained from county assessor records
Oregon’s Unique Detachment from RMV
17 states have separated values for property tax purposes – only Oregon and Arizona do not recalibrate value at the time of sale
“With no periodic recalibration of assessed values to market levels, the Oregon system has gone the farthest of any in breaking the link between property taxes and property values.”
Source: “Property Tax Assessment Limits: Lessons from Thirty Years of Experience.” Mark Haveman and Terri A. Sexton. Lincoln Institute of Land Policy. 2008.
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City Club of Portland report: Reconstructing Oregon’s
Frankentax
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“The sponsors of these measures, along with the voting majorities who supported them, sought to do good: reduce taxes and increase the predictability of property taxes for owners of property. They succeeded at these goals.
“However, like the creature in Mary Shelley’s novel, Oregon’s property tax, a Frankentax, is slowly but surely wreaking havoc upon its creators and their communities in ways they might not yet realize.”
City Club of Portland report: “Reconstructing Oregon’s Frankentax.” November 2013
The Consequences of“Frankentax”
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“Owners of properties with similar real market values pay different amounts of property tax.”
The tax caps “induce a confusing, uncoordinated proliferation of tax jurisdictions that cannibalize each other and make accountability more difficult.”
“Mechanisms designed to promote predictability in tax burdens, such as limits on tax rates, can induce reductions in service levels that voters have approved.”
“With a real market value of $98.3 billion, almost 200,000 properties in Oregon are exempt from paying some or all of their property taxes.”
“Oregon’s property tax system is difficult to comprehend, undermining its legitimacy.”
City Club of Portland report: “Reconstructing Oregon’s Frankentax.” November 2013
What Can I Do?
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Talk to your representatives
Learn more at www.orcities.org/taxreform
Share the story
Questions?
Additional information available at:www.orcities.org/taxreform
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Two initiatives shapeOregon’s property tax
system:
1. Measure 5 2. Measure 50
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Measure 5 (1990) Capped property taxes for all general
governments (cities, counties, special districts) and schools at $10 and $5 respectively per $1,000 of real market value (RMV) Limits property taxes to 1.5% of RMV
$200,000 home = $2,000 limit on general government property taxes; $1,000 limit for schools
Measure 5 limits mimic the real estate market Limits do not include capital bond measures
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Compression If the property taxes on an individual property
exceed the Measure 5 limits, the taxes are reduced until the limitations are reached, a process known as compression Voter-approved temporary taxes are reduced first, all
the way to $0, before collections from permanent rates are compressed
More than half of Oregon cities are in compression, as are all counties and 90 percent of school districts
Revenue lost to compression is increasing
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2009 2014$0
$500
$1,000
$1,500
$2,000
$2,500
$700 $646
$800 $738
$450 $415
$50 $0
Local option leviesSpecial DistrictCityCounty
Compression Example
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2009 2014 Difference
RMV $200,000 $180,000 ($20,000)
Measure 5 limits $2,000 $1,800 ($200)
Local Taxes
Local option levy $50 $0 ($50)
Special District $450 $415 ($35)
City $800 $738 ($62)
County $700 $646 ($54)
Revenue lost to
compression
Revenues compressed
Compression Losses for Cities, Schools and Counties
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Since FY2007-08 revenue lost to compression has increased:
• 384% for schools, or by $87.7 million• 254% for cities, or by $37.1 million • 148% for counties, or by $18.3 million
FY97
-98
FY98
-99
FY99
-00
FY00
-01
FY01
-02
FY02
-03
FY03
-04
FY04
-05
FY05
-06
FY06
-07
FY07
-08
FY08
-09
FY09
-10
FY10
-11
FY11
-12
FY12
-13
FY13
-14
$(100,000,000)
$(90,000,000)
$(80,000,000)
$(70,000,000)
$(60,000,000)
$(50,000,000)
$(40,000,000)
$(30,000,000)
$(20,000,000)
$(10,000,000)
$-
Revenue Lost to Compression
CitiesCountiesSchools
Four Major Problems #1 - Undermines local control
Voters are no longer in control of services provided locally
Example: City of Sweet Home• Low permanent rate of $1.42 per $1,000 of assessed
value• Reliant on temporary taxes to fund police & library
services• Voters have passed these taxes dating back to 1986,
most recently in 2010 with 60 and 55 percent support• Revenue loss from tax limitations have more than
doubled, from $300,000 in 2009-10 to $972,000 in 2013-14
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Fosters Belief in Bad Government
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Multnomah County's cutbacks in hours and services, tied to Oregon's complicated tax code, caught plenty of library-goers off-guard. Hollywood resident David Sparks is among those who voted to extend levy funding in May on the mistaken assumption that the library would stay open seven days a week.
"So terribly disappointed that what we voted for apparently wasn't," said Sparks, who has four children younger than 12 and brings his family to the library weekly.
The Oregonian, Thursday, July 19th, 2012
Multnomah County voters approved the renewal of the library levy with 84% of the vote.
Three Major Problems #2 – Spillover effects
The actions of one taxing district can have an effect on overlapping districts
Examples: Sweet Home, Albany and Linn County Multnomah County Library and Portland
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Three Major Problems
In many ways, our system really is nuts…
About one third of Portland homeowners don’t have to pay the entire [local option levy], and more than a quarter of all homeowners don’t have to pay anything at all…
Thanks to property tax compression, thousands of Portland homeowners may vote in support of tax hikes from which they are effectively exempt.
[Measures 5 and 50 have] created compression related inequities and distortions in a number of cities… they also tie the hands of local voters.
The Oregonian, Monday, July 30th, 2012
#3 – Some people not paying for voter-approved taxes
Solution Voter Control Referral – HJR 8 in 2013
Empower voters to pass local option levies outside of statewide limits Levies remain limited to five years maximum Referral is not retroactive Levies could still be passed within statewide
limits Proposed levies outside of limits must state that
the taxes paid will not be reduced due to statewide limits
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Two initiatives shapeOregon’s property tax
system:
1. Measure 5 2. Measure 50
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Measure 50 (1997) Set a new assessed value (AV) level
At 10% less than 1995 RMV Capped annual growth in AV at 3%annually Set permanent rates for all taxing districts
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Solution Reset at Sale – HJR 13 in 2013
Reset a property’s assessed value (AV) to real market value (RMV) at the time of sale or construction Includes provision to allow eligible low income
seniors to move without seeing taxes increase Revenue could help fund more targeted deferral
or exemption programs
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Two Limitations
Assessed Value x Tax Rate
= Tax ExtendedOR
Real Market Value x Maximum Category Rate ($5 per $1,000 schools & $10 per
$1,000 general gov.)= Maximum Allowable Tax
If tax extended is greater than the maximum allowable tax, the difference is reduced or “compressed” and is not collected by the taxing
district(s).
Measure 50 limits Measure 5 limits
City Local Option Levies
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West Linn
Ashland
Eugene
Gladstone
Grants Pass
Hillsboro
Springfield
St. Paul
Sweet Home
Stayton
Warrenton
Cities that have passed four or more local option levies (11)
Albany
Banks
Canby
Forest Grove
Happy Valley
King City
Port Orford
Seaside
Dayton
Cities that have passed three local option levies (10)
Portland
Bandon
Gold Beach
Phoenix
Bay City Lexington
Milton-Freewater
Lyons
Cities that have passed two local option levies (8)
Union
Cities that have passed one local option levy
School District Local Option Levies
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West Linn – Wilsonville
Ashland
Eugene
Riverdale
Sweet Home
School districts that have passed four local option levies (3)
Corvallis
Lake Oswego
Crow-Applegate-Lorane
School Districts that have passed three local option levies (8)
PortlandHood River
Pendleton
School districts that have passed two local option levies (2)School districts that have passed one local option levy (13)
Sisters
Tigard - Tualatin
Camas Valley
Colton
Helix
Oakland
Beaverton
JosephSherman County
Falls City
Condon
Morrow County
Siuslaw
Klamath Falls
Administrative
County Local Option Levies
32
Baek Dae H
Counties that have passed 6 or more levies (2)Counties that have passed 5 levies (5)
Counties that have passed 4 levies (1)
Counties that have passed 3 levies (2)Counties that have passed 2 levies (3)
Counties that have passed a levy (3)