FINANCE

1

FINANCEChris Fick

League of Oregon Cities

2

Cities are struggling Revenues have declined nearly 4 percent

over the last five years; Rainy day funds have plummeted 16

percent; 42 percent of cities report being less able

to address their financial needs this year; and

Nearly half of cities believe that their city will be even less able to meet financial needs next year.

3

Budget Reduction StrategiesEmployed by Cities

Cut road maintenance 38%

Reduced staff and/or operations at city hall 37%

Reduced total operating spending 30%

Decreased planning and permitting services 30%

Reduced number of FTEs 27%

Cut infrastructure spending 25%

Increased employee contribution to healthcare 24%

Decreased overall service levels 16%

Reduced public safety spending 14%

4

LOC Board: Makes revenue reform a long-term

priority of the League

Primary revenue constraints Measures 5 and 50

5

Measure 5 (1990) Capped property taxes for all general

governments (cities, counties, special districts, local option levies) at $10 per $1,000 of RMV Limits property taxes to 1% of RMV

$300,000 home = $3,000 limit on general government property taxes

Measure 5 limits mimic the real estate market

6

Measure 50 (1997) Set a new assessed value (AV) level

At 10% less than 1995 RMV Capped annual growth in AV at 3% Set permanent rates for all taxing

districts

7

Effects of Measures 5 & 50 Compression Loss of local control Inequity

Permanent rate Neighborhood to neighborhood New Property - Changed Property Ratio

Increased service delivery by districts

8

Compression Compression under Measures 5 & 50 occurs

when the value of property taxes on an individual property is greater than the $10 per $1,000 of RMV More than half of Oregon cities are in compression Revenue lost to compression is increasing

FY2008-09 FY2009-10 FY2010-11 FY2011-12

$(30.00)

$(25.00)

$(20.00)

$(15.00)

$(10.00)

$(5.00)

$-

$(10.80)

$(15.60) $(19.60)

$(28.20)

City Property Tax Revenue Lost to Compression

In m

illio

ns

9

Compression – Falling RMVs

2009 2012$0

$500

$1,000

$1,500

$2,000

$2,500

$800 $738

$650 $600

$500 $462

$50 $0

Local option leviesSpecial DistrictCityCounty

2009 2012 Difference

RMV $200,000 $180,000 ($20,000)

Measure 5 limits $2,000 $1,800 ($200)

Local Taxes

Local option levies $50 $0 ($50)

Special District $500 $462 ($39)

City $650 $600 ($50)

County $800 $738 ($62)

Revenue lost to

compression

Revenues compressed

10

Loss of Local Control Voters lack the ability to:

Make local decisions; Prioritize; or Engage in long-term planning (5 year limit on

local option levies)

11

Sweet Home, OR Timber-dependent city in Linn County Measure 50 permanent rate of $1.42 per $1,000

of AV City has funded police and library services with

local option levy since 1986 Voters approved levies with nearly 60 and 55

percent support respectively in 2010

12

Sweet Home continued… However, other taxing districts recently passed local

option levies Market values plummet $38 million, $34 million, and

$18 million over last three years Result: Revenue loss from compression has

doubled, from $300,000 (13% of property tax revenues) in 2009-10 to $730,000 (31% of property tax revenues) in 2011-12

Seven taxing districts in 1997 Possibly eleven taxing districts by 2013

13

Inequity – Permanent Rates

Permanent Rates vary dramatically $0.59 - Josephine County $0.60 – Curry County $4.34 – Multnomah County $4.50 – Harney County $8.53 – Wheeler County $8.71 – Sherman County

14

Inequity – Permanent Rates

Philomath PhoenixPopulation 4,610 4,550 Tax rate per $1,000 RMV $5.30 $3.65Police dept? Yes YesFire dept? No NoProperty Tax Revenues $1,301,749 $923,205

Permanent Tax Rate (in $) per $1,000 of RMV

Number of Cities

Percentage of Cities

None 13 5.4%

$0.01 to $1.00 23 9.5%

$1.01 to $3.00 72 29.8%

$3.01 to $5.00 72 29.8%

$5.01 to $7.00 45 18.6%

$7.01 to $9.00 14 5.8%

$9.01 to $12.00 3 1.2%

All Cities:

A comparison:

15

Inequity – Neighborhood to Neighborhood

Measure 50 locked in AV at 1996 levels

Block 1 RMV AV Taxes

9910 SW 61st $ 307,980 $ 195,790 $ 4,147

9931 SW 61st $ 316,630 $ 216,090 $ 4,577

9930 SW 61st $ 326,880 $ 198,530 $ 4,205

9911 SW 61st $ 365,590 $ 230,690 $ 4,886

Block 2 RMV AV Taxes

5134 NE 16th $ 312,720 $ 66,690 $ 1,416

5117 NE 16th $ 313,530 $ 47,410 $ 1,007

5126 NE 16th $ 330,910 $ 47,270 $ 1,004

5133 NE 16th $ 392,540 $ 64,100 $ 1,361

This block receives a Measure 50 discount of 79 to 85 percent off their tax rate applied to their RMV.

This block receives a Measure 50 discount of 32 to 40 percent off their tax rate applied to their RMV.

A Tale of Two Blocks

Esta

blish

edGe

ntrif

ying

16

Inequity – Changed Property Ratio

Changed Property Ratio (CPR) determines the “assessed value” given to newly constructed or altered property

Assessors multiply the ratio of AV to RMV within a county to the RMV of a new or changed property

Result: Inequity across cities – slower growing cities have lower AV; faster growing cities have higher AV

1997-9

8

1998-9

9

1999-0

0

2000-0

1

2001-0

2

2002-0

3

2003-0

4

2004-0

5

2005-0

6

2006-0

7

2007-0

8

2008-0

9

2009-1

0

2010-1

1

2011-1

240455055606570758085

Statewide Ratio of AV to RMV

Stat

ewid

e ra

tio o

f RM

V to

AV

17

Inequity – Changed Property Ratio (CPR) in Jackson County

Example: New Property with RMV of

$200,000Local tax rate of $5 per $1,000CPR calculated at county level

Central PointCity CPR: 81.1%AV: $162,200*Tax liability: $811*

Jackson CountyCounty CPR: 70%AV: $140,000Tax liability: $700

AshlandCity CPR: 61.4%AV: $122,800*Tax liability: $614*

-$111

+ $86

$0

* If CPR were determined locally.

Loss due to county-wide CPR

Gain due to county-wide CPR

18

Potential Solutions HJR 26 – Constitutional Amendment

Allow local option levies outside of compression

Restore maximum length of voter-approved local option levies to ten years

Reset at Sale Allow cities to create City Service

Districts Set a “floor” on CPR Lifting other state preemptions

19

The League’s Efforts HJR 26

Build a coalition Polling Leverage governor’s support Research/Media

State of Cities EcoNW report

Toolkit Regional meetings