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FINANCE

FINANCE. Chris Fick League of Oregon Cities. 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

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FINANCE

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  1. FINANCE Chris 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

  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

  9. Compression – Falling RMVs 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 All Cities: A comparison:

  15. Inequity – Neighborhood to Neighborhood Measure 50 locked in AV at 1996 levels A Tale of Two Blocks Established This block receives a Measure 50 discount of 32 to 40 percent off their tax rate applied to their RMV. Gentrifying This block receives a Measure 50 discount of 79 to 85 percent off their tax rate applied to their RMV.

  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

  17. Inequity – Changed Property Ratio (CPR) in Jackson County Example: New Property with RMV of $200,000 Local tax rate of $5 per $1,000 CPR calculated at county level Central Point City CPR: 81.1% AV: $162,200* Tax liability: $811* Jackson County County CPR: 70% AV: $140,000 Tax liability: $700 Ashland City CPR: 61.4% AV: $122,800* Tax liability: $614* $0 + $86 -$111 Gain due to county-wide CPR Loss due to county-wide CPR * If CPR were determined locally.

  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

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