An Overview of Oregon’s property Tax System

1. An Overview of Oregon’s property Tax System League of Oregon Cities

2. Where the Money Goes – Property Taxes in Oregon Based on Oregon Department of Revenue FY2013-14 Property Tax Statistics report

3. 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. FTE = Full Time Equivalent

4. Property Tax Fact #1:Oregon’s property taxes are below the national average. Source: Tax Foundation’s 2014 Facts and Figures Report

5. Property Tax Fact #2:For many communities, property taxes don’t cover the costs of public safety

6. Property Tax Fact #3:Oregonians pay more in state income taxes than in property taxes Source: Tax Foundation’s 2014 Facts and Figures Report

7. Property Tax Fact #4:Statewide property tax caps handcuff local voters 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

9. Ratio of AV to RMV in Multnomah County Source: Tualatin Valley Fire & Rescue

10. Property Tax Fact #5:Inequities are not confined to the metro region Data obtained from county assessor records

11. 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.

12. City Club of Portland report: Reconstructing Oregon’s Frankentax “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

13. The Consequences of“Frankentax” • “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

14. What Can I Do? Learn more at www.orcities.org/taxreform Share the story Talk to your representatives

15. Questions?Additional information available at:www.orcities.org/taxreform

16. Two initiatives shapeOregon’s property tax system:1. Measure 5 2. Measure 50

17. 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

18. 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

19. Compression Example Revenue lost to compression Revenues compressed

20. Compression Losses for Cities, Schools and Counties • 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

21. 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

22. Fosters Belief in Bad Government 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. Multnomah County voters approved the renewal of the library levy with 84% of the vote. The Oregonian, Thursday, July 19th, 2012

23. 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

24. Three Major Problems • #3 – Some people not paying for voter-approved taxes 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

25. 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

26. Two initiatives shapeOregon’s property tax system:1. Measure 5 2. Measure 50

27. 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

28. 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

29. Two Limitations 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 Real Market Value x Maximum Category Rate ($5 per $1,000 schools & $10 per $1,000 general gov.) = Maximum Allowable Tax Assessed Value x Tax Rate = Tax Extended OR

30. City Local Option Levies Warrenton Seaside Milton-Freewater Portland Banks Bay City Hillsboro Happy Valley Lexington Forest Grove Gladstone King City West Linn Union Dayton Canby St. Paul Stayton Albany Lyons Sweet Home Eugene Springfield Bandon Cities that have passed four or more local option levies (11) Port Orford Cities that have passed three local option levies (10) Grants Pass Phoenix Cities that have passed two local option levies (8) Gold Beach Ashland Cities that have passed one local option levy

31. School District Local Option Levies Administrative Helix Portland Pendleton Beaverton Morrow County Hood River Riverdale Lake Oswego Sherman County Tigard - Tualatin West Linn – Wilsonville Condon Joseph Falls City Colton Corvallis Sweet Home Eugene Sisters Siuslaw Crow-Applegate-Lorane Oakland School districts that have passed four local option levies (3) Camas Valley School Districts that have passed three local option levies (8) School districts that have passed two local option levies (2) Ashland Klamath Falls School districts that have passed one local option levy (13)

32. County Local Option Levies 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) Baek Dae H Counties that have passed 2 levies (3) Counties that have passed a levy (3)