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

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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

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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)