Oregon voters may be asked to decide the most sweeping changes in statewide property tax limits since they took effect years ago.
The changes could cost homeowners more, but only if local governments ask for higher levies exceeding the limits — and local voters approve them.
One change would allow local governments to seek approval of local-option tax levies that exceed the statewide limits set in 1990. These levies would be in addition to bond issues, which have always fallen outside the limits.
The other change would allow assessed value — the taxable amount that is applied to tax bills — to be reset to the sales price when a home or other property is sold. Under limits set in 1996 and 1997, most assessed values were rolled back to mid-1990s and grow at 3 percent annually.
Because the limits are in the Oregon Constitution, legislators would have to refer any changes to voters in the November 2014 statewide election.
Chris Fick is finance and revenue analyst for the League of Oregon Cities, which issued a recent report noting that half of Oregon’s 242 cities, all 36 counties and more than 90 percent of its 197 school districts are bumping up against the statewide limits.
Prior to 1990, when voters approved statewide limits on tax rates, they largely determined how much in property taxes went to local services and schools.
“That is what we are trying to restore” with both proposals, Fick said.
“In the polling we have done, we know that voters do not like the idea of statewide limits prohibiting them from getting the services they want locally.”
Greg Howe spoke for the Taxpayer Association of Oregon, whose late president was Don McIntire, the sponsor of the 1990 property tax limit known as Measure 5. Howe said the measure’s intent was to limit rates as growing tax bills burdened older homeowners.
Despite what local voters may want, he said, “we have a state Constitution which controls that. The people of this state say there should be some limit on property taxes.”
Voters set limits
Oregon voters passed the 1990 limit on its sixth attempt, dating back to 1978, the same year that California voters passed Proposition 13.
Oregon’s measure set a limit of 1.5 percent of taxable value, split into $5 per $1,000 of taxable value for education and $10 for all other local governments combined. But it did not limit taxable values of property.
In 1996, after population growth pushed up housing prices and property values, Oregon voters approved Measure 47 championed by Bill Sizemore. It rolled back those values to 1995 levels, reduced them by 10 percent, and capped annual increases at 3 percent. Lawmakers rewrote it and voters approved Measure 50 in 1997.
Over the years, school operating costs were shifted from local property taxes to state aid, largely from the tax-supported general fund.
New problems
But local governments, including schools, bumped up against the limits. When that occurs, the amount each government can collect in taxes is reduced proportionately to fit under the limit, a process known as “compression.”
School districts, education service districts and community colleges share one pot for education; all other governments are in the second pot.
According to data from Marion and Polk counties and the Oregon Department of Revenue, Fick said the Salem-Keizer School District is barred from collecting $1,070,000 this budget year because of compression, up from $527,000 last year and $300,000 in 2010-11.
For the city of Salem, the uncollectible amount this budget year was $1,115,000, up from $600,000 last year and $400,000 in 2010-11.
Meanwhile, taxable property values were the subject of a 2010 study by the Legislative Revenue Office.
The study looked at four areas, including Portland, where some homeowners in gentrifying neighborhoods were paying a fraction of property tax bills paid by others in the city — largely because their values were tied to mid-1990s levels.
“With no periodic recalibration of (taxable) values to market levels, the Oregon system has gone the farthest of any in breaking the link between property taxes and property values,” said a report by the Lincoln Institute of Land Policy.
While falling home prices during the economic downturn have had a moderating effect on values, Fick said, “we expect that in the future, the problem will only get worse.”
The proposal to reset taxable values of property to sale prices makes sense, he said.
“Most people understand that the value of their home is a market-driven determination,” he said, and are aware that there is a relationship with the property taxes they pay.
But Howe, speaking for the Taxpayer Association of Oregon, said the proposal would create its own inequities.
“It signals that new buyers will have their assessed (taxable) values equal to true-cash value, which few people have at this point,” he said. “I think what lies behind this proposal is that they want more revenue for government; if that is the case, we would oppose it.”
Similarly, Howe said if voters approve a proposal to allow local-option levies exceeding the current statewide property tax limits, “Measure 5 is gone.”
“We can expect to see the same growth in property tax levies that we did prior to Measure 5,” he said. “Now they would be saying there should not be a limit.”
Fick said the proposal by itself would not raise property taxes, because it would not be retroactive.
Although many local governments — Marion County, the city of Salem and the Salem-Keizer School District — have authorized property tax rates greater than those they actually levy as a result of compression, Fick said they could not collect those amounts.
Under it, local governments would have to seek specific approval or renewal of increased property taxes, for no longer than five years, and voters would be aware that a “yes” vote would be in favor of exceeding the statewide limits.
“It gives them real purchasing power, much like they have now with bond issues,” he said.
“If voters pass these levies, local governments would know there is a specific amount to hire police officers, firefighters or teachers for a fixed number of years. Right now, they do not have that certainty.”
pwong@StatesmanJournal. com or (503) 399-6745 or twitter.com/capitolwong
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