Chris Fick League of Oregon Cities

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 Nearly half of cities believe that their city will be even less able to meet financial needs next year 49 cities saw property tax revenues decline in FY2011-12

Cut road maintenance Reduced sta and/or opera6ons at city hall Reduced total opera6ng spending Decreased planning and permi>ng services Reduced number of FTEs Cut infrastructure spending Increased employee contribu6on to healthcare Decreased overall service levels Reduced public safety spending

38% 37% 30% 30% 27% 25% 24% 16% 14%

Made revenue reform a long-term priority of the League Primary revenue constraints

Measures 5 and 50

Capped property taxes for all general governments (cities, counties, special districts, local option levies) and schools at $10 and $5 respectively per $1,000 of RMV

Limits property taxes to 1% of RMV

$300,000 home = $3,000 limit on general government property taxes; $1,500 limit for schools Measure 5 limits mimic the real estate market

Set a new assessed value (AV) level

At 10% less than 1995-96 RMV

Capped annual growth in AV at 3%annually Set permanent rates for all taxing districts Shortened the maximum length of a local option levy from ten to five years

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 Assessed Value x Tax Rate = Tax Extended

Measure 5 limits (Real Market Value $1,000) x Maximum Category Rate = Maximum Allowable Tax
($5 schools / $10 general gov.)

OR

Compression Loss of local control Inequity

Permanent rate Neighborhood to neighborhood Changed Property Ratio

Increased service delivery by districts

Compression under Measures 5 occurs when the value of property taxes on an individual property is greater than $10 for general governments or $5 for schools per $1,000 of RMV
More than half of Oregon cities are in compression Revenue lost to compression is increasing

2009 RMV Measure 5 limits Local Taxes $200,000 $2,000

2012 $180,000 $1,800

Dierence ($20,000) ($200)

Revenue lost to compression

Local op(on levies Special District City County

$50 $500 $650 $800

$0 $462 $600 $738

Revenues compressed

($50) ($38) ($50) ($62)

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Since FY2008-09 revenue lost to compression has increased: 216% for schools, or by $50.9 million 154% for counties, or by $20.8 million 161% for cities, or by $17.4 million
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Voters lack the ability to:

Make local decisions; Prioritize; or Engage in long-term planning

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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

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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 $824,000 (27% of property tax revenues) in 2011-12 Seven taxing districts in 1997 Possibly eleven taxing districts by 2013

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As RMV and AV approach one another, the gap in which municipalities can pass local option levies, shrinks or becomes nonexistent

The Gap

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When the gap shrinks, the actions of overlapping taxing districts may have a detrimental effect on other districts by causing or worsening compression Examples:

A proposed increase in the 9-1-1 district rate in Deschutes County would have resulted in the city of Redmond losing $75,000 to compression A proposed local option levy in Madras would exacerbate compression on Jefferson Countys local option levy for its jail The proposed permanent library district in Multnomah County would result in the city of Portland losing at least $5 million to compression, and the citys local option levy losing $1 million The local option levy passed by voters in 2010 in Linn County increased compression of Albanys public safety local option levy. Albany then increased its local option levy rate when it was renewed in 2012, worsening Linn Countys compression
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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.

Multnomah County voters approved the renewal of the library levy with 85% of the vote.

The Oregonian, Thursday, July 19th, 2012

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In many ways, our system really is nuts About one third of Portland homeowners dont have to pay the entire [local option levy], and more than a quarter of all homeowners dont 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

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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

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All Cities:
Permanent Tax Rate (in $) Number per $1,000 of RMV of Cities Percentage of Cities

None $0.01 to $1.00 $1.01 to $3.00 $3.01 to $5.00 $5.01 to $7.00 $7.01 to $9.00 $9.01 to $12.00

13 23 72 72 45 14 3

5.4% 9.5% 29.8% 29.8% 18.6% 5.8% 1.2%

Example: Population Tax rate per $1,000 RMV Police dept? Fire dept? Property Tax Revenues

Philomath 4,610 $5.30 Yes No $1,301,749

Phoenix 4,550 $3.65 Yes No $923,205

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Measure 50 locked in AV at 1996 levels

A Tale of Two Blocks
Block 1 9910 SW 61st 9931 SW 61st 9930 SW 61st 9911 SW 61st Block 2 5134 NE 16th 5117 NE 16th 5126 NE 16th 5133 NE 16th RMV $ 269,670 $ 270,590 $ 279,390 $ 311,450 RMV $ 267,870 $ 268,480 $ 282,140 $ 352,530 AV $ 213,930 $ 236,110 $ 216,920 $ 252,070 AV $ 72,870 $ 51,790 $ 51,640 $ 81,930 Taxes $ 4,236 $ 4,270 $ 4,385 $ 4,897 Taxes $ 1,624 $ 1,154 $ 1,151 $ 1,826
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This block receives a Measure 50 discount of 13 to 23 percent off their tax rate applied to their RMV.

This block receives a Measure 50 discount of 73 to 82 percent off their tax rate applied to their RMV.

Measure 50 inequities are not confined to Portland metro area

RMV $ 245,250 $ 245,320 $ 270,510 $ 270,480 $ 285,270 $ 285,200 $ 164,710 AV $ 136,600 $ 245,320 $ 132,630 $ 270,480 $ 103,080 $ 285,200 $ 99,720 Taxes $ 2,080 $ 3,640 $ 2,020 $ 4,080 $ 1,570 $ 4,232 $ 1,846 $ 2,967 $ 2,490 $ 2,808 $ 1,997 $ 4,102 ($2,105) ($318) ($1,121) ($2,662) ($2,060) ($1,560) Dierence

$ 164,500 $ 164,500 $ 155,590 $ 134,530 $ 155,690 $ 155,690 $ 277,990 $ 123,220 $ 276,080 $ 251,520

Horizontal inequitiesunequal tax treatment of taxpayers with similarly valued property, are widespread among the four counties (Deschutes, Jackson, Multnomah and Sherman) observed.
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On reset at sale: Of the 18 states that apply their assessment limit to individual parcels, only Arizona, Minnesota, and Oregon do not have this acquisition value feature. 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 Land Institute. 2008.
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Local Control Referral (HJR 26 in 2011 session)

Empower voters to pass local option levies outside of compression Restore maximum length of voter-approved local option levies to ten years

Reset at Sale

Reset AV to RMV (or percentage thereof) for residential and commercial property at sale or time of construction

Allow cities to create city-service districts

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Since 1997:

45 cities have approved local option levies 34 cities have passed the same local option levies more than once
11 have passed four or more levies 10 have passed three levies

8 cities have passed local option levies for different services 26 school districts, 16 counties and 124 special districts have passed local option levies throughout the state

In May 2012, municipalities passed 18 out of 21 local option levies:

Cities passed 6 out of 6 local option levies Counties passed 5 out of 6 local option levies

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Seaside

Warrenton Portland Happy Valley Gladstone West Linn Canby Stayton Lyons Sweet Home Springfield Lexington Union Milton-Freewater

Banks Bay City Hillsboro Forest Grove King City Dayton St. Paul Albany Eugene

Bandon Port Orford Grants Pass Gold Beach Phoeni x Ashland Cities that have passed four or more local option levies (11) Cities that have passed three local option levies (10) Cities that have passed two local option levies (8) Cities that have passed one local option levy

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Administrative Beaverton Riverdale Tigard Tualatin Falls City Corvallis Siuslaw Eugene CrowApplegate -Lorane Portland Lake Oswego West Linn Wilsonville Colton Sweet Home Sisters Morrow County Hood River Sherman County Condon

Helix Pendleton

Joseph

Oakland Camas Valley School districts that have passed four local option levies (3) School Districts that have passed three local option levies (8) School districts that have passed two local option levies (2) School districts that have passed one local option
levy (13)

Ashland

Klamath Falls

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Counties that have passed 6 or more levies (2) Counties that have passed 5 levies (5) Counties that have passed 4 levies (1)

Baek Dae H

Counties that have passed 3 levies (2) Counties that have passed 2 levies (3) Counties that have passed a levy (3)

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