1. Property Tax
The League of Oregon Cities is committed to the passage of legislation that will enhance local decision-making, provide sustainable sources of revenue and streamline governmental processes.

2. Where the Money Goes – Property Taxes in Oregon
We all pay property taxes – either directly as property owners or indirectly for those who rent. Our property tax dollars pay for a variety of local government services. The largest share of property tax – 42% on average - goes to K-12 schools, with 22 percent going to cities, 18 percent to counties, and the rest to special districts and community colleges. These local government districts work together to provide services to citizens. All districts are subject to property tax limitations that I will describe in more detail later.
Property taxes are one of the largest streams of revenue for cities and typically pay for services for citizens, everything from emergency responders like police and fire to parks, libraries, recreation and road maintenance.
Based on Oregon Department of Revenue FY Property Tax Statistics report

3. City Revenues: Example
Property taxes, on average, represent approximately 55-60% of a city’s revenues.

4. General Fund Expenditures: Example
Decreases in property taxes have a significant impact on city services, especially public safety. For many cities, property taxes do not cover public safety costs.

5. School Revenues

6. City Budget Balancing Survey Results
Since , many cities have repeatedly:
Reduced infrastructure spending and maintenance
Decreased service levels
Reduced personnel
Including public safety

7. Survey on Infrastructure

8. Measure 5 Limits property taxes:
$10 per $1,000 of Real Market Value: General Governments (City, County, Special Districts)
$5 per $1,000 of Real Market value: Schools

9. Compression: Reducing Levies
If property taxes on an individual property would exceed the Measure 5 limits: the taxes are reduced on that property until the limitations are met (called compression)
Voter-approved temporary taxes are reduced first, all the way to $0, before collections from permanent rates are compressed (temporary taxes are often for public safety or school services)
City, County, School District in compression:
Over ½ of Cities
All Counties
90% of School Districts

10. Losses to Compression

11. Updated numbers. . . 2014-2015 $175 million lost to compression
Table 2.4 Tax Extended, Tax Imposed, and Compression due to Measure 5 Rate Limits
FY by Type of Taxing District and Limit Category
Tax Extended
Tax Imposed
Compression
District Type
Inside Limit
Outside Limit
Total
$ Reduction Due to Limit
% of Tax Extended
County
966,418,115
26,276,393
992,694,507
938,984,136
26,276,426
965,260,562
27,433,947
2.8
City
1,174,244,991
78,989,582
1,253,234,573
1,130,311,555
78,991,621
1,209,303,176
43,933,685
3.7
School
1,803,312,889
520,486,241
2,323,799,130
1,715,249,338
520,486,358
2,235,735,696
88,063,932
4.9
Education Service
114,698,693
112,577,162
2,121,471
1.9
Community College
157,101,009
80,617,105
237,718,115
154,216,260
80,617,205
234,833,465
2,884,582
1.8
Cemetery
2,653,053
2,625,204
27,854
1.1
Fire
306,266,434
14,072,945
320,339,379
305,183,823
14,072,958
319,256,781
1,082,927
0.4
Health
30,354,217
1,718,961
32,073,178
29,643,773
31,362,734
710,442
2.3
Park
72,927,691
13,666,143
86,593,835
72,734,806
13,666,152
86,400,958
192,906
0.3
Port
18,449,318
1,108,054
19,557,371
18,143,667
1,108,056
19,251,722
305,616
1.7
Road
10,621,128
10,615,275
5,859
0.1
Sanitary
1,118,118
1,349,978
2,468,096
1,118,115
2,468,093 4
0.0
Water Supply
3,589,732
1,306,715
4,896,447
3,588,719
1,306,716
4,895,435
1,014
Water Control
11,620,779
279,223
11,900,001
11,243,067
11,522,290
377,548
3.3
Vector Control
5,823,765
5,606,145
217,625
Service
61,258,783
38,436,241
99,695,024
58,298,529
38,436,348
96,734,876
2,961,538
4.8
Other
195,833,601
1,371,321
197,204,922
190,935,187
192,306,508
4,898,530
2.5
Statewide Total
4,936,292,316
779,678,902
5,715,971,218
4,761,074,761
779,681,322
5,540,756,083
175,219,480
3.6
Notes: The category "Other" includes taxing districts such as library, transit, and public utility districts.
Taxes in the "Outside Limit" category are not subject to the Measure 5 rate limits.
Differences between "Outside Limit" tax extended and tax imposed is due to rounding done at the district level.
Urban renewal revenues are not included in this table.

12. League Proposal
HJR 20 Constitutional amendment allowing local voter choice to adopt operating levy outside Measure 5 limits (outside compression). HJR 20, if passed, would not raise anyone’s taxes, but would empower voters to authorize a tax for local operations.
Limited to 5 years
Vote at general election

13. Measure 50 Set a new assessed value (AV) level
At 10% less than Real Market Value (RMV)
Exception: new and improved property uses discount ratio
Capped annual growth in AV at 3% annually
Set permanent rates for all taxing districts at rate in 1997
Created permanent inequities in taxation across the State due to how tax is calculated
(see #2, Assessed Value in Identified Problems List from LOC for details)

14. Permanent Rate of Oregon’s 242 Cities:
Beaverton $4.15
Eugene $7.00
Hood River $2.81
Klamath Falls $5.44
Ontario $4.83
Portland $4.58
Wilsonville $2.52
Forest Grove $3.96
Independence $4.59
Salem $5.83
Tualatin $2.27

15. School District Permanent Rates School district permanent property tax rates range from $0 to about $5.50 per thousand dollars of assessed value for the 197 school districts. However districts are concentrated at the high end of the range as illustrated in the chart below. Almost 70% of school districts (137) have a rate between $4.00 and $5.00 per thousand. Half the districts with 83% of the students measured by average daily membership (ADM) have rates between $4.00 and $5.00. About 10% of school districts (19) with 12% of students are above $5.00, 11% (22) with about 4% of students between $3.00 and $4.00 and the remaining 10% (19) with 0.4% of students are below $3.00. Two districts, Ashwood 8 in Jefferson County and Frenchglen 16 in Harney County, have a zero tax rate. Districts with low rates tend to be small districts with ADM of less than 1,000. The four districts with rates below $1.00 have fewer than 6 ADM each. The state average school district permanent rate is $4.64 per $1,000 of assessed value (2010 LRO Report)

16. Inequities example: Same sales price: $2,896 difference in property taxes

17. League Proposal
HJR 12 Constitutional amendment resetting assessed value and maximum assessed value to real market value at sale
“Oregon has gone the farthest of any [state] in breaking the link between property taxes and property values.”
This bill would start to restore the link.
Bill would not raise taxes on anyone’s current home, but would restore equity by recalibrating taxes based on the market’s valuation of a property at the time of sale. This timing would also better ensure an owner’s ability to pay.

18. Property Tax Exemptions
Need to be more judicious in giving away money
Need periodic review
Need to balance economic development with revenue loss– “but for”
Need schools to weigh in more – formula issues

19. Property Tax Exemptions– passed in 2015
HB 2126: vertical housing exemption sunset extension
to 2026
HB 2171: nonprofit history and science
museums exemption revision; nonprofit organizations
exemption reform for 2016
HB 3125: new exemption for food processing machinery and equipment used to process grains, eggs, milk and bakery products
HB 3492: new exemption for solar projects (payment in lieu of taxes)

20. SB 611– Central Assessment
Centrally assessed= taxed on real property and personal property (both tangible and intangible)
New property tax exemptions:
Value of franchises of communication companies
Value of satellites used to provide communications services directly to retail customers
Caps intangibles using a historical or original cost formula
Qualified high speed gigabit communication service projects
Data Centers: further clarifications to ensure that data centers are generally not centrally assessed

21. SB 611– Central Assessment
Revenue Impact (in $Millions):
Impact Explanation:
The revenue impact includes losses in revenue for local governments derived from the exemptions provided in the bill that would reduce value and subsequent taxes levied for existing companies in Oregon. The revenue impact does not include estimates for potential companies that could receive exemption under the qualified project investment exemption. This potential loss is not included because, while the exemption will be available to companies meeting the qualified project investment requirements, there is no assurance that an undertaking such as this will occur.
Fiscal Year
Biennium
Local Government
(4.3)
(8.8)
(9.1)
Local Education Districts
(3.5)
(7.2)
(7.5)
Total Revenue Loss
(7.8)
(16.0)
(16.6)

22. GAIN SHARE – SB 129

23. SB 129 (2015) Changes 50/50 split on new jobs 80/20 on retained jobs
Capped Gain Share distributions at $16 million per county
Extended sunset to 2025
Remember-- to qualify for SIP/Gain share need more than $100 million investment ($25 million for rural)

24. Need Comprehensive Property Tax Reform with a Referral by the Legislature
Repeal Measure 50 and replace it with a new tax scheme
Such a system should be built with such goals as the following:
stability/predictability;
fairness/equity;
simplicity/clarity;
adequacy/sustainability; and
voter/local control
Sought tax reform commitment from legislature
HB 2171 (2015) passed– requires LRO report– due December 2015

25. Problems to Address in Comprehensive Reform: See handout
Permanent Rate (frozen at 1997 rates
Assessed Value/Real Market Value Unfairness
Reset at Sale (HJR 12)
Change Property Ratio (HB 2993)
Caps ($10 per $1000 on RMV for government; $5 per $1000 RMV for schools)
3% Growth limit on AV
Levy Time Lines
Compression
Voter Control (local option levies outside of caps– no compression) (HJR 20)
Property Tax Exemptions and Deferral Programs
Intangible Property – Central Assessment