1

FINANCE

Chris FickLeague of Oregon Cities

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Cities are struggling

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; and

Nearly half of cities believe that their city will be even less able to meet financial needs next year.

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Budget Reduction StrategiesEmployed by Cities

Cut road maintenance 38%

Reduced staff and/or operations at city hall 37%

Reduced total operating spending 30%

Decreased planning and permitting services 30%

Reduced number of FTEs 27%

Cut infrastructure spending 25%

Increased employee contribution to healthcare 24%

Decreased overall service levels 16%

Reduced public safety spending 14%

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LOC Board:

Makes revenue reform a long-term priority of the League

Primary revenue constraints Measures 5 and 50

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Measure 5 (1990)

Capped property taxes for all general governments (cities, counties, special districts, local option levies) at $10 per $1,000 of RMV Limits property taxes to 1% of RMV

$300,000 home = $3,000 limit on general government property taxes

Measure 5 limits mimic the real estate market

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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% Set permanent rates for all taxing

districts

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Effects of Measures 5 & 50

Compression Loss of local control Inequity

Permanent rate Neighborhood to neighborhood New Property - Changed Property Ratio

Increased service delivery by districts

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Compression

Compression under Measures 5 & 50 occurs when the value of property taxes on an individual property is greater than the $10 per $1,000 of RMV More than half of Oregon cities are in compression Revenue lost to compression is increasing

FY2008-09 FY2009-10 FY2010-11 FY2011-12

$(30.00)

$(25.00)

$(20.00)

$(15.00)

$(10.00)

$(5.00)

$-

$(10.80)

$(15.60)

$(19.60)

$(28.20)

City Property Tax Revenue Lost to Compression

In m

illions

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Compression – Falling RMVs

2009 2012$0

$500

$1,000

$1,500

$2,000

$2,500

$800 $738

$650 $600

$500 $462

$50 $0

Local option leviesSpecial DistrictCityCounty

2009 2012 Difference

RMV $200,000 $180,000 ($20,000)

Measure 5 limits $2,000 $1,800 ($200)

Local Taxes

Local option levies $50 $0 ($50)

Special District $500 $462 ($39)

City $650 $600 ($50)

County $800 $738 ($62)

Revenue lo

st to

co

mpre

ssion

Revenues compressed

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Loss of Local Control

Voters lack the ability to: Make local decisions; Prioritize; or Engage in long-term planning (5 year limit on

local option levies)

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Sweet Home, OR

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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Sweet Home continued…

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 $730,000 (31% of property tax revenues) in 2011-12

Seven taxing districts in 1997 Possibly eleven taxing districts by 2013

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Inequity – Permanent Rates

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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Inequity – Permanent Rates

Philomath Phoenix

Population 4,610 4,550

Tax rate per $1,000 RMV $5.30 $3.65

Police dept? Yes Yes

Fire dept? No No

Property Tax Revenues $1,301,749 $923,205

Permanent Tax Rate (in $) per $1,000 of RMV

Number of Cities

Percentage of Cities

None 13 5.4%

$0.01 to $1.00 23 9.5%

$1.01 to $3.00 72 29.8%

$3.01 to $5.00 72 29.8%

$5.01 to $7.00 45 18.6%

$7.01 to $9.00 14 5.8%

$9.01 to $12.00 3 1.2%

All Cities:

A comparison:

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Inequity – Neighborhood to Neighborhood

Measure 50 locked in AV at 1996 levels

Block 1 RMV AV Taxes

9910 SW 61st $ 307,980 $ 195,790 $ 4,147

9931 SW 61st $ 316,630 $ 216,090 $ 4,577

9930 SW 61st $ 326,880 $ 198,530 $ 4,205

9911 SW 61st $ 365,590 $ 230,690 $ 4,886

Block 2 RMV AV Taxes

5134 NE 16th $ 312,720 $ 66,690 $ 1,416

5117 NE 16th $ 313,530 $ 47,410 $ 1,007

5126 NE 16th $ 330,910 $ 47,270 $ 1,004

5133 NE 16th $ 392,540 $ 64,100 $ 1,361

This block receives a Measure 50 discount of 79 to 85 percent off their tax rate applied to their RMV.

This block receives a Measure 50 discount of 32 to 40 percent off their tax rate applied to their RMV.

A Tale of Two Blocks

Esta

blis

hed

Gen

trify

ing

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Inequity – Changed Property Ratio

Changed Property Ratio (CPR) determines the “assessed value” given to newly constructed or altered property

Assessors multiply the ratio of AV to RMV within a county to the RMV of a new or changed property

Result: Inequity across cities – slower growing cities have lower AV; faster growing cities have higher AV

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

40455055606570758085

Statewide Ratio of AV to RMV

Sta

tew

ide r

ati

o o

f R

MV

to A

V

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Inequity – Changed Property Ratio (CPR) in Jackson County

Example: New Property with RMV of

$200,000Local tax rate of $5 per $1,000CPR calculated at county level

Central PointCity CPR: 81.1%AV: $162,200*Tax liability: $811*

Jackson CountyCounty CPR: 70%AV: $140,000Tax liability: $700

AshlandCity CPR: 61.4%AV: $122,800*Tax liability: $614*

-$111

+ $86

$0

* If CPR were determined locally.

Loss due to county-wide CPR

Gain due to county-wide CPR

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Potential Solutions

HJR 26 – Constitutional Amendment Allow local option levies outside of

compression Restore maximum length of voter-approved

local option levies to ten years Reset at Sale Allow cities to create City Service

Districts Set a “floor” on CPR Lifting other state preemptions

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The League’s Efforts

HJR 26 Build a coalition Polling Leverage governor’s support Research/Media

State of Cities EcoNW report

Toolkit Regional meetings