Chris Fick League of Oregon Cities. Cities are struggling Revenues have declined nearly 4 percent...
-
Upload
marybeth-byrd -
Category
Documents
-
view
222 -
download
2
Transcript of Chris Fick League of Oregon Cities. Cities are struggling Revenues have declined nearly 4 percent...
PROPERTY TAX REFORM
Chris FickLeague of Oregon Cities
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 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
22
* Data from 2012 State of Cities report
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%
33
* Data from 2012 State of Cities report
LOC Board:
Made revenue reform a long-term priority of the League
Primary revenue constraints Measures 5 and 50
44
Measure 5 (1990)
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
5
Measure 50 (1997)
Set a new taxable value (assessed or AV) level At 10% less than 1995-96 RMV
Capped annual growth in taxable value at 3% annually
Set permanent rates for all taxing districts Shortened the maximum length of a local option
levy from ten to five years
6
Two Limitations
7
Taxable Value x Tax Rate
= Tax Extended
OR
(Real Market Value ÷ $1,000) x Maximum
Category Rate ($5 schools / $10 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
Effects of Measures 5 & 50
Compression Loss of voter control Inequity
Permanent rate Neighborhood to neighborhood
8
Compression
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
9
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
Compression – Falling RMVs
102009 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 ($38)
City $650 $600 ($50)
County $800 $738 ($62)
Revenue lo
st to
co
mpre
ssion
Revenues compressed
Compression Losses for Schools and Counties
11
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
FY97-9
8
FY98-9
9
FY99-0
0
FY00-0
1
FY01-0
2
FY02-0
3
FY03-0
4
FY04-0
5
FY05-0
6
FY06-0
7
FY07-0
8
FY08-0
9
FY09-1
0
FY10-1
1
FY11-1
2
$(80,000,000)
$(70,000,000)
$(60,000,000)
$(50,000,000)
$(40,000,000)
$(30,000,000)
$(20,000,000)
$(10,000,000)
$-
CitiesCountiesSchools
Loss of Voter Control
Voters lack the ability to: Make local decisions; Prioritize; or Engage in long-term planning
12
Example: 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
13
Sweet Home continued…
However, other taxing districts also have 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
14
Loss of Voter Control –“The Gap” and Unintended Consequences
As RMV and AV approach one another, “the gap” in which municipalities can pass local option levies, shrinks or becomes nonexistent
15
“The Gap”
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 County’s local option levy for its jail
The proposed permanent library district in Multnomah County would result in the city of Portland losing at least $7 million to compression, and the city’s local option levy losing $1 million
The renewal of a local option levy by voters in 2010 in Linn County increased compression of Albany’s public safety local option levy. Albany then increased its local option levy rate when it was renewed in 2012, worsening Linn County’s compression
16
Loss of Voter Control –“The Gap” and Unintended Consequences
Fosters Belief in Bad Government
17
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.
18
Voting for local option leviesbut not paying
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
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
19
Inequity – Permanent Rates
20
Example: 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:
Inequity – Neighborhood to Neighborhood
Measure 50 locked in taxable value (AV) at 1996 levels
21
Block 1 RMV AV Taxes
9910 SW 61st $ 269,670 $ 213,930 $ 4,236
9931 SW 61st $ 270,590 $ 236,110 $ 4,270
9930 SW 61st $ 279,390 $ 216,920 $ 4,385
9911 SW 61st $ 311,450 $ 252,070 $ 4,897
Block 2 RMV AV Taxes
5134 NE 16th $ 267,870 $ 72,870 $ 1,624
5117 NE 16th $ 268,480 $ 51,790 $ 1,154
5126 NE 16th $ 282,140 $ 51,640 $ 1,151
5133 NE 16th $ 352,530 $ 81,930 $ 1,826
This block receives a Measure 50 discount of 73 to 82 percent off their tax rate applied to their RMV.
This block receives a Measure 50 discount of 13 to 23 percent off their tax rate applied to their RMV.
A Tale of Two Blocks
Esta
blis
hed
Gen
trify
ing
Inequity – Property to Property
Measure 50 inequities are not confined to Portland metro area
$ 164,710 $ 99,720 $ 1,846
($1,121)$
164,500$
164,500 $ 2,967$
155,590 $
134,530 $ 2,490
($318)$
155,690$
155,690 $ 2,808
RMV AV Taxes Difference$
245,250$
136,600 $ 2,080
($1,560)$
245,320$
245,320 $ 3,640$
270,510$
132,630 $ 2,020
($2,060)$
270,480$
270,480 $ 4,080$
285,270$
103,080 $ 1,570
($2,662)$
285,200$
285,200 $ 4,232
Redm
ond
Bend
“Horizontal inequities—unequal tax treatment of taxpayers with similarly valued property, are widespread among the four counties (Deschutes, Jackson, Multnomah and Sherman) observed.”
$ 277,990
$ 123,220 $ 1,997
($2,105)$
276,080$
251,520 $ 4,102
Sist
ers
22
Oregon’s Unique Detachment from RMV
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.
23
Potential Solutions
Voter Control Referral Empower voters to pass local option levies (temporary
taxes) outside of compression Reset at Sale Referral
Reset taxable value (AV) to real market value (RMV) at time of sale or construction
24
Statewide Support for Local Option Levies
Since 1997: Voters in 45 cities have approved local option levies Voters in 34 cities have passed the same local option levies
more than once 11 cities have passed four or more levies 10 cities have passed three levies
Voters in 8 cities have passed local option levies for different services
Voters in 26 school districts, 16 counties and 124 special districts have passed local option levies throughout the state
In May 2012, voters passed 18 out of 21 local option levies: City voters passed 6 out of 6 local option levies County voters passed 5 out of 6 local option levies
25
City Local Option Levies
26
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
27
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)
Portland
Hood 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
28
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)