Next chapter on horizon for local property taxes
Local taxing districts in Oregon have felt the pinch from a depressed housing market and reduced commercial/industrial property values. Officials are scrambling for solutions, but diverse considerations need analysis before we pass new laws or tax levies.
We’ve experienced the first significant property value downturn since major changes in property tax law were enacted in the 1990s. Many believe that skid has come to an end, and that values will rebound in the next year or two.
It’s transition time for property taxes, with ongoing legislative and local government discussions about ways to increase revenues. Again, we urge caution and careful review of trends.
Oregon has two primary property tax limits. One, Measure 5, capped taxes for education and general government at $5 and $10, respectively, per $1,000 of real market value (RMV). If the combined operating levies exceed those limits, all are reduced through a process called compression.
Second, Measure 50 established fixed tax rates and maximum assessed values (MAV) for properties. MAV levels generally were about three-quarters of RMV, with MAV limited to a growth of 3 percent a year. The law stipulated that property would be taxed on the lesser of MAV and RMV, but that was never an issue until recent years.
Many property RMVs plummeted, in some cases dropping below MAV. The decrease produced reduced tax bills for the property owner and a smaller take for local taxing districts.
Confused yet? Don’t worry. Even experts in the field admit to difficulties with the complexity of Oregon’s property tax system. It’s even more confusing because compression limits are based on RMV, while tax rates mostly are applied to MAV.
Two legislative proposals being considered in Salem could become ballot measures seeking to change the Oregon Constitution:
Senate Joint Resolution 10 would let voters approve temporary levies exceeding the Measure 5 limits; SJR 11 would reset a property’s MAV to the sale-based RMV level whenever the property is sold. Both measures are supported by the League of Oregon Cities, as they would generate more funds for ailing government budgets.
Again, major changes in Oregon’s property tax system need to be put into perspective. Government budgets likely will rebound with rising property values, and new construction that follow economic recovery. If so, new laws or a string of local levies could cause hefty tax increases that exceed needs.
Locally, we are fortunate that the county, cities and school districts have been good stewards of public funds. That’s particularly true in McMinnville, where careful protection of reserves has helped the city and school district survive financially challenging times. Those budgets will grow slowly but steadily as the residential market and economy rebound.
Oregon’s tax system is difficult to understand and does create inequalities. But it includes voter-approved protections against out-of-control tax increases from decades past, and it provides for stable growth that both government and taxpayers can more easily predict.
The system takes a hit from economic downturns, but before approving major changes, let’s make sure that governments and voters take a big-picture approach to property tax analysis.