Tax assessor explains the effects of past ballot measures
By Randy Parks
With the 2012-13 property taxes having been imposed, Harney County assessor Ted Tiller attended the county court meeting on Wednesday, Oct. 17, to answer any questions.
Tiller presented a summary of assessment and tax roll, which included a comparison of the taxable assessed value between fiscal years 2011-12 and 2012-13.
The figures for the previous year were: Real property $395,071,055; Personal manufactured structures $5,913,050; Personal property $7,429,737; Utilities (dictated by the Oregon Department of Revenue) $38,738,219; Total $447,152,061.
Figures for the current year are as follows: Real property $405,932,588; Personal manufactured structures $5,762,967; Personal property $7,216,340; Utilities $63,967,383; Total $482,879,278.
Tiller said there have been questions about the automatic 3 percent increase each year, and he stated that the increase is a result of Measure 50, which was approved by voters in 1997 and has to do with “Maximum Assessed Value” (MAV).
He explained that there is the Real Assessed Value (RAV) done by the tax office, as well as the MAV. Measure 50 set the MAV by taking the RAV in 1995, and subtracting 10 percent from that amount. Taxes are then imposed on the lower of the two values.
Tiller said the driving force behind Measure 50 was the predictability of what people would pay in taxes. He said using the RAV, people occasionally saw their taxes take a big jump in just one year’s time, while with the MAV, the increase was set at 3 percent.
He added that the 3 percent is an annual increase that will continue until it equals or surpasses the RAV, then it freezes at that level.
“For the vast majority of people, the real market value is going to be higher than the maximum assessed value,” Tiller said.
Tiller stated that there are some exceptions, but if the property remains “unchanged” in a year’s time, it’ll probably see the 3 percent increase.
The amount of tax for each property is then figured by using a permanent rate established by the Oregon Department of Revenue in 1997.
There are 16 taxing districts in the county, with each one having a different permanent rate.
Tiller was asked if each district had to impose the full amount of the permanent rate. “No, but they can’t impose more than that amount,” he answered.
He stated that for a citizen to see an “across the board cut,” every district would have to agree to it.
Measure 5, passed by voters in 1990, has also affected property taxes. An executive summary is as follows:
Oregon’s property tax system has undergone dramatic changes over the last 21 years, affecting not only the local taxing districts that rely on the revenue to provide essential services to over 3.8 million citizens, but also the property owners who pay for those services. These changes, first initiated by Ballot Measure 5 in 1990, followed by Measure 47 in 1996 and Measure 50 in 1997, have turned the property tax system upside down by altering the levying authority of over 1,200 municipal corporations – counties, cities, education districts and special districts – and dictating how nearly $5 billion in property taxes are assessed and billed for more than 2.8 million distinct pieces of property.
Ballot Measures 5 and 47 were the result of citizen-led initiative petition drives that presented Oregon voters with the chance to amend the state constitution by placing limits on the amount of property taxes that could be collected. Ballot Measure 50 was referred to voters by the Legislature as a replacement of Ballot Measure 47 after legislative leaders determined that Measure 47 was essentially unworkable as written. The Oregon Legislature responded to these constitutional limitations by approving legislation that dealt with a myriad of details, from establishing the assessment date when values are determined to the appeal process.
While both Measure 5 and Measure 50 reduced the amount of property taxes that could be collected from property owners and made numerous major changes to the property tax system, each had essential elements that defined and forever changed the system. Those changes are still in effect today and, quite literally, affect the lives of every single Oregonian.
Approved by voters in November 1990, Measure 5 placed limits on two broad categories of property taxes: 1) taxes used to support the public school system; and 2) taxes used to support government operations other than the public school system. The limits for the first year were $15 per $1,000 of real market value for the public school system and $10 per $1,000 for operations other than the public school system. The maximum amount of taxes for schools was then decreased by $2.50 each year until it reached $5 per $1,000. These limits continue to restrict the amount of property taxes that can be assessed on property, 21 years later.
What distinguished Measure 5 from previous property tax limitation measures, and still stands as its most enduring legacy, was the requirement that the State replace any revenue lost by the public school system due to the application of the property tax limitation. While this constitutional requirement only extended to the 1995-96 fiscal year, the practical and political reactions went well beyond what was strictly required and are, in effect, still in place today.
Essentially, Measure 5 accomplished two policy objectives that had eluded State leaders for decades prior to 1990: 1) shift more of the burden of funding public education to the State to reduce the percentage of funding from local property taxes; and 2) equalize the per student spending by local school districts across the state. By dramatically reducing the amount of property taxes that school districts could collect, the Legislature was forced to allocate more resources to K-12 public education. And if the State was going to be paying the lion’s share of school operating costs out of its General Fund, the distribution of those dollars had to be on a more equalized basis. The formula for distributing funds that was adopted shortly after the implementation of Measure 5 is still largely in use today.
Prior to Measure 5, property taxes paid for roughly 70 percent of each school district’s operating costs, with 30 percent coming from the State. Today, it is the reverse, with State dollars comprising nearly 70 percent of operating funds. School board members and superintendents now look more to Salem for funding rather than local property owners.
Schools are now more reliant on the volatile State personal income tax and corporate excise taxes, which are both more sensitive to changes in the economy than property tax revenue. At the same time, property taxes, which still comprise over one-quarter of school funding, have been seriously limited. This has caused a roller- coaster of funding for public education.
Measure 5 had only limited the amount of property taxes that could be collected from each property as a percentage of the real market value. It did not limit the assessed value of property.
Starting in 1990, real estate values began to increase substantially, negating some of the property tax reductions under Measure 5. When legislative leaders made the decision to replace Measure 47, they set about to limit taxes by creating a “split-roll,” whereby market value and assessed value used to calculate the tax bill were different. Additionally, assessed value growth was limited to 3 percent per year, with some exceptions. However, simply reducing values would not limit increases in property tax bills since tax bases would have continued to increase 6 percent per year, and the tax rate per $1,000 of assessed value would simply be increased to raise the full amount of that tax base authority. Measure 50 therefore eliminated all tax bases and almost completely changed the property tax system from a levy-based to a rate-based system.
The fundamental differences between a levy-based system and a rate-based system, and the implications for taxing districts and property owners, cannot be overstated. Under a levy-based system, taxing districts receive the full amount of property tax authority regardless of changes in total assessed value within the district. The tax rate is simply recalculated up or down to raise the same amount of money. Any changes in value from year to year therefore impact property owners. Under a rate-based system, any changes in total assessed value of a district do not change the tax rate since it is fixed. Any variability of total assessed value results in property tax collections increasing or decreasing for the taxing district.
This complete reversal of how changes in assessed value impacts taxing districts versus property owners has altered the dynamic of policy discussions surrounding the effects of property tax exemptions, property value appeals and urban renewal. These changes have played out in years when the economy and real estate market were strong, as well as years when recession gripped the state. The latter is certainly true of the last couple of years, and revenues of both state government and local governments have been constrained. At the same time, property owners have seen less volatility in annual property tax statements under the rate-based property tax system. They are now questioning why tax bills continue to increase even as the market value of their property plummets.
Do the positives of a more predictable and stable property tax system for property owners outweigh the negatives of lower revenues for over 1,200 taxing districts? What is the proper amount of property tax increases allowed for taxing districts: 6 percent, 3 percent, a variable percentage based on growth? Are the inequities built into the system so egregious that reforms to the system are warranted? If so, what are citizens willing to pay in extra property taxes to correct those inequities? The document, “Recent History of Oregon’s Property Tax System,” addresses those questions.
Harney Emergency Medical Services Director Jeff Sceirine was in attendance to discuss the county’s Ambulance Service Area (ASA) plan.
Sceirine said that he went through the previous plan and updated some issues and made language changes and “general housekeeping” additions or subtractions.
The ASA has to be approved by the county court before they can advertise a proposal to bid on it.
There was a discussion about medical air transportation, which is not included in the ASA, and the changes that have come about since AirLink was purchased by a private company rather than being run as a non-profit by St. Charles Medical Center in Bend.
The non-profits had a reciprocal agreement to honor one another’s memberships, but with AirLink being a for-profit company, they don’t honor any other membership program. The only way people can be sure they are covered is to have two memberships. “It’s not fair, and the county isn’t happy with this approach,” Sceirine said. He added that a solution to the problem is being worked on.
Sceirine also noted the deciding factor on which company to call is response time. “We don’t make calls based on membership,” he said.
Two areas that need to be better addressed in the ASA are extrication and hazardous materials, Sceirine said.
In other business, the court:
• voted to change their second November meeting to Tuesday, Nov. 20, because of the Thanksgiving holiday;
• appointed Cheryl Norton as the hospital representative to the Harney County Mental Health Advisory Committee;
• reviewed the 2011 Material Recovery Report issued by the Department of Environmental Quality