Tax-exempt land is no deterrent to city's jobs, businesses
Twenty-two local mayors are calling for changes to Oregon's complex property tax-limitation system.
But not Troutdale Mayor Jim Kight.
Kight declined to sign a letter sent last month asking Gov. John Kitzhaber to appoint a high-level task force to review the system and recommend "vital fixes."
Among other things, the letter said cities were having trouble collecting all the property taxes they need to provide basic services.
"The structural pressures on our property tax system are eroding our ability to respond to house fires, medical emergencies, and crimes against people and their property," said the
letter, which was signed by
Portland Mayor Sam Adams, who must close a budget gap
approaching $17 million.
Kight disagrees that changing the system is a solution to the problem.
"I'm against finding ways to increase property taxes on residents and businesses who are already paying them," Kight says. "I think the answer is to create more jobs, homes and businesses."
In fact, Kight has more reason to complain about the property tax system than the other mayors who signed the letter. Troutdale has the lowest percentage of taxable land of all cities in the Portland area -- 42 percent compared to an average of 66 percent for all 25 cities within the jurisdiction of Metro.
That means Troutdale must ask its residents and businesses to pay a higher tax rate to raise the equivalent amount of money as the other cities -- a big political problem in a bad economy.
"That's why I say the answer is growth, not even higher taxes," says Kight.
Portland has the second-lowest amount, 51 percent. A full 91 percent of the property in Damascus, the newest city within Metro, is taxable. The highest percent -- 98 percent -- is in Johnson City, the smallest city with just 43 acres of property.
The information was provided to Metro by the Multnomah, Clackamas and Washington assessors' offices. It broke the percent of non-taxable land into two categories: tax-exempt land and right-of-way land. Tax-exempt land includes property owned by governments, churches and non-profit groups. It also includes lands for which specific exemptions have been granted, such as the construction of affordable housing and new businesses in designated areas. Right-of-way land includes property under roads and bridges.
It is not surprising that Portland would have a relatively low percentage of taxable land, according to Tom Linhares, executive director of the Multnomah County Tax Supervising and Conservation Commission.
"As the biggest city in the state and the seat of county government, you'd expect Portland to have the most public buildings, including the most federal offices, the most school buildings, including at least a couple of colleges," says Linhares.
Troutdale also has a relatively large percent of publicly owned land, partly because of historical chance and partly because of recent city decisions, according to Kight.
For example, the former Multnomah County Poor Farm once occupied 345 acres of Troutdale property. After it closed, most of the property was sold in 1990 to micobrew/pub pioneers Mike and Brian McMenamin for the Edgefield Manor. The county still owns 77 acres of the land.
In 2004, Troutdale annexed 700 acres of land owned by the Port of Portland. The port purchased the former Alcoa-Reynolds aluminum plant near the Columbia River for redevelopment.
Both properties reflect Kight's approach to creating jobs, housing and businesses. After the Poor Farm closed, Multnomah County operated the site as a jail. Kight pushed the county to close it and sell the property with the historic buildings. Now he is trying to broker a deal with the McMenamins to buy the remaining 77 mostly vacant acres for a new hotel.
Plans call for the port to develop the former aluminum plant in three phases. It is expected to eventually support 3,500 jobs and generate $46 million in state and local taxes.
A regional Fed-Ex distribution center has already opened on the site. Kight says it is on track to expand operations ahead of schedule.
City guides developments
Other cities are also working to convert public lands to private developments, including Portland. The recent recession and other circumstances have complicated some of these projects, however.
For example, work stalled on the Burnside Bridgehead redevelopment project after the city bought several blocks of property from private owners at the east end of the Burnside Bridge more than six years ago.
The city only recently contracted with the Beam Development company to rehabilitate the vacant Convention Plaza building on the site. Jim Niemeyer, the building's original owner, is appalled the project has dragged out so long.
"The Convention Plaza was a fully occupied office building when the city forced me to sell it to them through eminent domain," says Niemeyer.
The city has also expressed interest in buying the Portland Public Schools headquarters building near the Rose Quarter for redevelopment. No deal is in sight, however.
The Portland Development Commission is still negotiating with the U.S. Postal Service to buy its distribution center at the west end of the Broadway Bridge.
Portland has had more luck encouraging developers to build on private property within urban renewal areas. PDC has guided mixed-use developments in the River District, which includes the Pearl District, and the North Macadam area, which includes South Waterfront. The developments have not increased the city's general fund property tax revenue, however, because funds must be reinvested in the renewal districts.
City budgets struggle
In their letter to Kitzhaber, the 22 mayors outlined problems they say were caused by Oregon's property tax limitation system that holds each property's taxable value to a percent of a real market value, and caps the total rate of all local government property tax measures. When that cap is reached, the governments can only collect a portion of the revenue authorized by the measures.
The system was created in 1990 when property taxes were increasing beyond the ability of some property owners to pay them. Now the interaction of various tax limitations is proving unworkable, mayors wrote in the letter.
According to the mayors, problems include equivalent properties with wildly different taxable values and tax bills. Local governments are also unable to collect enough money to meet their responsibilities, the mayors wrote.
Because some of the limitations are in the state Constitution, they cannot be changed without a statewide vote, however. Kitzhaber's office did not respond to requests for comment on the letter.