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Governments cash in on property values

Portland property taxes up 8 percent for city, schools


Market values of property, after a five-year hiatus because of Oregon’s economic downturn, are going up for the third straight year.

Taxable values — a portion of market values under Oregon law — are continuing their gradual increase, buoyed by new construction that pushes their annual growth beyond 3 percent.

The upward trends are making it possible for local governments in the Portland area to collect more in property taxes.

But some homeowners, whose rates were compressed in recent years to stay below statewide limits for schools and other local governments, will pay more than the usual 3 percent increase.

“As the market values dropped over the last few years, the difference between the market and assessed values became closer,” says Rich Hobernicht, director of Washington County assessment and taxation. “In some cases, this caused compression.

“As the market value increases, the difference between the market and the assessed values may increase as well. This reduces the chance for compression, but can also increase your tax liability if compared to a prior year’s tax that was in compression.”

Local governments in Multnomah, Washington and Clackamas counties will lose a projected $105.8 million in property taxes due to compression, down from $130 million last year. About 70 percent of this year’s total uncollectable taxes would have gone to Portland Public Schools and its renewed local-option levy; Portland city government and its levy for children’s programs, and Multnomah County and its library district.

In Washington and Clackamas counties, schools are the biggest losers in compression.

“If you are in the tri-county area, the problem is still there,” says Mike McCauley, executive director of the League of Oregon Cities, which has led efforts — unsuccessful so far — to persuade lawmakers to refer changes to Oregon voters.

Tax collections

Based on reports released last week by assessment and taxation officials, Multnomah County will collect $1.52 billion in property taxes, up 4.8 percent from 2014-15; Washington County, $963 million, up 5.1 percent, and Clackamas County, $725.6 million, up 6 percent.

County governments will keep only small shares of those totals. The bulk of property taxes goes to school districts, cities and special-purpose districts, such as fire protection. The three counties contain nearly 200 such districts.

A report by the Legislative Revenue Office, which advises state lawmakers on taxes and school finance, projected average increases of 5 percent this year and 4.7 percent in 2016-17 in property tax collections for school districts.

Since Oregon voters approved statewide limits in a series of ballot measures in the 1990s, schools no longer get the bulk of their operating money from property taxes. Instead, schools rely on the state budget, which comes largely from personal and corporate income taxes. Lawmakers approved a two-year state school fund of $7.4 billion, which includes lottery proceeds.

But cities and special-purpose districts still rely on property taxes for services related to property. County governments have more diverse sources, although Washington and Clackamas counties have special levies for libraries and Multnomah County has a separate library district.

The tax collections for Portland Public Schools will go up 7.9 percent, and for Portland city government, 8 percent, excluding the city fire/police retirement and disability fund, which actually will dip by .3 percent. For Multnomah County and its library system, which is a separate taxing district, the amounts will go up 5.7 percent.

Voters approved a new five-year local-option tax levy for Portland Public Schools, and it is reflected in the 2015-16 tax statements.

Voter approval elsewhere of bond issues — which are exempt from the statewide limits — and local-option levies also will increase tax bills depending on where a property is.

Voters in Washington County will decide Nov. 3 whether to extend a pair of local-option levies for libraries (Measure 34-235) and public safety services (Measure 34-236). But their passage will have no effect on this year’s tax bills.

According to an Oregon Department of Revenue report based on 2014-15 figures — the most recent available statewide — local governments in the three counties accounted for $3 billion of the $5.76 billion collected statewide in property taxes.

Property values

Under state law, property values must be set as of Jan. 1, 2015, so changes after then will not be reflected on the 2015-16 tax bills.

Although real market value no longer figures directly into the calculation of property tax bills — the tax-limiting measures of the 1990s changed that — it is still an important indicator.

From January 2008 through January 2013, real market value in Oregon actually fell, even while assessed (taxable) values continued to rise gradually.

But a turnaround began in 2013.

That growth has continued as real market value rose 10.5 percent in Multnomah and Clackamas counties over the past year ending Jan. 1, and by 7.3 percent in Washington County.

Assessed values rose at more moderate rates: 6.3 percent in Washington County, to $56.9 billion; 4.7 percent in Clackamas County, to $44.2 billion, and 4.1 percent in Multnomah County, to $66.1 billion.

Most values are permitted to increase by 3 percent annually under the statewide limits, but officials can add the value of new construction and major improvements.

The “average” assessed value of a single-family home in Clackamas County as of Jan. 1 was $262,514, 77 percent of real market value. In Washington County, it was $244,150, 73 percent of real market value, and in Multnomah County, $202,883, 59 percent of real market value.

Compression

Many local governments will lose less — and some taxpayers will have to pay more — as “compression” eased this past year for only the second time in a decade.

Compression occurs when combined operating levies for school districts, education service districts and community colleges exceed the statewide limit of $5 per $1,000 — bond issues are exempt — and the levies must be pared to fit within the limit. For all other local governments, compression kicks in when their combined levies exceed the statewide limit of $10 per $1,000.

Those losses are less severe this year.

In Multnomah County, losses dropped from $103.3 million to $83 million; Clackamas County, from $13.7 million to $10.3 million, and Washington County, from $13 million to $12.6 million.

Almost $70 million of the $83 million in losses in Multnomah County comes from just a handful of levies: Portland and the city’s special levy for children’s programs; Multnomah County and its library system, and Portland Public Schools and its local-option levy.

In Washington County, virtually all of the compression losses are in the Beaverton, Hillsboro and Tigard-Tualatin school districts.

In Clackamas County, there’s a similar pattern of losses by West Linn-Wilsonville schools, which account for $6 million, and Lake Oswego and North Clackamas schools. Together they account for more than $8 million of the $10 million foregone by schools.

According to a League of Oregon Cities report presented to lawmakers during the 2015 session, compression resulted in property tax losses in 34 of Oregon’s 36 counties, half of its 242 cities, and 90 percent of its 197 school districts.

Gresham is among those cities, and the League of Oregon Cities’ McCauley says it’s gotten to the point that Salem cannot raise the money to operate a fire station that voters have approved.

But McCauley is an optimist. He says there are discussions under way among lawmakers and staff that could result in changes emerging from the 2017 session.


By Peter Wong
Reporter
(503) 385-4899
email: pwong@portlandtribune.com
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