HASSO HERING

A perspective from Oregon’s mid-Willamette Valley

Property tax reform: Sure, but how?

Written October 26th, 2020 by Hasso Hering

As if to provide consolation, Oregon trees turn colorful just when property tax bills arrive.

The Albany Budget Committee Monday heard a presentation on the complications and unfairness of Oregon’s property tax. Let’s not forget that the system is what it is because citizens tried to protect themselves from skyrocketing bills.

Yes, the Oregon property tax used to be simple. Schools and local governments would levy an amount — either the tax base or a sum approved by voters for one year. The assessor would calculate a rate based on the district’s total market value, and owners would be billed based on their property’s value.

But approved tax bases could rise up to 6 percent a year without a vote, which they routinely did. Taxing units without an updated base usually persuaded voters to approve annual amounts that also rose at a healthy clip. Their argument was that unless the voters said yes, the schools would close, and that worked for years.

But tax bills on individual properties kept climbing. Persistent calls for the legislature to pay more of the schools’ expenses were ignored. And in 1990, the voters had enough. They approved, largely on the votes of property owners in the metro area, Don McIntire’s Measure 5. (He died in 2012, but I still have his Gresham number in my vintage spring-loaded address book and used it to look up the spelling of his name.)

Measure 5 set caps on tax rates per thousand — $10 for general government and $5 for education — and required the legislature to fund schools to a greater extent.

But rapidly rising property values made the caps on rates less effective. That’s why Bill Sizemore  (his old number is in there too) managed to initiate a more drastic reform and get it approved in 1996 as Measure 47. That measure rolled back property values and limited their annual rise for tax purposes to 3 percent. The measure proved unworkable in its details, and the 1997 legislature reworked it. Voters approved it as Measure 50 in 1998.

Because of the way these constitutional limits have worked out, there’s unfairness in the system now. Similar properties often pay a different amount. But for homeowners, the system has always been unfair, forcing them to pay ever higher tax bills based on market trends they could not control and did them no good.

The speakers who addressed the Albany budget meeting urged the city to join in lobbying the legislature to put a fundamental property reform on the ballot. Simplifying the system is one thing. But what the reformers usually want is to remove the existing limits so that revenue from the property tax goes up faster than it already does.

We should be skeptical of so-called reforms. The only way to make the property tax totally fair is to get rid of it. Then it would have to be replaced. The question is with what. (hh)



15 responses to “Property tax reform: Sure, but how?”

  1. tom cordier says:

    HH You imply citizen action in former times is to blame. The real issue is the spending appetite of local gov’ts is never enough. No matter who/how a fairer system is adopted. Costs/taxes never go down. Doing more with less is never discussed. Budget process is designed to always increase.
    City managers metric is:: as # of residents goes up; local gov’t costs MUST go up.
    That is the fundamental assumption error—never gets challenged. Cut headcount, keep special interest groups at bay. We should not try to be all things to all people

  2. Adam says:

    Property and other taxes in Oregon are a nightmare not because of politicians but because of the voters. Politicians move in the direction of the voters because they want to stay in office. Why do voters want taxes? Because they expect some type of service. Once enough voters decide that they want less from government, then and only then will taxes go down. The reality is that the majority of voters want government to do something and that costs money.

    A basic governing structure is required to maintain a civil functioning society. The real question is what that looks like and how much money it will take.

    Look at your property tax bill. I suspect that schools make up the largest portion. Want lower property taxes? Home schooling is the answer, but I doubt that many families want to assume that responsibility permanently, so we pay for it.

    • Craig says:

      Hold off there Mr. Adam, We have successfully home schooled 5 children in North Albany, We ALSO pay for the school system which we have never used or benefited from. We were never even given so much as a tax credit.

      You are assuming that Government is 100 percent efficient and non-corrupt. I suspect that special interests, personal and otherwise affect peoples decisions no matter how honorable have a lot of influence on the outcomes. Hence someone is willing to spend 100 million dollars to get an office in Washington.

      • H. R. Richner says:

        The revenue from the school taxes should go to the parents in the first place. They are responsible for their children’s education, not the state nor the teachers’ union. The lack of free choice for our offspring’s education is a fundamental, global disaster. Even though mass public education started with Bismarck, we never noticed its results, right from the start. Without it, the worst of history after that could well never have happened.

  3. Gordon L. Shadle says:

    Well, the average homeowner in Linn County is taxed $12.58 per $1,000 of real market value, higher than every other county in Oregon.

    https://www.oregonlive.com/news/erry-2018/10/7273fa75401636/property-tax-rates-in-oregons.html

    So you aks the right question about reform – with what? I dunno. Most people just want government to provide free stuff.

    Whatever “solution” perpetually fills the Albany government trough to overflowing, make sure it exempts seniors, illegal immigrants, single folks, students, people who make <$400k/yr, PERS recipients, and self-proclaimed non-partisan Democrats.

    • Steven Reynolds says:

      I have no arguments to defend against your accusations Gordon, although I do not think it’s necessary to demonize specific private citizen groups. That’s why we had the double majority safety valve, unfortunately certain groups in power were able to disable this protection and now we’re in the mess we’re in…. It’s becoming painfully obvious we have many more public sector obligations than we have the ability to pay for. We were in a precarious position before the pandemic but I can’t even imagine what this looks like after the moratoriums come off. It’s already becoming apparent that if the county levy passes it will put us into compression and cut into the other levies. I guess we can hope the Democrat party wins on the federal level and makes programs like PERS whole which would take care of many of our budget issues at least on paper, it’s kind of a quasi-bankruptcy but just not calling it a BK, just not sure what that kind of liquidity in the money supply would look like. Already paying close to $6 for a 2×4 which is close to three times as much just a year or so ago, I wonder how many, like myself, are putting all projects on hold for the foreseeable future.

      The biggest issue is going to be if the big property owners, I.E. Comcast, ATI, etc. challenge like they did after 08/09. Wasn’t it millions that Benton county had to return after they lost appeals against HP?

      https://www.co.benton.or.us/boc/page/commissioners-establish-reserve-fund-repay-hp

      Somehow those that stick around in the community and not move on are going to have to work through these issues.

  4. Jeff Senders says:

    “with what?” a thinly disguised attempt to resurrect the old, tired, many times rejected or defeated, costly to promote, almost perennial SALES TAX issue.

    Perhaps the Biden or Trump Camp could bring this issue up as a last minute divisive tiebreaker in States that do not already have a sales tax

    Do you believe it would help them gain votes?

  5. Rick says:

    As for spelling, D.O.N. for a man, doesn’t seem too difficult.

  6. HowlingCicada says:

    What we need:

    1 – Everyone can make their own choice to live in a high-maintenance or low-maintenance place — like Albany or Corvallis vs Josephine County.

    2 – Make it fair for kids by reducing the percentage of local-source school funding as much as possible. In 2016–2017 it was 35.9% according to the graph:
    https://sos.oregon.gov/blue-book/Pages/education-public.aspx

    “””Historically, the largest source of funding had been local property taxes, but this changed dramatically in 1990 when voters passed Measure 5, which lowered the amount of property taxes dedicated to schools. By the 1995–1996 school year, local property taxes for education were limited to $5 per every $1,000 of a property’s assessed real market value. In 1997, voters passed Measure 50, which further limited local property taxes for schools by placing restrictions on assessed valuation of property and property tax rates. The effect of these measures was to shift the bulk of public school funding from local property taxes to Oregon’s General Fund, which comes from state income taxes.”””

    3 – Fairness. Equal treatment under the law. A cherished American value until California destroyed it with Prop. 13 in 1978. You wouldn’t believe the inequity because of it, and the tax burden passed onto everyone who wasn’t privileged by it.

    But, however you try to fix Oregon’s problem (before it becomes terminally malignant like California’s), you’ll get a million people like Hasso saying “… for homeowners, the system has always been unfair, forcing them to pay ever higher tax bills based on market trends they could not control and did them no good.”

    There has to be a way. One idea:
    — Reduce the rate so the end-result is revenue-neutral.
    — Base it on full current market value.
    — Those who want can pay the full amount and incur no further obligation.
    — Others can pay partially in cash (often less than their current tax bill because of “revenue-neutral”) and partially by a loan at market interest rates, payable to the county when the property is sold or inherited by someone other than a spouse.

    That was just off the top of my head. There are many possibilities. I don’t mind paying taxes, even high taxes, when they are fair and rational. I’m sure I’m not the only one.

    • Steven Reynolds says:

      I’m pretty versed on how the Oregon P.T. system works. Just curious

      What does revenue neutral mean?

      What would be a full amount with no further obligations?

      “Others can pay partially in cash (often less than their current tax bill because of “revenue-neutral”) and partially by a loan at market interest rates, payable to the county when the property is sold or inherited by someone other than a spouse.”

      Is this a reverse loan against your equity paid to the government? Are you suggesting that property owners take out a mortgage to pay government for their ownership of some percentage of your bundle of rights?

      • HowlingCicada says:

        Sorry, my idea was confusing. First, let’s back-up a bit.

        The only fair real-estate tax is one which is applied equally to everyone, regardless of how long they owned the property, or how they obtained it. For those who disagree with that premise, nothing else I say will be of any interest.

        If taxes are based on current market value, as they should be, then they will increase. By “revenue neutral,” I mean reducing the rate so that the county’s total real-estate tax collection doesn’t change.

        Unfortunately, equality affects some people adversely, as Hasso described. My idea is to provide a way for people whose tax would increase (in a fair system) to postpone paying the INCREASE until the time they profit from selling the property (or any earlier time of their choosing). The “full amount with no further obligations” is simply the full tax bill which will be higher for old-timers obligated to pay on the same basis as everyone else.

        Trying to answer your last question: Legally, it would be like a lien, not a loan. It would be the county’s responsibility to borrow (via bonds) to cover any shortfall.

        This isn’t some kind of socialist plot. I’m just suggesting a possible answer to Hasso’s excellent question, “Property tax reform: Sure, but how?” Prop. 13 is the same kind of millstone around the economic neck of California that PERS is for Oregon — a gigantic, unintended(?) re-distribution of wealth. Both horrible mistakes whose consequences have grown exponentially over time. Oregon’s experiment with unfair taxation is still young enough to fix.

  7. birdieken says:

    “From each according to their ability, to each according to their need” Karl Marx. If you can pay more, God loves a cheerful giver.

  8. Carole Dvorak says:

    Hi, well, I thought when the lottery was pitched to us it was as a measure to help support schools and lower our property taxes. I’m a senior citizen and on a limited income of social security. I don’t get a whole lot in that income. Taxes go up, cost of living goes up, groceries, and everything goes up, but not my social security. This great state of Oregon, County of Linn is going to end up taxing me right out of my home… Thank you very much. I’m sure I”m not the only senior in this position.

  9. thomas earl cordier says:

    My property taxes are not based on RMV of land or structure and have not been for several years. The first time my property tax was established back in 1994 as a new home. That amount was multiplied by 1.03 which determines my tax for the following year.
    That 1.03 multiplier was used every year for the next 27 years. That 3% increase is the maximum lawful increase. Has nothing to do with RMV’s Calculate 1.03 to the 27th power is 2.22. So a $3000 initial tax will expand to $6,660 in 27 years City could under levy i.e. less that the 3% but they never do.

  10. Rachel La Brasseur says:

    How about a sales tax? A sales tax could also be used to help get PERS back to what is was supposed to be.

 

 
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