SPECIAL REPORT: Voter-Approved Tax Levies Losing More Money Than Ever Before

Size: px

Start display at page:

Download "SPECIAL REPORT: Voter-Approved Tax Levies Losing More Money Than Ever Before"

Owen Hall
8 years ago
Views:

1 LEAGUE OF OREGON CITIES SPECIAL REPORT: Voter-Approved Tax Levies Losing More Money Than Ever Before MAY 2013 Published by the League of Oregon Cities

2 Voter-Approved Tax Levies Losing More Money than Ever Before New data from the Department of Revenue confirm that Oregon s current property tax system s built-in limitations have potential to harm local communities. This year, local governments will lose more than $184 million in property tax revenue, money that would otherwise be used to fund important public services. Local governments are losing this money due to tax compression, a result of statewide limitations in Oregon s property tax system. More than one-half of the money lost to compression is from voter-approved local option levies used for schools, police, fire, libraries, and other local services. Recent data made available by the Department of Revenue yield some worrisome trends in regards to the impact of compression. Under Oregon s property tax system, voter-approved local option levies are the first to be impacted by compression. Since 2007, compression for school local option levies has increased by 990 percent; county levies have seen an increase of 316 percent. Money lost from local option levies has exceeded $99 million for all taxing districts. Voters find that money they approved is cut in half, or by 60 percent, or even 70 percent (see p.2). With compression increasing, voters are essentially losing their power to fund services at the levels they see fit. Background: Limitations on Property Taxes What is? Each property has a limit on how much that property owner will pay for taxes. If that limit is exceeded, the property owner doesn t pay the full amount of the tax levied, regardless of what voters approve, and local governments get less money. Oregon s property tax system as we know it today is shaped by Measures 5 and 50, two constitutional amendments that introduced statewide limitations on property taxes. is a side effect of Measure 5, which Oregon voters passed in Measure 5 set limits on how much property tax any property owner can pay for local governments and schools: $10 per $1,000 of real market value (RMV) for general government (e.g. cities, counties, special districts) and $5 per $1,000 for schools. Bonds are outside of these limitations. Since local governments all share the same pie of $10 per $1,000, an increase in one local government s tax rate, the creation of a 1

Local governments are losing this money due to tax compression, a result of statewide limitations in Oregon s property tax system.

3 new tax district, or the passage of a voter-approved levy can all cause another local government to go into compression. Declining RMVs, which Oregon has experienced since the collapse of the housing market in 2008, can also worsen compression. Hurts Locally-Approved Taxes First Most property tax dollars support public safety and schools crucial services for our communities. Voters value these services and show their support at the ballot box by approving local option levies (temporary taxes used to pay for operating costs for local governments). In fact, last year 14 out of 15 city levies (93 percent), 6 out of 8 county levies (75 percent), and 4 out of 6 school district levies (67 percent) were passed by voters Difference RMV $200,000 $180,000 ($20,000) Measure 5 limits $2,000 $1,800 ($200) Local Taxes Local option levies $50 $0 ($50) Special District $500 $462 ($38) City $650 $600 ($50) County $800 $738 ($62) The table on the left shows a house s local taxes before and after hitting compression limits. Once the limits are met, local option levies are reduced first, and then all other local government taxes are reduced proportionally until the limits are met. Even if voters pass local option levies, they still may not get what they desire. When compression happens, local option levies are compressed first, all the way down to zero, before the permanent rate taxes are touched. That means that the services identified by local voters as important will lose their funding first. School and city local option levies have been especially hard hit, and compression loss rates continue to grow. West Linn-Wilsonville School District compression has grown from $630,000 in to $6,616,000 in , an increase of 950 percent. 2

Hurts Locally-Approved Taxes First Most property tax dollars support public safety and schools crucial services for our communities.

4 $0 -$1,000,000 -$2,000,000 -$3,000,000 -$4,000,000 -$5,000,000 -$6,000,000 -$7,000,000 West Linn-Wilsonville Loss The Tigard-Tualatin School District has lost $14 million since fiscal year Tigard- Tualatin School Board Chair Maureen Wolf sums up compression impacts this way I believe it will be impossible to deliver the level of education expected from Tigard-Tualatin schools, given the losses we have and will incur. 1 The Morrow County School District passed their local option levy in 2009 to help maintain education programs as a way to cope with reduced state funding. However, due to compression, voters are not getting what they approved the district will only receive $400,000 of the $1.4 million levy. Top Percentage Losses for School Districts ( ) Taxing District Tax Extended Loss Actual Local Option Tax Imposed Morrow School District $1,421,000 -$1,020,000 $401,000 72% as a % of Tax Extended West Linn-Wilsonville School District Levy Crow-Applegate-Lorane School District Levy $9,433,000 -$6,616,000 $2,817,000 70% $313,700 -$208,000 $105,700 66% 1 Board members urge Senate committee to protect local option levies from compression. February 28, Retrieved from 3

Tigard- Tualatin School Board Chair Maureen Wolf sums up compression impacts this way I believe it will be impossible to deliver the level of education expected from Tigard-Tualatin schools, given

5 as a Percentage of Tax Extended - Selected Cities 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Albany Sweet Home Portland City Children's Levy in cities continues to grow as well levies in Albany, Sweet Home, and Portland lost a higher percentage of tax extended in than ever before, leaving less money to support children s programs, police, fire, and libraries. Percentage Losses for Selected Cities ( ) Taxing District Portland City Children s Levy Tax Extended Loss Actual Local Option Tax Imposed $19,257,000 -$8,972,000 $10,285,000 47% as a % of Tax Extended City of Sweet Home $2,736,000 -$906,000 $1,830,000 33% City of Albany $3,094,000 -$901,000 $2,193,000 29% The Growing Problem of has been growing over time, and has been increasing dramatically in the last few years. In 2007, total compression for all taxing districts was $49 million. Now, just five years later, it s nearly $185 million. That s an increase of 275 percent. The chart below shows the rapid growth in compression revenue losses for cities, counties and schools. 4

6 Revenue Lost to $0 -$10 -$20 FY97-98 FY98-99 FY99-00 FY00-01 FY01-02 FY02-03 FY03-04 FY04-05 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY $30 -$40 Millions -$50 -$60 -$70 -$80 -$90 -$100 Cities Counties Schools impacts are felt across the state. In fact, 100 percent of counties, 90 percent of school districts, and over 50 percent of cities are experiencing compression. The dollars lost to compression can be high. The table below shows the highest compression loss (includes local option and permanent rate compression) in dollars from the tax year. The city of Portland could face as much as an additional $10 million reduction in property tax revenue due to the recent creation of a new county library district. As a result, the city is examining a number of cost-cutting measures, including leaving police and fire positions unfilled and cutting school resource officers around the city. 2 2 Law, S. Police, fire can t avoid cuts in budget. Portland Tribune. March 21, Retrieved from 5

The dollars lost to compression can be high. The table below shows the highest compression loss (includes local option and permanent rate compression) in dollars from the 2012-13 tax year.

7 Districts with the Highest Total Loss in Dollars in 2013 Taxing District Total Tax Extended Actual Tax Imposed Total Tax Portland School District $294,207, 000 $263,164,000 -$31,043,000 City of Portland $359,208,000 $328,193,000 -$30,533,000 Eugene School District $77,460,000 $65,540,000 -$11,920,000 West Linn/Wilsonville School District $37,379,000 $29,257,000 -$8,121,000 Tigard-Tualatin School District $53,941,000 $47,680,000 -$6,261,000 is Limiting Our Communities As a result of compression, Oregonians lose some of their control over their communities voters can no longer make decisions related to how much funding they want to give for local services. Property taxes are crucial for the continued success of school, police, fire, and a myriad of other local government services. Thanks to Measure 5, property tax revenues for many local governments are diminishing. Revenue lost to compression has been growing rapidly in recent years, and if that trend continues, local governments may be forced to lower service levels. Already local governments have less money available to keep schools running, police on the streets, and to provide other services that citizens depend upon. As compression losses continue, citizens will be left with few options for getting the services they value. 6

School District $53,941,000 $47,680,000 -$6,261,000 is Limiting Our Communities As a result of compression, Oregonians lose some of their control over their communities voters can no longer make

SCHOOL LOCAL OPTION PROPERTY TAX

SCHOOL LOCAL OPTION PROPERTY TAX STATE OF OREGON LEGISLATIVE REVENUE OFFICE State Capitol Building 900 Court St. NE, Room H-197 Salem, Oregon 97310-1347 Research Report (503) 986-1266 FAX 503-986-1770 www.leg.state.or.us/lro/home.ht m