Fixing a skewed tax system

The League of Oregon Cities is supporting two proposed constitutional amendments in the 2013 legislative session dealing with the long-term effects of property tax limitation measures passed decades ago. One is logical but unlikely to succeed. The other would return a degree of local control and voters should have the chance to consider it.

HJR 13 would address assessed values that lag far behind the property's real market value. This is the result of Ballot Measure 50, passed in 1997, which reset assessed values at 90 percent of the 1995-96 real market value and limited the annual increase in value to 3 percent, regardless of the actual market conditions. Over the years, real market values rose faster than the artificially limited assessed value.

Today, homes in different neighborhoods can have nearly identical market values but drastically different assessed values.

The proposed bill would ask voters to amend the Oregon Constitution to reset assessed value to real market value when a property is sold. Over the long term, this makes sense from a fairness standpoint, but would mean huge increases in tax levels for some properties and not others, leading to big disparities within neighborhoods. For that reason, it's not likely to win voter approval even if the Legislature passes it.

The other measure, HJR 8, would address the issue of "compression" stemming from 1990's Ballot Measure 5, which set a cap of $10 per $1,000 assessed value on taxes levied by cities, counties and special districts and a $5 cap on school districts.

Under the law, any taxes levied in excess of the caps are reduced until the limit is reached. Taxes outside an entity's base rate are reduced or "compressed" first. This means a special levy, such as the Ashland School Activities Levy, can be reduced from the amount voters approve to avoid exceeding the limit.

This restricts the ability of local communities to tax themselves for the general good. In Ashland, the voter-approved levy for 2012-13 was reduced $1.2 million, or 35 percent, to keep the total levy inside the $5 per thousand cap.

Statewide, school districts lost $74.5 million to compression in the past fiscal year. Counties lost $34.3 million, cities $28.2 million. All Oregon counties, half of all cities and more than 90 percent of all school districts are in compression.

HJR 8 would ask voters to amend the constitution to allow local-option levies outside the caps. This would not raise anyone's taxes unless voters approved a levy; it would simply give local communities the option of taxing themselves for the public good.

We are not optimistic that such an amendment would win voter approval, but it's reasonable to ask Oregonians if the present system is what voters had in mind when they approved Measure 5 three decades ago.

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