Twisted path to unfair taxes

Oregon's property tax system is a mess. Changing it won't be easy.

If you are lost in a strange place it helps to remind yourself what steps you took to get there.  

Veteran journalist Tam Moore takes on the task of reviewing the history that brings us to a place where similar properties pay very different taxes. It will be hard to change because the people advantaged by the inequality want to keep the sweet deal they have. Unfair systems can persist indefinitely when the general public doesn't understand the system we have, and we don't remember how we got it.

Tam Moore is a graduate of Oregon State University. He worked in broadcast news in Eureka, California and Medford, Oregon. He was a Jackson County Commissioner and served as Chair of its tax-equalizing Board of Equalization--back at a time when properties of similar value paid similar taxes. After leaving office he was a print journalist for the Capital Press. He has been observing and reporting on Oregon for five decades.

Guest Post by Tam Moore

Oregon turned down the path of unequal property taxation in three steps, two of them triggered by initiative petitions. The third step was a legislative fix because what the voters passed in November 1996 just wouldn’t fly legally; the “fix” passed in May of 1997.

Often beneath the radar of both community news coverage and state legislators, the property tax system is one of the most significant sources of revenue for over 1,200 local taxing districts in Oregon – from giants like  Multnomah County, population 829,560,  to the city of Lonerock, population 21, in Gilliam County. (We don’t count Greenhorn these days, a dormant municipality straddling the Baker-Grant County line; at last count it didn’t have any permanent residents but 10 dwelling units are reported by the Census Bureau.)

Moore, circa 1972

Steve Novick, a former Portland City Commissioner, suggested incremental change to Oregon’s property tax system in an August 23 blog:  Updating real property value each time local voters approve  a bond issue. 

The gate-keepers in Salem – the House Interim Committee on Revenue – held a hearing two days later. Tacked on to the bottom of their agenda for reference were four failed legislative efforts to reform Oregon’s property tax system, along with a 2019 attempt to direct the Legislative Revenue Office to study what the bill called “land value taxation.”

Chris Allanach, the Legislative Revenue Officer, asked after the hearing if any of those past ideas got traction, said it appeared they aren’t going anywhere.

“There are voices out there who want some kind of property tax reform,” he said, but the committee doesn’t have interest in moving forward with these particular proposals. How did we get in the mess where one Portland house Novick used as an example had a market value of $412,900 and paid $3,819 in property taxes while another  valued at $856,000  paid $2,469 in property taxes?

It all began in California. Voters in California passed a statewide property tax limit –the infamous proposition 13 – in 1978. Some folks in Oregon, which then had a much different local government revenue system from California, thought a property tax limit ought to work here. They gathered signatures for repeated initiative measures, which Oregonians rejected.

 After several tries Oregon voters passed Measure 5 in November 1990, limiting property taxes for schools. At the time Don McIntyre, a conservative activist, was leading the charge to put Initiative measures on the state ballot. He’s credited as the “father” of Measure 5. When it took effect as part of the state constitution, the legislature had to scramble to pick up a large share of operating budgets for local school districts which then depended on property taxes for much of their operating budgets and for paying off bond issues financing new buildings.

Not content with the limit on schools, property tax foes returned to the ballot in November 1996 with a lid on most property tax rates, including this time municipalities and special districts. The lengthy constitutional amendment had legal problems, so the 1997 legislature worked to preserve the concept of Measure 47 which voters passed 704,554 to 642,613. The result was Measure 50. Tucked away in the fine print is Oregon’s limit of 3-percent-a-year on the computed “maximum assessed value” of real property.  MAV as it’s called, over the years tends to get further away from the current market value of most properties.  Measure 50 passed in a May 1977 special election, 429,943 to 341,781.

Local government revenue and financing changed forever after that election—phased in over a few years. So here we are 24 years after Measure 50. School funding is more-and-more the responsibility of the legislature with local school boards and their voters in a secondary role. Cities and counties, now limited to “permanent tax rates” and “local option tax” for operating budgets,  discovered “user fees” which the governing body often tacks on to monthly municipal utility bills or transactions such as taking out a building permit.

In the 2021 legislative session HJR 13, a constitutional amendment which would have required the ratio of maximum assessed value be at least 75 percent  of real market value got out of the House Revenue Committee only to die in the Rules Committee before it could come to a floor vote. The same concept, in a different form, SJR 1, died in the 2019 legislature, along with two related constitutional amendments. 

The most sweeping 2019 proposal, SJR 21, would have moved all of the 1997 constitutional language from Ballot Measure 50  into statute. Had voters  approved that move, the legislature could then go about changing the law to make things equitable without having to refer every detail to  statewide elections. 

So here we are, with a system which treats similar properties differently depending on whether they were put on the tax rolls in the mid-1990s or if they were built or sold more recently. Who cares? 

We all should, elevating property tax reform to part of the ongoing dialog with local and state elected officials.