Oregon's Quirky Property Tax System

The Oregonian over the weekend had a nice article on how property tax compression is affecting local option levies for school districts: returning far less money than anticipated by the voters that passed them.  It is a big problem for school districts and an even bigger problem politically because the system has become so complicated that most voters don't understand it.

Which is why it is nice to have a good ol' school newspaper to help highlight and explain such things.  Here is Findley Merritt in the O:

The answer is both complicated and quite simple.

The simple part is this: In 1990, voters passed Measure 5, setting various limits on property taxes. One of those limits was on school funding. No matter how many taxing districts were out there, an individual property owner would pay no more than $5 per $1,000 of real market value in education taxes (excluding bond levies). For example, if you owned a home appraised and assessed at $200,000, you would never pay more than $1,000 a year for school taxes.

In 1997, the real market value was separated from the assessed value. Properties were taxed on 90 percent of the real market value, creating a new, lower assessed value. And that assessed value could increase no more than 3 percent per year.

But what if multiple tax districts popped up and each of them taxed your property? Let's say the local school district charged $3.50 per $1,000 of the assessed value, then later added a local option levy that tacked on another $1 per $1,000. But there's also a regional education service district charging 50 cents per $1,000, and a local college district charging another 50 cents. Add those up and you're being charged $5.50 for every $1,000 in assessed value. The bill on your house is now $1,100.

Well, that's when the Measure 5 limit kicks in, bringing your total bill back down to $5 per $1,000 of real market value.

So which of those taxing districts loses out? There's an order for that, too, and the first one on the list is the local option tax. In our example, that $1 per $1,000 local option levy is effectively reduced to 50 cents per $1,000 for your house. In tax talk, it's called "compression."

With the housing market collapse, market values declined, causing the Measure 5 limit to reduce taxes more than in the past. With values significantly lower, the local option levy is bringing in far less, causing the shortages.

To compound things, as the state has reduced school funding, districts have increased their basic tax rates, and many of them are near or above the $5 limit, further reducing local option levy rates and pinching other districts.

I have pushed the limits of fair use here because I think this is a very fine piece of writing and reporting on a very complicated topic. Kudos to Ms. Merritt.

It also provides me a chance to get up on my soapbox again an extoll the virtues of the good old ink and paper newspaper. In order for this to get on the front page and into peoples consciousness it takes editors who are thinking about what are the important issues that readers need to know and understand. It takes real reporters out there who go and dig out the information. And hopefully it takes credulous readers who are willing to read beyond just the things that are most interesting and relevant. In other words it takes a lot more than what blogs and other non mainstream media offer.

Anyway, it is certainly time to rethink the way we constrain property taxes though I am a little nervous about piecemeal solutions as we just wriggle ourselves further into the straightjackets we have made for ourselves. I have no real hope that it will happen but I can dream of wholesale reform of our revenue system that provides stability that is lost when we limit property taxes (which I think we should at some level).

Finally, one more note about the dear old O: it is getting dizzying trying to keep up with the staff of reporters - it seems like every week there are new ones arriving and 'old' (those that have more than 1 year) off to the greener pastures of PR.

For a while (like 6 months) it was Molly Hottle who was doing a lot of business reporting then suddenly she is gone to Providence as a PR flack and in comes another Molly, Molly Young, who is doing business stuff. Hard to remember whom I am talking to when they call for a quote... I hope someday soon things will stabilize for the MSM and old-school newspapers can once again become a career destination and not a 1 year paid internship for newly minted journalism students on the pay to a PR job. Because we need newspapers.