SALEM — Leaders of Oregon’s cities and school districts want voters to undo some of the stringent restrictions they placed on property taxes in the 1990s.
Several mayors and school-board members made their case to state lawmakers on Wednesday, complaining that property-tax limits from two 1990s ballot measures are severely hampering their ability to pay for police and fire services, libraries, parks, road maintenance and teachers.
“Our revenues are not keeping pace with our expenses, and as a result each year we are forced into more cuts,” Salem Mayor Anna Peterson told the Senate Finance and Revenue Committee.
Critics warn that that the local officials’ proposals might raise taxes too high for people on a fixed income and could discourage some people from moving.
Local governments have set their sights on Measure 5 from 1990, which capped total property tax payments, and Measure 50 of 1997, which limited the growth of a property’s assessed value. They aren’t asking for an outright repeal of those two measures, but they do want the state Legislature to refer new ballot measures in 2014 that would limit their reach.
State government is funded primarily by income taxes, but local governments rely substantially on property taxes to fund their services.
Under limits created by Measure 5, property taxes are capped at $15 per $1,000 of the property’s value — $5 for schools and $10 for all other taxing districts. If voters approve local levies that would put a property’s tax bill above the threshold, local governments must lower their collections proportionately until the threshold is met.
The practice is known as compression. It can prevent school boards, cities, library districts and other taxing jurisdictions from collecting property taxes that voters have approved.
In a neighborhood at or near the cap, a tax levy approved to hire more police officers might end up reducing money available for the water district as all taxing authorities reduce their collections to fit under the cap.
That’s happening in half of Oregon’s cities, all counties and many school districts, said Chris Fick of the League of Oregon Cities.
“The voters of our district have consistently voted by large margins to support smaller class sizes, but that wonderful community support is losing ground to compression,” said Betty Reynolds, a board member for the West Linn-Wilsonville School District. “If a local community chooses to raise money for its schools, we would hope they could realize the full value of that levy.”
The measure sought by local governments would allow voters to exempt themselves from the Measure 5 property tax caps in future levy elections.
A separate proposal would undo some of the effects of Measure 50, which fixed the rate of growth of a home’s taxable value at 3 percent per year. The local governments’ proposal would reset a home’s taxable value when it’s sold.
Critics don’t see the problem, saying voters were clear when they chose to limit the amount of government could collect in property taxes.
Changing the constitution to allow higher taxes could severely hurt people who already struggle to pay their tax bill, said Jason Williams, director of the Taxpayer Association of Oregon.
“These are people who will either lose their home or have their quality of life diminished,” Williams said.
Increasing the taxable value of a home upon sale might discourage people from downsizing as they get older because a tax bill might be higher, said Shaun Jillions, a lobbyist for the Oregon Association of Realtors. He said real-estate agents value public services and are open to discussing changes in property taxes, but lawmakers should be careful not to propose changes that would make tax bills unaffordable.