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TD faces funding challenge

The Dalles is one of eight cities featured in a special report that tracks how property tax revenue is spent and areas of public service that face a financial challenge.

“Where the Money Goes” was recently released by the League of Oregon Cities to coincide with the October mailing of property tax statements.

“If people are wondering where their property tax dollars are going and how cities are faring, this report will give them an accurate picture of the stark realities,” said Allegra Whillhite, LOC’s lead author of the report.

She said LOC chose cities from different locations in the state to provide an economic picture of the issues Oregonians are grappling with. There are 242 incorporated cities in the state and the report also features data on Gresham, Pendleton, Grants Pass, Bend, Albany, Coos Bay and Eugene.

Information included in the report was gleaned from the Oregon Department of Revenue, city budget documents and annual financial reports, and Portland State University’s Population Research Center.

“This report was very interesting to work on, I learned a lot, too,” said Whillhite.

She said the purpose of the study was to reflect the variety of ways that local governments are seeking to meet citizen demands for services with constrained property tax revenues.

“We advocate for cities and this is something they have identified as an issue,” she said. “Our goal is to provide information so that citizens can make decisions about addressing the challenges.”

One of the facts given about The Dalles, with a population of about 14,400, is that the permanent city tax rate of $3.02 per $1,000 of assessed value is lower than many similarly sized cities — La Grande has a rate of $7.44 — which is making it more difficult to cover the rising cost of public safety services.

One of the reasons identified for the lower rate in The Dalles was that citizens have divided services among several special districts, including fire, health, libraries and parks.

The LOC study lists municipal court and police department costs at 119 percent of property tax revenue in The Dalles general fund, which is also used to pay for community development and administrative services.

In his budget report for fiscal year 2013-14, Nolan Young, city manager, outlined that property taxes comprise 42 percent of the $6.5 million general fund, with operating transfers from other funds to cover department services providing another 17.6 percent slice of the pie. Franchise fees collected from utility and cable companies contribute another 15.8 percent in funding and hotel taxes 10.6 percent. The remaining revenue sources include court fines at 3.5 percent, money from other governments at 7.3 percent and about 3.1 percent income from other sources.

With public safety costs more than the property taxes received from citizens in The Dalles, the LOC report identifies that funding for other crucial services, such as road maintenance, is becoming more difficult. This has led local government leaders into discussions about forming a county-wide road district to pay for infrastructure improvements.

According to LOC, voters in The Dalles, based on recent history, have been supportive of creating new taxing districts.

Cities within Wasco County receive only 9 percent of property tax collected, compared to the statewide average of 20 percent.

The rest is shared among the county (23 percent), schools (40 percent), and other taxing districts (28 percent).

Adding a road district, states the LOC report, could contribute to a growing problem in The Dalles of taxes exceeding statewide caps. That could result in reduced revenues for all taxing districts and reduced funding options for citizens.

Young said the road district proposal referred to in the report has not moved forward at either the city or county level.

He said both entities are exploring other options to cover the costs for road maintenance and repairs.

According to Department of Revenue data, The Dalles lost 3.4 percent of total property tax revenue — $88,697 — during fiscal year 2012-13 due to compression.

“I was kind of surprised about how high our compression was,” said Young after reading that information.

Under Measure 5, which was approved by Oregonians in 1990, the amount of tax that can be obtained from property taxes is capped. Taxes for education (not including bonds) can’t exceed $5 per $1,000 of a property’s actual, or real market, value. Those for general government can’t exceed $10 per $1, 000.

When a property’s tax bill exceeds the legal limit, it is reduced uniformly among agencies. Temporary levies are compressed before taxes that fund permanent districts.

As a result, revenue lost from local option levies in Oregon topped $99 million for all taxing districts in 2012-13, according to the Department of Revenue.

Statewide, local governments lost $185 million to compression in 2012-13. The constitution also limits the rate of growth in assessed values for the vast majority of properties to 3 percent annually and sets permanent tax rates for all districts.

While that makes property taxes predictable for Oregonians, LOC contends that property tax revenue is no longer keeping pace with expenses.

“Even though property tax bills have been increasing for most residents, city expenses are often growing at a far greater rate,” states the report.

“Local governments unfortunately have little control over the rising costs of materials (driven by market force) and personnel (such as Public Employees Retirement System, which is governed by policy decisions at the state level), leaving citizens to find ways to providing services with less revenue.”

Measure 50 was enacted in 1997 and also affects the collection of property tax revenue. Real market values were frozen at the assessed rate of 1995 and local governments allowed only a 3 percent increase each year unless major development takes place.

ters can approve a temporary tax, which allows a government entity to temporarily exceed the permanent rate limit. Temporary taxes are restricted to five years for operations and 10 years for capital projects.

Oregon currently ranks 26th in property tax collections per capita, despite being one of only five states without a sales tax, according to 2013 figures provided by the Tax Foundation, a non-partisan research group based in Washington, D.C.

Additional information on the LOC report about Oregon’s property tax structure can be found

at www.orcities.org /taxreform.

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