The Dalles joins a majority of cities in the state that have deferred maintenance of streets due to budget constraints, according to a recent report issued by the League of Oregon Cities.
The annual “State of the Cities” report outlines that the largest challenge facing the 180 cities that participated in the survey is a limitation on property tax collections.
Measure 5, a constitutional amendment, and Measure 50, a citizen initiative, restrict the level that taxes can be raised each year and set a cap for how much can be taken from a property owner.
City property tax collections lost to these caps have increased by 335 percent between fiscal year 2008-09 and 2012-13, according to the 2014 report.
Five years of financial data was provided by The Dalles and 179 more of the state’s 242 cities for the latest analysis.
Nolan Young, city manager for The Dalles, said compression of taxes increases by about $20,000 each year at the local government level, which has become a source of concern.
Compression occurs under Measure 5, enacted in 1990, when a property’s tax bill exceeds the legal limit of $5 per $1,000 of a property’s real market value for education (not including bonds) or $10 per $1,000 for general government. Once that happens, the amount collected is reduced uniformly among taxing agencies. Temporary levies are compressed before taxes that fund permanent districts.
Young said the latest report reflects that many cities are worse off than The Dalles because they are not only faced with roadwork funding challenges. Thirty-eight percent are identified as also struggling to cover the cost of sewer and water system upgrades. And 37 percent have deferred maintenance on their fleets, buildings and other internal municipal needs.
Cities within Wasco County receive 9 percent of the property tax collected, compared to the statewide average of 20 percent. That differential is due, in part, to the creation of separate taxing districts to fund fire, park and library services.
Property taxes in The Dalles 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.
Measure 50 became law in 1997 and froze real market values at the assessed rate of 1995. Local governments are allowed only a 3 percent increase each year unless major development takes place. If that occurs, an agency can temporarily exceed the permanent rate limit to take care of service needs, but only for a period of five years for operations or 10 years for capital projects.
Significant improvement projects on individual projects can also spur revaluation.
Young said property taxes have remained steady in the past few years but there has been a slight decrease in the amount of franchise fees the city has collected, which is a trend that bears watching. These fees collected from utility and cable companies contribute 15.8 percent to the general fund and hotel taxes another 10.6 percent.
Young said the city is considering a gas tax proposal to raise more money for repair and maintenance of about 88 miles of streets. About 60 percent of these roadways are dilapidated enough to need a more extensive level of work.
One way to come up with another $450,000 per year for projects is to double the current 3 percent local gas tax, although Young said nothing has been decided upon at this point.
He said the city council is considering whether to partner with the county on formation of a road taxing district to generate revenue for road work. An increase in vehicle registration fees is also on the table for consideration.
Young said reviewing the league’s annual report is enlightening because it highlights more severe problems that other cities are grappling with.
For example, many municipalities are groaning under the weight of Public Employee Retirement System rates.
Young said The Dalles does not participate in this program and has been spared the 73 percent hike in rates from 2009-11 to 2013-15.
He said The Dalles has also fared better than cities with their own building departments, which have experienced a drastic decline in operating revenue since the Great Recession began in 2008. The Mid-Columbia Council of Governments handles permits for residents in town.
“We’ve stayed fairly even during the recession even though our franchise fees and Transient Room Taxes have been a little flat,” said Young. “We feel we have a pretty good handle on our budget.”
The league’s report says that Oregon’s housing market is improving in more populated areas and construction has started to pick up.
Young said there has been a slight increase in residential growth — about a dozen homes were built in town the last year – but not enough to call it an uptick.
“We are about the same,” he said.
He said having revenue begin to decrease in some areas while operating expenses continue to go up is going to necessitate some budget adjustments in the upcoming year.
“We’re still good but we’re keeping an eye open for opportunities to tighten our belt if we need to,” said Young.