Taxed to Death, Part 2

This is the second article on current property tax issues, continuing the article in the Eliot Neighborhood News Spring issue. The first warned of potential changes to property taxes by the current state legislature. At the time, there were several legislators arguing inner N/NE properties were under-taxed and should be reassessed to increase tax payments. This was a consequence of Measure 50, a citizen initiative to cap the rate of property tax increases passed in 1997. It appears that won’t happen. More on that in a bit, but Eliot hasn’t dodged the tax increase bullet.

The other way Multnomah County can extract more taxes from a property in Eliot is selective reassessment. I stopped a County Assessor inspecting homes on my street about a month ago. He said the County was “updating its records.” While the Assessor has an obligation to keep accurate records, doing so on a selective basis — say focusing on Eliot because it is “under-assessed” — strikes me as inequitable. While Measure 50 caps the basis for real market value (RMV), it allows reassessment for new construction and other improvements. Generally, reassessment is triggered by building permits; however, self-constructed improvements are included. Adding a deck is an example and was one item of interest to this assessor (among others). He also volunteered that the County was implementing a “pilot” project to see how many improvements since 1997 were missing from their records. Of course, any improvements that were noted would result in reassessment and higher taxes. Geographically targeted reassessments are concerning enough, but I heard another story that was more disturbing. Several years ago a friend had a house built on her spare lot, like many others with their ADUs, It was permitted and assessed at the time. Recently she received a property tax bill for 5-years of under-assessment. She was told the County hadn’t adjusted her property value at the time and was collecting for the previous 5-years at the corrected rate, a bill over $25,000!

The lesson for all of us in Eliot is that the County apparently has targeted our area for selective increases in assessed value and higher taxes. I noted this as a “worst-case” for property tax collections, but one that is pressing because governments can’t increase taxes as much as they want because of Measure 50. To recap, property taxes are currently based on County assessment of the value of the land and improvements on it, typically a house. The tax rate for both is the same, so the total tax is based on the combination of land and improvements. Measure 50 fixed the local property tax rate to 0.015% of market value and limited annual increases to 3%. The assessed value was indexed to 90% of 1996-7 RMV. As a review of the book Survival Math on page 5 of this issue indicates, Albina in the 1990s was wracked with drugs, prostitution, and gang warfare resulting in reduced property values. Using a real-world example, in 1997 a small house in Eliot had an RMV of $50,000 and taxes set at $750 (other fees brought the total to $1,000). Thanks to Measure 50, that house is now assessed $94,000 and total taxes at $2,400. Without Measure 50, the RMV would be $430,000 and the taxes roughly four times higher!

The previous article noted that if the state legislature did void Measure 50, it would cause all properties to be revalued and the actual tax change somewhat less than four times, so long as the total amount of tax collections was the same as today. For example, if all properties were assessed at twice the current value, the actual tax would be the same as today – to prevent a windfall of tax payments to area governments. However, not all properties have increased at the same rate. Eliot’s values DID increase faster than some parts of the city, such as neighborhoods to the east and far south. As a result, Eliot tax payments would still increase more than many other neighborhoods.

The legislature did not void Measure 50, and it’s possible it can’t because it was a citizen initiative, which may require a public vote to change. What the legislature did instead, with the urging of many governments and social and environmental groups, was offer a proposal of a study of different ways of assessing taxes, one based only on land value; the value of improvements would not be reflected in the tax rate. In other words, a small, 1909 cottage in Eliot would be assessed at the same rate as the recently built McMansion next door. This tax scheme is called land value taxation. A bill (SB 702) to study it as a replacement for current property taxes has passed the Oregon Senate. It calls for a study next year, presumably to be used during the next Legislative session in 2021. The bill notes that the purpose of this study IS to find ways to increase revenues from property taxes, meaning higher property taxes regardless.

One thought on “Taxed to Death, Part 2

  1. Hi Mike, I appreciate your look at property tax issues in NE. A big hike, for “under-assessed” homes, seems like it will only further the housing crisis for those who do not live in $900k homes (most of us in NE). I’ve seen my taxes increase by about 40% in the last 6 years due to 3% annual plus bonds voted in. It’s getting to be a big bill for my little house.

    Like

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