REVENUE MEASURES PASSED
1997 OREGON LEGISLATURE

PROPERTY TAXES

Alters pre-certification process for enterprise zone properties to include approval by county assessors.

Transfers administration of water association property tax exemption from the Department of Revenue to county assessors. Establishes requirements for water associations to apply for the exemption to the county assessor and for assessors to notify associations of approval or disapproval of application. Directs Department of Revenue to develop the application form.

Increases the maximum property tax exemption for veterans or surviving spouses living in non-profit homes for the elderly to conform to the maximum exemption under the veterans homestead exemption.

Local: Revenue loss to local taxing districts of less than $5,000 for the 1997-99 biennium.

Replaces limit on rents paid by one tax exempt entity to another with a requirement that rents charged reflect property tax reductions due to the tax exempt status of the lessor.

Modifies distribution formula for property tax revenues from small private rail car companies to match the formula used for large rail car companies.

Eliminates requirement that local governments file a copy of their budgets with the county assessor and the Department of Revenue.

Authorizes Department of Revenue to develop rules for electronic filing of property tax appeal of assessment petitions.

Allows Department of Revenue to consolidate payments to counties for the senior citizen special assessment deferral program. Allows the Department to pay off small accounts early.

Eliminates rural telephone gross earnings tax beginning July 1, 1998.

Local: Increase of about $56,000 statewide in 1997-99. This is a one-time acceleration of senior deferral payments from the state to local government.

Extends 3% discount for timely property tax payment to taxpayers who receive tax bills at times other than in October. Allows discount if tax paid within 30 days after tax bill is mailed.

Local: Negligible

Expands local authority to transfer properties to non-profit organizations and county authority to cancel delinquent property taxes on transferred properties. Allows this if property used for any public purpose of the non-profit organization. (Current law allows this only for properties to be used for low-income housing, social services, or child care.) Allows transfer to specify the local government may reclaim the property if it is used for a purpose inconsistent with the grant.

Exempts non-profit corporation property held for future development of low-income housing from property taxes. Imposes additional taxes if property put into different use.

Local : The effect of allowing the cancellation of delinquent property taxes upon transfer to a non-profit is indeterminate, but likely to be small.

Exempting property held for future low-income housing development has an uncertain effect. Currently in Lane County there are two parcels valued at a total of about $2 million that would qualify for exemption under this measure starting in 1998-99. If the statewide total exempt value is $10 million, the local revenue loss will be about $100,000 in 1998-99 and $200,000 in the 1999-01 biennium.

Disregards lump sum PERS payments in determining eligibility for senior homestead property tax deferral. Applies only to payments made as compensation for taxation in breach of contract.

Local: None. The state pays any deferred taxes.

State: Prevents a small potential reduction in deferral spending. The PERS payments would otherwise disqualify some people for deferral for one year.

Retroactively exempts the Franciscan Montesorri Earth School in Portland from 1995-96 property taxes and the Jesus Our Jubilee Church in Dallas from 1993-94 taxes. Imposes late filing fees for receiving the retroactive exemptions.

Local: $48,000 reduction shared among districts in Multnomah County and $4,000 reduction shared by districts in Polk County.

Allows Department of Revenue to grant a retroactive senior property tax deferral if the owner had been previously granted deferral and was now ineligible solely due to failure to file a claim. Gives state the 3% discount for paying retroactive deferrals.

Allows senior deferral participants to continue in the program if their home is condemned by the Department of Transportation and they purchase a new home within one year.

Local: $300 loss to local governments in Washington County due to amendment granting 3% discount to the state when paying property taxes for deferrals granted retroactively.

State: Increased expenditure of $10,000 in property taxes to local governments, to be repaid at a later date by the taxpayers. This bill affects properties in Washington County for four tax years.

Expands activities that qualify as farm uses in an exclusive farm use zone to include processing of farm products and by-products, game farming, and greyhound breeding. Limits processing activities to facilities under 10,000 square feet in floor area in which at least one quarter of the crops processed at the facility are be grown on land owned by the facility owner.

Local: Including activities as farm uses makes the land involved in the activity eligible for farm use assessment. The processing facility provision exempts about $70 million in value from property taxation according to the Department of Revenue. The greyhound breeding and game farming provision exempts about $1.5 million.

The measure takes effect in 1997-98. Under Measure 50, the exemptions will not reduce revenue, but will shift the taxes from the exempted properties to other taxpayers.. The amount of the shift will be approximately $1.5 million in the 1997-99 biennium.

Extends to metropolitan service districts the authority to acquire land specially assessed as farm use land without having to incur the additional taxes normally paid when land is disqualified from farm use assessment. Currently only cities, counties, and park districts have this authority. The land must be acquired for public recreational purposes or for preservation of scenic or historic places. Applies to land acquisitions occurring on or after May 1, 1995.

Local: Uncertain, but likely to be small. Since May 1, 1995 METRO has acquired only one parcel. The additional taxes totaled about $7,000. Local governments agreed not to collect them from METRO. The future revenue loss to local governments for these acquisitions is uncertain. Because local governments often choose not to collect the taxes anyway, and because METRO could, as an alternative, condemn the land and avoid the taxes anyway, the revenue impact of this bill may be zero.

Extends to metropolitan service districts the authority to acquire land under forestland special assessment without having to incur the additional taxes normally paid when land is disqualified from special assessment. Currently only cities, counties, and park districts have this authority. The land must be acquired for public recreational purposes or for preservation of scenic or historic places. Applies to land acquisitions occurring on or after July 1, 1995.

Local: Uncertain, but likely to be small. There is little forest land in metropolitan areas, so acquisitions of this type are rare. There have been no acquisitions since July 1, 1995. Because local governments often forgive the additional taxes when the land is acquired by another government, the revenue impact if this measure will be very small or zero.

Extends the riparian land property tax exemption sunset date from December 31, 1997 to July 1, 2004.

Allows riparian land eligible to apply for the exemption as of July 1, 1997 to continue to be eligible even if the land is removed from farm or forest land designation or moved inside the urban growth boundary. Allows owner five year after the zone or urban growth boundary change to apply for the exemption.

Increases the limit on streambank in each county that can be approved as riparian land from 100 to 200 miles per year.

Local: Revenue loss of less than $5,000 for the 1998-99 tax year and less than $10,000 for the 1999-01 biennium. For the 1995-96 tax year, land valued at $200,000 was exempted under this program, and the Department of Fish and Wildlife does not expect participation to grow significantly.

Treats companies that generate electricity using wood waste or biomass as fuel as industrial plants rather than utilities for property tax purposes. Applies to plants with a capacity of less than 20 megawatts who and sell their electricity to a utility rather than directly to customers.

Allows income tax credit to businesses that provide transit passes for their employees. Sets credit to qualify for a three-year income tax credit equal to 5% of the cost of the passes in each of the three years.

Removes sub-caps within the $40 million overall limit on the business energy credit.

Local: Minimal, and possibly zero, change in property tax revenue. Two plants with a combined value of $12 million be shifted for industrial classification. These plants would be valued by a cost approach rather than the current income approach. It is unclear which approach would produce a higher value.

State: Minimal. In some years the full $40 million in energy conservation credits is not granted because the full amount allocated in a particular sub-category may not be claimed. Removing the sub-caps will probably result in the full $40 million being granted every year.

Implements Measure 50.

Calculates 17% statewide tax reduction on virtually all operating levies. Distributes constitutional Measure 50 tax cuts like Measure 47 cuts, except for differences required by Measure 50. Distributes statutory cuts required by this bill by equal rate (about 1.4%) against all operating levies except hospital districts. Makes special provision for high value growth districts, high 1995-96 offset districts, Heppner, and districts faring worse under Measure 50 than Measure 47.

Applies $5 school rate limits and $10 non-school limits to each property rather than applying the limits to each code area.

Establishes Measure 50 assessed value system. Determines value by property tax account. Sets value of new property by county-wide ratios areas and by property classes. Sets property classes by rule. For utility class, sets ratio statewide. Freezes maximum value growth if assessed value falls below maximum. Exempts up to $10,000 of minor construction from triggering higher taxes due to construction if it does not exceed $25,000 over 5 years. Prohibits assessor from revaluing property before applying Measure 50 limit.

Establishes similar assessed value system for specially assessed and partially exempt property. Increases veterans exemption by converting to assessed value. Repeals down-zoned property and home in commercial zone partial exemption. Allows casualty reduction for the duration of loss.

Specifies information that must appear on property tax election ballots. Requires red letters announcing tax election on mail ballot envelopes. Allows appeal of 50% turnout determination.

Repeals Board of Ratio Review. Converts Board of Equalization into Board of Property Tax Appeals. Extends Measure 5 appeal procedures to Measure 50. Gives supervisory authority to the Tax Court.

Requires urban renewal districts to make good faith estimate of total indebtedness needed to finance existing plan. Allows district to impose special levy to finance existing plan. Allows municipality one-time election in 1998-99 to permanently limit the amount raised from the tax increment for an existing plan, raising the rest from the special levy.

Moves property assessment date to January 1, beginning in 1998-99. Lengthens time to file property tax returns. Allows Department of Revenue to design property tax statement by rule. Makes other changes to property tax timelines. Repeals six year reappraisal cycle. Repeals requirement to remove large contested values from the tax roll. Allows counties, with approval of commissioners, to hold appeal reserve.

Ends practice of offsetting severance taxes and other receipts against tax levies before Measure 5 compression. Offsets severance taxes against rate limits.

Refines definitions of capital improvement bonds repayable by taxes imposed outside Measure 5 limits. Defines capital projects fundable by local option levies. Specifies remedies court can order if district spends funds contrary to definitions. Allows community colleges to ask voters to impose local option levies up to amount of district's Measure 50 loss..

Specifies process for determining if local fee increases are property tax shifts requiring voter approval. Limits effect to first year of measure.

Allows urban renewal district to retroactively impose 1995-96 taxes that were not collected due to failure to file notice. Makes Boardman annexation effective on July 1, 1995.

Conforms local budget law to Measure 50 changes. Allows districts to adjust budget to correct errors in 1997-98 if approved by the Department of Revenue.

Conforms district formation, merger, and consolidation laws to Measure 50 changes. Allows city not imposing property taxes to combine merger vote with permanent tax rate vote.

Declares emergency.

State - General Fund reduction of $6 million in 1997-99 from higher property tax deductions on personal and corporate income tax returns. (This is the combined effect of Measure 50 and SB 1215).

Local - Reduces revenue (in addition to the reductions required by Measure 50) as follows:

If a municipality elects to limit the amount raised for urban renewal from its increment, schools and non-schools in the area will gain back some of the revenue they would otherwise lose under Measure 50 and this bill. This effect begins in the second year (1998-99). It could be significant in some areas, such as Portland and Salem, depending on local decisions.

The veterans exemption expansion will save participants an additional $1.4 million over Measure 50 reductions in the 1997-99 biennium. These taxes will be shifted onto other taxpayers. Repeal of the down-zoned property and home in commercial zone exemptions will have virtually no effect. The down-zoned property exemption has no known participants. The effect of the home in commercial zone assessment is achieved by the normal operation of Measure 50.

The Boardman annexation fix will increase the city's property tax revenue about $200,000 per year. The retroactive urban renewal tax provision will increase the City of Redmond's urban renewal revenue about $135,000 in 1997-98.

The entire bill in combination with Measure 50 will produce the following total property tax reductions.

Requires that circuit court actions seeking to invalidate Measure 47 on constitutional grounds be filed in Marion County. Allows direct appeal of these decisions to the Supreme Court if the action was filed before or within 180 days after the act's effective date.

Allows direct filing in Tax Court of actions to determine whether: (1) bonds exempt from Measure 47 are included in calculating Measure 47's operating tax limits, or (2) governments may impose operating property taxes outside Measure 47's limits on voter approval. Directs tax court judge to try the case, thus bypassing the tax court magistrate. Applies to actions filed within 180 days of the act's effective date.

Declares emergency, takes effect on passage.

None.

Exempts intangible property of utilities from property taxes. Adds franchises and licenses, including Federal Communications Commissions (FCC) licenses, to list of property defined to be intangible. Specifies that a nuclear power plant is not an intangible as long as the Public Utility Commission includes it the companies rate base.

Begins changes in 1997-98 tax year.

Local - 1997-98: Relatively little reduction in the short run because the exemptions begin in the first year of Measure 50, the year permanent property tax rates are set. The exemption will increase these rates, thus shifting the taxes saved by utilities onto other property. There will some revenue reductions to a few local governments where Measure 50 tax rates will exceed the $10 Measure 5 limit.

The bill exempts about $760 million in value from tax in 1997-98. This estimate comes from two places:

1. $670 million from a joint industry - Department of Revenue study. Because most large companies have agreed to abide by the study's valuation methods and the Department of Revenue has developed rules based on them, the results are likely to be reliable for 1997-98.
2. $90 million in FCC cellular and personal communication systems (PCS) licenses. About $34 million of these licenses was on the roll in 1996-97.

The total exempt value implies a tax increase on other property of about $10.6 million. About 5% of this represents a reversal of a decrease that would otherwise occur.

1998-99: In addition to the shift described above, the bill will exempt another $80-90 million in cellular and PCS licenses that otherwise would be added to the roll in 1998-99. Since permanent tax rates were set in the prior year, this exemption will reduce revenue (prevent an increase) of local taxing districts by about $1.1 million.

Long Run Effects: Uncertain loss of revenue in the future. The exemption could grow in the future because the statute appears to be drawn more broadly than the rules. The ultimate outcome depends on how a court would interpret the statute. The existing statute for industrial property has seen little litigation. The outcome could also be influenced by the development of more sophisticated appraisal techniques as intangible wealth becomes more important in a modern economy.

Raises minimum amount of personal property subject to property taxation from $3,000 per county for each taxpayer to $10,000 per county for each taxpayer. Increases penalties for late filing or non-filing of personal property returns. Sets penalty based on how late return is filed, up to 100% of tax for return over five months late.

Exempts mineral interests owned separately from surface interests if the property is not being mined.

Continues property tax lien leased property after the lease expires.

Establishes that water improvement district charges are to be collected just like ad valorem property taxes and special assessments. Clarifies that all charges on the tax roll are to be paid on the same schedule and that all charges, taxes, and assessments must be paid on time to obtain the 3% discount.

Changes forest land special assessment filing dates to be consistent with other special assessments.

Begins higher penalties and mineral interest exemption in 1998-99. The rest begin in 1997-98.

Local: No revenue reduction from raising the personal property minimum because it begins in the first year of Measure 50, the year permanent property tax rates are set. The exemption will increase these rates, thus shifting the taxes onto other property. The bill will exempt about $136 million in personal value, thus shifting about $1.9 million in taxes per year.

Exempting inactive mining claims will reduce revenue about $65,000 per year starting in 1998-99.

Allows 15-year property tax exemption for investment in a non-urban enterprise zone in a county with chronic unemployment. Requires that investment exceed $50 million, the firm hire at least 100 full-time employees within 5 years, and the average wage be at least 50% above the county average. Exempts project from property taxes during construction.

Grants corporate income tax credit to taxpayers receiving the property tax exemption above, if approved by the Governor. Sets credit to 62.5% of the taxpayer's payroll and employee benefit costs at the facility. Allows credit against state corporate income, gross receipts, sales and use, and similar taxes relating to the facility. Applies credit only to tax liabilities above $1 million. Allows credit for 15 years. Allows credits to be carried up to 5 years after 15-year period expires. Exempts taxpayer from state corporate income and similar taxes relating to the facility until facility placed in service. Distributes 30% of any tax paid by taxpayer receiving credit to local sponsor.

Sunsets new exemption and credit after 2002.

Allows enterprise zones to have separate areas up to 15 miles apart if the enterprise zone is in a non-urban area of a sparsely populated county. (The current limit is 12 miles.) Allows Astoria Enterprise Zone to be extended to the Clatsop County boundary.

Allows local governments to enhance public services to enterprise zones.

Allows business that missed first-year filing deadline to apply for remaining 2 to 4 years of exemption.

Allows zone sponsors to give hotel, motel, and resort properties enterprise zone exemptions.

Local: The 15-year property tax exemption is aimed at a corporation considering a $280 million investment near Coos Bay. At the planned site, this implies tax savings of about $2.2 million per year once the facility is operational. Other firms could also qualify for this exemption if approved by local ordinances. How much the exemption reduces revenue depends largely on whether the development or some other would occur without the exemption. Some reduction will occur because the exemption applies to all property at the facility, including land.

Coos County would receive 30% of taxpayers state income tax (up to $300,000) after the facility is placed in service.

The other provisions of the measure have an indeterminate but small revenue local impact. Because this measure eases restrictions on enterprise zones, some additional zone activity could occur. If the activity would have occurred elsewhere, the enterprise zone exemption will reduce revenue. If the activity would not have occurred, then local governments may receive higher property tax revenue from the increased investment after the exemption period expires.

State: Probably little effect on 1997-99 General Fund revenue due to the long time lines needed to develop these types of projects. Future revenue losses are indeterminate but potentially large. The corporation targeted by the credits estimates, when fully operational, its payroll will be about $14 million a year, creating a potential credit of $8.75 million per year for this one firm. Other firms could also qualify depending on how widespread the property tax exemption is used.

How much these credits reduce revenue is difficult to determine. Although these may be large credits, the profits attributable to the facility would have to high to use them all. The bill also allows the credits to be used against any state gross receipts tax, sales and use tax, or similar taxes. Oregon does not generally impose a large amount of these taxes (assuming the employment taxes are not similar taxes).

Exempts non-profit art museums from property taxes.

Local: Uncertain. This bill affects only the Coos Art Museum. According to the Oregon Arts Commission, assessors in all counties except Coos have interpreted the current charitable exemption to include non-profit art museums. In addition, the Coos Art Museum has been transferred to the City of Coos Bay and is now exempt as public property. So this bill exempts the property if ownership is transferred back to the non-profit organization.

Exempts property leased by fraternal organizations from property taxation.

Local: Uncertain, but likely to be small. The Liberty Lodge in Springfield recently sold its building and leased it back. The bill will exempt this property from about $1,100 in taxes per year. It is unknown if other fraternal organizations lease property.

Allows local governments to convey real property, including tax-foreclosed property, to a non-profit or municipal corporation for open space, parks, or natural areas. Requires reversion to conveying government if property not used for the eligible purposes.

Local: Small loss of revenue. Local governments will lose revenue only if properties conveyed under this provision would otherwise have been sold or donated to a taxable private entity

Retroactively exempts property leased by one exempt organization to another from 1992-93 to 1996-97 property taxes if exemption denied solely due to failure to file on time. Imposes late filing penalty.

Local: About $25,000 revenue loss from exempting three developmentally disabled group homes owned by Specialized Housing, Inc.

Expands activities qualifying as farm uses to include raising insects, except insects under government quarantine.

Local: Including activities as farm uses makes the land eligible for farm use assessment. The bill appears to affect four commercial insect operations with a combined value of about $2 million. Most of this is improvements. Because "insectaries" do not use much land, the tax reduction will be small.

Extends the rehabilitated residential housing special assessment sunset date from 1998 to July, 1 2008. Allows local government to exempt specially assessed housing being converted to condominiums from paying back taxes if the converted units had rents of at least 125% of federal Section 8 fair market rents.

Local: Extending the sunset date will extend the program into the second year of the 1997-99 biennium, resulting in a 1998-99 revenue loss of about $375,000 and a 1999-01 loss of about $800,000.

Exempts non-profit wastewater and sewage treatment facilities from property taxes if corporation and plant in operation on July 1, 1997. Applies retroactively from 1996-97.

Local: Revenue reduction of about $2,200 per year. The bill exempts a plant operated by the Mapleton Commercial Areas Owner's Association. It is unlikely any other facilities qualify for the exemption.

Sets procedure for May 20, 1997 statewide election on restructuring the property tax (HJR 85, Measure 50) and modifying state prison industries (HJR 2). Appropriates $753,888 to cover costs of election.

None.

Partially implements Measure 50.

See SB 1215.

Replaces existing constitutional property tax limits, except for Measure 5.

Requires 17% statewide cut of operating property taxes in 1997-98. Exempts bonds, hospital districts, some police and fire retirement fund taxes, and levies for 1996-97 and later that met Measure 47 voting requirements. Distributes statewide cuts to reflect Measure 47 cuts while recognizing new levies.

Limits 1997-98 assessed value of each property to its 1995-96 market value less 10%. Limits growth to 3% thereafter. Allows additions to value for new construction, subdivision, rezonings, omitted property, and loss of exemption. Adds new value at the ratio the average assessed to market value of existing property in the same class and area. Applies similar limit to farm use and other special values.

Establishes permanent rate limits for each taxing district based on reduced levies and new assessed values. The fixed rate and 3% value cap limit the tax on each existing property to 3% growth.

Allows voters to approve new levies outside the rate limit (but not over Measure 5's rate limits). Limits operating levies to five years. Limits capital project levies to 10 years or the useful life of the project, which ever is less. Allows voters to establish permanent rate limit for district not imposing property tax.

Requires levies outside the rate limits, new rate limits of previously untaxed districts, and bond levies outside the Measure 5 rate limits to be approved at the general election or an election with a 50% turnout.

Requires Legislature to limit local ability to raise fees to make up cuts made by this measure unless approved by voters.

Applies Measure 5 rate limits ($5 per $1000 of real market value for schools and $10 per $1000 for non-schools) by code area rather than property-by-property. Allows property assessment date to be moved back to January 1. Requires value reduction of property suffering significant casualty loss.

Returns hybrid urban renewal system to one dedicating all taxes on growth in renewal area to the urban renewal district. Allows district to impose taxes above tax increment to repay debt of existing plans.

Requires the state to replace school revenue lost due to the 17% cut.

Allows HJR 85 implementing statute to take effect immediately.

See SB 1215.

Amends Oregon Constitution to eliminate 50% turnout requirement on property tax elections.

Submits question to voters at the May 1998 primary election.

Local: Indeterminate. Eliminating the requirement makes it easier to pass property tax levies. Thus voter approval of the measure would probably increase revenue. However, there is no reasonable way to estimate the amount.

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LEGISLATIVE REVENUE OFFICE