TVF&R warns local governments property tax compression will ...

Tualatin Valley Fire & Rescue is taking the lead in warning government agencies statewide about property tax compression, a once abstract economic threat that is now taking a very real toll on local budgets.

Property tax compression is what makes the following scenario possible: A resident could vote for a local option levy, perhaps even campaign for it, but unknowingly and legally contribute no property taxes toward it. Such is the result of Measure 5, a 1990 measure intended to cap property taxes that, combined with the recent decline in real market values, is reducing the amount some taxpayers give, especially to local option levies.

TVF&R relies almost entirely on property taxes, so it has taken particular notice.

In 2011, TVF&R chief financial officer Debra Guzman and staff launched a broad study of property tax compression in cities and counties statewide. It's not the first study of its kind, but illustrating compression in areas with geographic information systems mapping ? the same technology TVF&R uses to respond to emergency calls ? was novel.

"We are completely about property taxes," Guzman said. "So we have to think long-term. And when we started looking at compression, it was pretty striking and we thought, 'wow, we've got to find a way to share this information ... and demonstrate what is a very complex problem.'"

TVF&R has shared the study with the state Legislature, various counties and cities across the state, and, most recently, in a presentation before the Washington County Board of Commissioners last week. TVF&R and Washington County are not the most hard-hit by compression, counties such as Deschutes are experiencing much sharper declines in property taxes, but the presentation nevertheless spurred a nearly hourlong conversation about the future of compression in the county. The idea that local option levies could be competing for funds from a decreasing property tax pool was of particular concern.

"We really don't want to get to a place where services people need are fighting for funding," commissioner Bob Terry said. "What happens then?"

Local option levies are the first hit when property tax compression occurs, thanks to Measure 5, which set a $5 limit for education and $10 limit for government taxes per $1,000 of real market value.

A second rate is also calculated on every property, the assessed value multiplied by the tax rate. The lesser of the two rates determines a person's property taxes.

The system worked in the 1990s, when the assessed value rate was almost always the lower of the two, according to Rich Hobernicht, Director of Washington County's Assessment and Taxation department. But with the bursting of the housing bubble in 2008, real market values started falling and Measure 5 began to prove the most limiting in some cases.

When that happens, compression occurs -- and local option levies are the first to lose funding, followed by permanent rates.

Educations districts completely or partially inside Washington County were the most affected by Measure 5 compression in 2011, losing almost $6.7 million. Other government agencies in Washington County lost about $79,000 during the same period.?

The issue has gathered particular momentum during a campaign season when many state senate hopefuls are including some variation of tax reform as campaign centerpeices. Ginny Burdick, D-Portland, chairs the Senate Finance and Revenue Committee and has made comprehensive tax reform a talking point.

Simply excluding local option levies from Measure 5 limitations would be a good start, Guzman said.

"We need to try and tackle this somehow," Guzman said. "And that has been the response we get from a lot of politicians when we show the presentation." ?

- Katherine Driessen

Source: http://www.oregonlive.com/washingtoncounty/index.ssf/2012/10/tvfr_warns_local_governments_p.html

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