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This page contains a single entry from the blog posted on September 2, 2005 2:04 AM. The previous post in this blog was Nightmare. The next post in this blog is Eerie. Many more can be found on the main index page or by looking through the archives.



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Friday, September 2, 2005

It isn't just Measure 47

Yesterday's In Portland magazine (inside The O) blasted Oregon's property tax system, pointing out the unfairness of comparative tax levels for houses in different parts of town. The story lays the blame on bad old Measure 47 (Son of Measure 5), which essentially froze property tax assessed values in 1995, allowing them to rise only 3 percent a year. Unlike in some other places, the tax assessments don't change when the property is sold. And so if you live in a neighborhood where the real market appreciation has been huge since 1995, you get a tax break compared to a neighborhood where the appreciation hasn't been so great. The "hot" neighborhoods get taxed on assessed values way below market reality, whereas in declining neighborhods, the assessed values and market values are relatively closer together.

Fair enough point, and Willamette Week Lite did a pretty decent job with the story. Even ran photos of Super Vicki and her modest home -- I suspect she'll eventually wish they hadn't done that, although she appears to have cooperated with the article, furnishing a quote that supported the author's obvious point of view.

But there's more to our property tax weirdness than the effect just noted. As the recent rounds of discussion here about the now-rejected tax abatement for the Alexan apartment tower revealed, the process of assessing new construction has some reality detachment as well.

The tower was going to cost $60 million to build, but the city was projecting property taxes of only $750,000 a year, which is another way of saying the assessed value was going to be only around $34 million, by my calculations. How does that happen? If it costs $60 million to build the thing, that's surely the best indicator of its market value on the day it opens. So how does the initial assessed value of the new building get cut down to just over half of that? Surely that isn't a function of Measure 47, is it?

The Alexan saga has spun off several new avenues that I've got to explore when time permits. That one is high on the to-do list.

Comments (9)

Right on Jack,

I had sent the same spreadsheets to the "O" I sent to you asking why? We need to give them KUDOS for at least responding, and they did publish my letter to the editor comparing the tax allocation for services. I have met some of those folks over the summer, and got the gut impression at least some of them are sincere with their heart in the right place. We certainly need to start a public discussion on how we reform the tax system.

The "3 percent illusion" and "A short history of property tax measures" in that same article says it all, and lets you understand my favorite question "who benefits". It seems the Unions and Developers got themselves exempted in 1997 with a "clean up measure drafted by the legislature that clarified and implemented measure 47. Exempted urban renewal taxes and Portland's Police and Fire disabiltiy pension levy from the cuts."

Why not schools, why Developers? Kind of shows you who has the influence in Salem.

It is a function of Measures 47 and 50. The property tax statutes say in effect that new construction gets the same break as its neighbors. So if you build something in an area (and "area" has a special meaning here) where buildings are assessed at an average (say) of 65% of real market value, your new building will get assessed at 65% of real market value also.

"the tax assessments don't change when the property is sold."

I thought when you bought a new house now the assessed value went up to the purchase price (or close.) At least my friends who bought new houses are paying at a rate close to their purchase price. This is like they used to do with adjusting the basis for the IRS on cap gains before when you made a house sale.

Amazing how a 3%/year tax increase when inflation has been below that is still not enough for government.

If we had allowed prop taxes to increase like government wanted think of all the senior citizens who would have to leave their houses they have lived in for 40+ years due to property taxes.

As I recall, Randy Leonard was an active participant in the rewrite of Measure 47 into Measure 50.

Great analysis, Jack.

BTW, if you ever cross paths with Don McIntire, I encourage you to ask him about the M47/50 mess. He passed M5 to limit property taxes but did not support M47 and actively opposed M50.

McIntire contends that M5 had eliminated the bulk of urban renewal subsidies going out to developers, but that Sizemore ruined everything by passing a clumsy measure to curb property assessment increases (M47) and then allowed the lobbyists and legislators to completely game him with the fix (M50).

In 2000 my spousal unit and I bought a house that happened to have been reassessed in 1995 in the aftermath of some post-fire reconstruction. It was a crappy house in a lousy part of Humboldt in North Portland. The Piedmont area just north of it had begun to grow very nicely, as had parts of the Humboldt area to the east. But most of these houses had not been reassessed. They had started to sell like hotcakes, and as I walked the neighborhoods and collected all the real estate flyers, which included tax information, I was astounded to find that at about $2400/yr we were paying, for our $150,000 house, substantially more than houses that were selling for prices way higher, even double or more.

Who knew that "luck of the draw" had landed us a greater-than-usual contribution to the city coffers? It was a question that in the purchase (moving back to Portland from farther north) it had never occurred to us even to ask.

For a variety of reasons we were thrilled to sell that house. I was crossing my fingers that the next poor sucker would be as ignorant as we had been.

I tried and failed to interest someone at The Oregonian to take on the monstrous task of approaching this property-tax-disparity story. I'm glad it has finally been done. It makes no sense, the way it is currently laid down, and it certainly generates inequities and resentments.

That's not even counting the obscenity of the rich-downtown-condo near-total abatements.

I tried and failed to interest someone at The Oregonian to take on the monstrous task of approaching this property-tax-disparity story. I'm glad it has finally been done.

There's a lot more story to tell. The consistent underassessing of major downtown properties. The Fox Tower, for example, currently assessed at $50 million less than its "real market value"...a disparity that's been in place since it was built a few years ago. Well over a million dollars a year in property tax savings for Tom Moyer...and no special abatements needed.

You know, this effectively comes down to taxing adjoining properties at different rates, based on largely arbitrary standards. I buy a 2000 square foot home on 1/6 acre, it's taxed at 1.313% of real market value. My neighbor buys the 2000 square foot home on 1/6 acre right next door, it's taxed at 0.6712% of real market value.

I wonder if a state can justify this kind of tax disparity between similarly-situated property owners under the 14th Amendment's equal protection clause? Anyone know if any federal appellate court has ruled on this question?


Thanks for posting this. I was out of town (APSA meeting) when this story came out. It doesn't make me feel particularly good since I live in Eastmoreland, apparently one of the highest taxed areas (proportionally), since it was "hot" prior to 1995.

It does explain the disparities that I have noticed when I look at some for sale ads.

What PDX and MC and OR may not realize is that it is disparities like these that makes it so hard for people to support new taxes, even while our school situation is so dire.


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