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Friday, May 4, 2012

Is City of Portland school bailout plan unconstitutional?

We need some education here, folks -- no pun intended. We thought that Measures 5 and 50, which are part of the Oregon constitution, put an absolute cap on how much property tax revenue can be raised for public schools. And we thought that the school districts had reached that cap. If that's true, how can the City of Portland simply write a check to school districts for $7 million plus, out of the city's general fund, for basic school programs such as teacher salaries? Isn't the city's general fund fueled by property taxes? And so doesn't the city subsidy violate Measures 5 and 50?

Can anybody out there straighten us out on this? Please use plain English, if that's possible. We're all ears.

The other aspect of the school bailout proposal that raises concerns is the mayor's idea of leaving the money in cash at the City Hall reception desk for the school superintendents to come in and pick up.

Comments (27)

Great closing line, there!

I can't remember the case name, but I have a recollection that there was a veru similar argument made in Lane County several years ago about a "fee" that Eugene was imposing. The Court (can't remember if it was Oregon Supreme or Oregon Court of Appeals; I do know it wasn't the Oregon Tax Court) held that the fee was a "tax" and exceeded the Leasure 50 / 47 limits and was void.

Maybe 4 - 6 years ago?

Jack, you have better access to online Wedst law type stuff. Can you find it. I also vaguely think it had to do with EWEB - Eugene Water and Electric Board ????

We do know part of city's general fund comes from water and sewer "Utility License Fee", so another non-mission spending item could be added to lawsuit from John DiLorenzo.

Found it.

Amazing case, just about on point on all facts and issues with Sam's proposal.

Urhausen v. Eugene, 341 Or. 246, 42 P.3d1023 (2006). Opinion by CJ DeMuniz, rfeviewing a lower Tax Court decision.

Eugene's plan to spend City general fund dollars to support local schools unconstitutional.

Text of opinion at:,6&as_vis=1

Watch the line wrap, that's a looong URL.

In the Eugene case, I recall that it might have had something to do with their Library funding. At least there was a major controversy about library funding.

Both Sam the Scam and Dan the Legend have alluded to higher than expected business license fee revenues. They may be able to use their colors of money story to say that it's not coming out of property taxes.

I am just guessing but I think there are merits for a legal suit against the city for such maneuver. To be effective in stopping this plan, there may only need to be merit. Because then it becomes a question as to whether the city and school district are willing to set away funds for a legal ruling against the plan.

The Oregonian doesn't question the legality of the plan, and seems to infer there are cases of city governments making contributions to schools (where there's no explicit imposition of a property tax for funding such contribution).

The merits for bringing a case against the plan would be to show Portland city property tax revenues are fungible, and therefore, are involved in at least partly funding the plan. This would be a violation I very much believe of the constitutional property tax limits. The city would have to prove property tax funds are not effectively being used.

I am conflicted on this one. On the one hand, Portland Public Schools' average teacher compensation package is way too generous, as it now approaches $100k per year. So, in essence what we have is much of the same: Funding of Portland Public Schools is not going towards the hiring of new teachers but rather compensating existing teachers with over generous compensation.

On the otherhand, if the city of Portland is giving the money away on schools, it may be just switching one type of wasteful spending for another type of wasteful spending. I should know better, though. Most likely the city will be looking to impose some new fee or non-property based tax to fund this expense. Or, it may stretch road repair out another 5 years so as to neglect its basic maintenance function for a decade or more.

Meanwhile, we plebs are told to please not give up on things like the Oregon (financially un)Sustainability Center or the Convention Center Hotel. And especially don't give up on the decade's long promise of a wave of non-government "green" jobs. If we bleed our public coffers enough, maybe they'll come for more than a cup of coffee; or maybe they won't (keep the faith, plebs).

Hey, I love the Sam Adams' end date clock. Wonderful, BoJack addition.

Figured you would enjoy this personal experience... So I follow the mayor on Twitter just to antagonize him and see the crazy side up close and personal. Yesterday afternoon after he starts touting his new 7.5 in found sofa $$$ I send him...

Me: "yeah, by jacking up my water rates, not paving roads, and paying for frivolous mass transit nobody uses..."

Now this is not the first time i have pestered him by any means, but today I finally get a response, which to me only made it funnier.. He sends me the link from the O that is basically kissing his ass...

Sam: Also, Water rate increases now down abt 3%, I cut manager positions to add back maintenance workers

So what am I to surmise from this? 2 things we have known all along he only listens to the people that agree/control him, and the O is completely incapable of asking tough questions for the benefit of the citizenry. Less of an increase is still a burden on me and my household, but that's ok because it's less than he threatened earlier? He gets to "find" 7.5 million for PPS AND wants me to feel ok about it because somebody else in another department gets fired?

Yeah that makes sense..... Here's an idea, why don't we just stop funding/subsidizing the stuff nobody else in the country is stupid enough to pay for. But that's an answer we will never see.

from Shilo Inn v. Multnomah County:

"A portion of the taxes assessed against those properties was levied by extending the school taxing districts' rates, but was disbursed to an urban renewal agency. Although that portion was not used "to fund the public school system,"

Kinda reminds me of that Qwest? bundling commercial on the tube - the one where "they're robbing us blind" and thanking the robbers.

Sorry all you l ... er... professionals out there, I know it's only your job, but how can it be ok to participate in this community rape.
Is it a case of somebody's going to do it -it might as well be me? Or maybe I just can't see the big picture? Or that's just the way the system works?

It seems that the professional class keeps getting increasingly creative in ethics and interpretation.

Nothing personal - just an observation from the bottom.

You might be able to derail this boondogle by making a complaint to the Tax Supervising and Conservation Commission.

It looks like in the Eugene case they were trying to use a special levy, while Portland is just going to the general fund. No idea of the legality.

Frankly, I'd like more of my taxes to go to schools and less to the city (since they barely provide services anyway). So if the city wants to just do a direct transfer to the schools, I may just look the other way on this one.

Many more egregious practices to sue the city over before this one. (my opinion)

The City cuts services in the current budget - Police, Fire, Parks, Transportation. And they take the money from those cuts and hand it over to the Schools? Sorry, education is not the City's job. The City needs to focus on its business, and the State needs to fix the friggin education system.

More important question: What will the city expect in return?

I'm not with PPS any more, but I do remember the Eugene case and am (somewhat) familiar with the Shilo case.

In the Eugene case, the city voters approved a local option property tax levy, the bulk of which directly funded in-school classroom activities in the two local school districts: "school-based instruction in music and physical education; school-based counseling; school-based nurse services; school-based library services; and high school or middle school athletics and student activities." (From the ruling.)

At the time of the ruling, my sense was that was how the levy and its use violated Measure 5: Property taxes levied explicitly for educational purposes, even if levied by the city, should fall under the $5 per $1,000 educational tax rate limit, not the $10 per $1,000 local government tax rate limit.

The Shilo ruling dealt with the reverse: Urban renewal tax increment financing collected based on the underlying education district's approved tax rates. In that case, even if it is a school district's tax rate generating the TIF, the taxes collected must be considered "local government" revenue under Measure 5.

I expect the city's current proposal is perfectly legal, even given those rulings, for at least two reasons:
1) The city could pay for school district costs that are not direct classroom expenses, such as security, afterschool activities, grounds maintenance (all of which it can be argued are legitimate interests of the local government, which after all provides similar programs through parks, SUN school programs, police, etc). Money is fungible, and if those costs were covered, the school district would have more of its own money to maintain teaching positions.
2) The city's general fund is fed not only by local property taxes, but also by business license fees, which do not fall under the Measure 5 cap.

This current city proposal is thus very different from the Eugene situation, where a local option levy was passed explicitly to pay for the in-classroom expenses of the local districts.

Jack's the tax law prof and I'm just an amateur. But that's my understanding!

1) The city could pay for school district costs that are not direct classroom expenses, such as security, afterschool activities, grounds maintenance (all of which it can be argued are legitimate interests of the local government, which after all provides similar programs through parks, SUN school programs, police, etc). Money is fungible, and if those costs were covered, the school district would have more of its own money to maintain teaching positions.

That's expressly not what they're doing. Read today's paper. Lots of things could happen, but what you describe isn't what's going on.

The city's general fund is fed not only by local property taxes, but also by business license fees, which do not fall under the Measure 5 cap.

Maybe that theory will work. But it would be cleaner if the city set up some separate accounts to funnel the business taxes straight to the schools. Then again, that might very well be taboo under some of the city's current bond documents.

I'm not with PPS any more

BTW, did you ever pay your $75?

They've been running for years on the theory that nobody who has the resources to take them to court over it will consider it worth the time commitment, which is huge. All you people who turned up your noses and were too cool to sign the recall petitions have nobody to blame but yourselves.

The city is allowing PPS not to lay off teachers. They can do that by paying for non-classroom expenses, allowing PPS to shift funding to pay for teachers. The end result is the same -- teachers' jobs saved, as per the coverage -- but the accounting is important.

And thanks for asking about the elections complaint. Of the 11 originally found in violation, four of us appealed (including two graphic/web designers who were not fined and thus were told they had no right to appeal). The state immediately folder on the two designers -- rescinded the finding of violation. Katie Essick and I had two days of hearings this winter before the administrative law judge. The primary issues were our specific roles around the various documents found in violation, and the various documents' level of impartiality. The hearing was delayed from last fall as the compliance officer in question unexpectedly retired. Still awaiting the judge's recommendation to the Secretary of State, and her decision of whether to accept it.

"folded" not "folder." Sorry.

They can do that by paying for non-classroom expenses

Even if that's true -- the Children's Levy carefully danced around to avoid Measure 5 -- it's simply not what the mayor has announced.

Still awaiting the judge's recommendation

Were you represented by legal counsel? If so, who paid for the lawyer?

Sarah CA - we know you're not with PPS anymore - you work for the gov on education - but why did Carole Smith list you as one of admin people she was cutting "to save budget dollars" when you don't even work there any more ...makes no sense...thanks.

More important question: What will the city expect in return?

Support for their agenda.
Not to make a fuss over their debt/spending or the URA's that take money from the schools.
Votes for certain ones.

All you people who turned up your noses and were too cool to sign the recall petitions have nobody to blame but yourselves.

Some of us knew what would happen and we also know what will continue to happen if we let the same types in those council seats. It is almost unbearable to think about it.

"The primary issues were our specific roles around the various documents found in violation, and the various documents' level of impartiality. The hearing was delayed from last fall as the compliance officer in question unexpectedly retired. Still awaiting the judge's recommendation to the Secretary of State, and her decision of whether to accept it..."

So the good ol' boys have got your back?

Jack: Nancy Hungerford represented us, pro bono. PPS didn't pay for counsel.

Links: I was on leave from PPS to take a temporary job in the Governor's Office, and expected to return from leave in April. In March I found out that I could, indeed, return to PPS in April, but then I would be laid off as of July 1 when my position will be eliminated under the budget cuts (that's what you read in the paper). I haven't returned to PPS (may never) and have extended my stay in the Governor's Office for another couple months. So my job was cut and I will not be replaced. It is a little confusing.

Mister Tee: Not sure who the "good ol' boys" are that you're talking about. Kate Brown found us in violation, and the AG's office represented her office in the appeal hearing.

As bilbo mentioned, monies given to the school districts will result in City lay-offs. That could be a good thing if those laid off were managers, planners, mayor's staff etc. but we all know it will be park and maintenace workers, support staff and so on who lose their jobs.

Is this why Sam told all the bureas to submit cuts of 4%, 6% & 8%?


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