Our County

The 1997 Legislature drafted Measure 50 in response to the passage of citizens’ initiative

Measure 47 in November 1996. Measure 47 would have rolled back property taxes (not assessed

values) to 90 percent of the 1995–96 level for each property in the state. Measure

47 was repealed by Measure 50. This legislatively-referred measure was drafted to correct

a number of technical problems with Measure 47 while replicating its tax cuts.

The objective of Measure 50 was to reduce property taxes in 1997–98 and to control their

future growth. It achieved these goals by cutting the 1997–98 district tax levies and by

making three changes: switching to permanent rates, reducing assessed values, and limiting

annual growth of assessed value.

While Measure 5 simply limited the tax rates used to calculate taxes imposed, Measure 50

changed the concepts of both assessed values and tax rates. Assessed value is no longer

equal to real market value. For 1997–98, the assessed value of every property was reduced

throughout the state, this change had varying impacts. Properties that had experienced

the greatest value growth between 1995–96 and 1997–98 received the greatest cuts

in assessed value, and consequently in taxes. For new property that did not exist in 1995–

96, such as business personal property or improvements, the assessed value was calculated

as a percentage of its market value.

For existing property, Measure 50 limited the annual growth in assessed value to 3 percent.

This limitation made predicting future assessed values much simpler. For new property

(e.g., newly constructed homes), assessed value is calculated by multiplying the new

property’s real market value by the ratio of assessed value to real market value of similar

property. This approach to assigning values to a new property assures that it is taxed con

until it reached a rate of $5 per $1,000 assessed value in 1995–96.

sistently with similar existing properties. Measure 50 also stipulates that assessed value

may not exceed real market value. As a result, if the real market value of a property falls

below its assessed value, the taxable value will be set at the real market value.

Prior to Measure 50, levies were set by local governments and voters, and tax rates were

the result of dividing levies by assessed value. Under Measure 50 most levies were replaced

by permanent tax rates, making the permanent rates central to the property tax

system. There are three types of property taxes that taxing districts may impose: taxes

are fixed; they do not change from year to year. Bond levies typically are approved in terms

of dollars, and the rates are calculated as the total levy divided by the assessed value in

the district. Local option levies may be approved either in rate or dollar terms. If the local

option levy is in dollar terms, then rates are calculated the same way as for bond levy

rates.

Taxes from the permanent rates, typically referred to as operating taxes, are used to fund

the general operating budgets of the taxing districts. They account for the single largest

component of property taxes. Strictly speaking, the permanent rates are rate limits, so

districts may use any rate up to their permanent rate.

Local option taxes represent the only way taxing districts can raise operating revenue beyond

the permanent rate amount. Even so, these taxes are the first to be reduced if the

Measure 5 limitations are exceeded. Because voters at the local level must approve these

levies, they represent one aspect of local control over the level of property taxes. All districts

except educational service districts (ESDs) are authorized to levy local option taxes;

2000–01 was the first year that school districts were able to use them. Measure 50 requires

that local option levies in elections other than general elections be approved by a

majority of voters with at least 50 percent of all registered voters actually voting.

Bond levies have remained largely unchanged. They are used to pay principal and interest

for bonded debt. Under the provisions of Measure 50, new bond levies, like new local option

levies, are subject to a 50 percent voter participation requirement if the election is not

a general election.

Some taxing districts receive timber tax revenue. This revenue, known as an offset, actually

reduces the amount of revenue that districts may raise from their permanent rates.

Only county government districts reduce their permanent tax rates when they receive offset

payments. When schools receive timber tax payments, it is in addition to what they

raise through property taxes.

Under Measures 5 and 50, the state was required to compensate schools for losses in tax

revenue due to changes in each ballot measure. In both cases, the effects of the requirements

were negligible since the Legislature appropriated more than the required amount

each biennium. Under Measure 5, losses from tax compression were required to be replaced

through 1996, but the state was not required to continue the level of Basic School

Support that it had provided to school districts prior to Measure 5. The replacement revenue

requirement ended up being partially offset by reductions in other Basic School Support

funds that were no longer mandated. Measure 50 also contained a constitutional

requirement that the Legislature replace school district revenue lost due to the Measure 5

funded with the operating taxes of districts. The pension levy represents an ongoing obligation the City of

Portland has to its fire and police forces. Both of these eventually will become part of the permanent rate for

their respective districts.

rate limits. This requirement likewise has had a minimal effect on actual state school

funding because the school revenue compression losses under Measure 50’s lower tax environment

have been smaller than the amount of Basic School Support provided by the