Item 2G: Approval of Construction Excise Tax

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ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Approval of Construction Excise Tax – Bethel School District Meeting Date: February 25, 2008 Agenda Item Number: 2G Department: Central Services, Finance Division Staff Contact: Larry Hill www.eugene-or.gov Contact Telephone Number: 682-5722 ISSUE STATEMENT Bethel School District 52 has passed a resolution regarding a new Construction Excise Tax. The district has asked the City of Eugene to engage in discussions towards an intergovernmental agreement under which the City would collect the tax on behalf of the district and remit the proceeds to the district. It is possible that similar requests may be made in the future by Eugene School District 4J and Junction City School District. All three school districts include territory that is within the city limits of Eugene. BACKGROUND In 2007 the Oregon Legislative Assembly passed and the Governor signed SB 1036, relating to local government construction excise taxes. SB 1036 prohibits any local government, except school districts, from imposing a tax on the privilege of constructing improvements to real property. School districts are specifically permitted to levy these taxes, but only for capital improvements within a long-term facilities plan and only within certain restrictions. Improvements to agricultural buildings, private school, hospitals, religious facilities, low-income housing and public improvements may not be taxed. The tax may not exceed $1 per square foot for residential structures, nor may the tax exceed $0.50 per square foot for nonresidential structures up to a limit of $25,000. SB 1036 provides that construction excise taxes levied by a school district may be collected by one or more other local governments under intergovernmental agreements (IGA). Logically, these would be the local governments that issue building permits for the territory within the school district. Once agreement is reached these governments would then act as agents for the school district, collecting the tax and remitting the revenue to the district. SB 1036 does not require local governments to collect the tax. Collection would be pursuant to an intergovernmental agreement that the local government voluntarily enters into with the district. A government may decline to agree to collect the tax. In December, the governing board of Bethel School District 52 adopted a resolution to implement a construction excise tax. Bethel will need IGAs with both Eugene and Lane County in order for the tax to be imposed and collected equitably across the district’s territory. Bethel is currently negotiating towards an IGA with Lane County, and Eugene staff is following these negotiations. The City of Eugene cannot collect the tax unless Lane County agrees to as well. F:\CMO\2008 Council Agendas\M080225\S0802252G.doc