Item B: Youth/School-Based Services Local Option Levy

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Litigation History The current levy has been challenged in Tax Court in the Urhausen v. City of Eugene case, where the petitioners asserted that the portion of the levy used to fund youth services provided by 4J and Bethel (93% of levy) should be counted as part of the Measure 5 tax rate limit of $5 per $1,000 of assessed value for schools rather than as part of the general government $10 tax rate limit. On February 16, 2006, the Tax Court agreed with the petitioners that Measure 5 requires the 93% to be counted toward the $5 limit. The court directed the City to refund the excess collected under the $10 limit to the three petitioners and to categorize the portion of the FY07 levy used by the 4J and Bethel districts under the $5 tax rate limit for schools. According to analysis by the Assessor’s Office, if the 93% portion of the current year tax levy had been levied in accordance with the Tax Court ruling, 4J would have lost approximately $2.5 million and Bethel about $0.2 million to Measure 5 compression. Because 4J has its own local option levy under the $5 education limit, they would have lost an additional $1.6 million due to compression on their local option levy. The 7% portion of the local option levy (used by the City to directly fund youth services) is not affected by this ruling. The chart below sets out the estimated revenues before and after the Tax Court ruling for the current tax year. Gross Levy Before Gross Levy After Amount Lost to Court Decision Court Decision Compression 4J – City Levy $6.4 million $3.9 million $2.5 million Bethel – City Levy $1.3 million $1.1 million $0.2 million City’s portion – City Levy $0.6 million $0.6 million -- Total – City Levy $8.3 million $5.6 million $2.7 million 4J Local Option Levy* $11.1 million $9.4 million $1.6 million Source: Lane County A&T *Amount shown before court decision is the gross levy less compression, prior to the Urhausen decision. In April, the City filed an appeal with the Oregon Supreme Court. At the same time, the City asked the court to establish an expedited process to review the case. The Supreme Court agreed to the expedited appeal. The reason for the expedited review request was to attempt to have the Supreme Court make a final ruling on this case prior to certifying taxes for FY07. The oral arguments are scheduled for June 19, 2006, under the expedited schedule, which would give the court more than two months in which to issue a decision (if favorable) in a time frame that could preserve the entire levy for FY07. This is the latest that the City could receive a ruling and certify the FY07 taxes prior to the September 1 extended certification deadline. The Supreme Court’s acceptance of the expedited schedule does not guarantee, however, that the court will rule within that time frame. As a result of the uncertainty from the legal challenge to this levy, the FY07 budget included a contingent categorization of this tax. In the event that the Supreme Court overturns the Tax Court ruling, the City will certify the levy under the $10 general government tax rate limit. If the Supreme Court has not ruled by September 1, or if the Supreme Court upholds the Tax Court ruling, the City will categorize the levy in accordance with the Tax Court ruling. Current Services Youth services currently provided directly by the City include prevention-based programs, such as the Fun For All program, RecZone After-School Programs, Youth Leadership and Community Service Opportunities, Summer Swim and Water Polo League, and special neighborhood events. In addition, L:\CMO\2006 Council Agendas\M060626\S060626B.doc