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ATTACHMENT C OPTION 3 – Tax on Increases from Legislative Changes Description: When the council adopts changes to land use regulations or plans, depending on the nature of those changes, it is possible that the changes reduce the fair market value of particular properties, but it is equally possible that the changes increase the fair market of certain properties. For example, if the council amends the land use code to expand the types of uses allowed in a particular zone, or relaxes a height or setback restriction, or increases the maximum density for a particular type of zone, the value of certain properties may increase. This option would involve imposition of a tax on the increase in fair market value resulting from an ordinance that amends the land use code or makes a legislative change to the Metro plan or to a refinement plan. Is the fee/tax legally permissible, or somehow preempted (by statute or constitution)? As noted previously, the City’s home-rule powers authorize the council to adopt any type of fee or charge that is not preempted by federal or state law and that does not violate the U.S. or Oregon Constitutions. Neither the Constitution nor state statutes would preempt the council from adopting such a tax or fee. Therefore, the council has the power to enact a tax on the increases in fair market value resulting from legislative changes to the land use code or to land use plans. Would voter approval be required before adopting the fee/tax? No. Generally, voter approval is required only for certain taxes that are imposed on real property and subject to the limits of Measure 5. Other types of taxes (like the City’s telecommunications privilege tax, or an income tax or gross receipts tax) do not require voter approval. (In certain counties and cities in Oregon, the home-rule charter may include a provision that requires voter approval. Eugene’s Charter does not.) However, since the tax would be adopted through an ordinance, it would be subject to referendum. How would the fee/tax be administered and calculated? In order to impose this type of tax, the City would need to make two sets of determinations. The first set determinations would be policy decisions to be made by the council. The second set would involve administrative decisions, presumably made by staff or a hearings official. First, the council would need to determine the amount of the tax that would be imposed. Like the first two options, the tax could be a specified percentage of the increase in fair market value. This rate could be structured a number of different ways. The simplest way to structure the rate would be as a straight percentage of any increase in value; for example, the tax could be 25% of the amount that the property increased in value. More complicated structures could include exempting a certain portion of the increase and taxing the remainder. In this latter alternative, the council could structure the tax as follows: determine the increase in value, deduct from that L:\CMO\2006 Council Agendas\M060125\S060125A.doc