Item A: Measure 37 Givings Tax - Laserfiche WebLink

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all properties (developed and undeveloped), it is likely that someone would challenge the tax as being a Measure 5 tax. We would argue that the tax was not imposed as a “direct consequence of ownership,” but instead, as a direct consequence of having increased in value. This would be a close legal question. Depending on whether the fee was imposed on an annual basis, imposed only for properties that had been or are being developed, or imposed only when some other event triggers the tax, the likelihood that the City would prevail would vary. Should the council direct further work on this option, as part of that additional work, the City Manager would intend to schedule an executive session with the council to allow the City Attorney to discuss the legal risks in more detail. ORS 306.815 preempts the council’s authority to adopt a “real estate transfer tax.” More specifically, that provision states that a city cannot impose “a tax or fee upon the transfer of a fee estate in real property, or measured by the consideration paid or received upon transfer of a fee estate in real property.” Preliminary research into the legislative history of this preemption suggests that the preemption is focused on preventing local governments from using non- discriminatory real estate transfer taxes as a general revenue raising tool; other fees or taxes imposed as a result of development, or other activity taken with respect to the property do not appear to fall within the preemption – as long as they are not imposed as a prerequisite to transferring the property to another person. 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? Administration and calculation of a capital gains type tax would depend significantly on whether the council chose to impose the tax annually on all property where value has increased, or only upon some triggering event. For either choice, the council would need to establish the rate of the tax as well as the factors that would be used to calculate the “increase in value” upon which the tax rate would be imposed. For example, would the tax be imposed on the entire difference in value (assuming a positive number) between the value from one year to next (assuming annual tax), or from one trigger event to the next? Or, would the City deduct from that difference in value items such as new investment and inflation? If the council chose to impose the tax annually, the City would need to develop an administrative assessment mechanism that would enable the City to determine (1) whether property increased in value, (2) if so, by how much, and (3) the amount of the tax. In addition, the City would need to develop a billing system (or contract with another entity) to send out the bills, monitor who has paid, and pursue collection on those who failed to pay. If the council chose to impose the tax upon some triggering event, the administrative mechanism probably would depend upon the nature of the triggering event. For example, if the triggering L:\CMO\2006 Council Agendas\M060125\S060125A.doc