Item A: Measure 37 Givings Tax - Laserfiche WebLink

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ATTACHMENT B OPTION 2 – Tax on “Local Improvements” Description: The City undertakes public improvements that increase the fair market value of property. Some of the time, the City creates a local improvement district and assesses the benefited property owners the cost of the improvements. Occasionally, the City makes an improvement and pays for that improvement with other public funds, and does not require the benefited property to pay for the improvement. For example, the City may purchase property for and develop a park, or may purchase property for open space. Some of these improvements may increase the fair market value of nearby property. The “local investment” tax would involve taxing that increase in fair market value. Is the fee/tax legally permissible, or somehow preempted (by statute or constitution)? As noted above, 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 these increases in fair market value attributable to improvements by the City (or by other governmental entities). 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.) The tax 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 several determinations. First, the City would need to determine whether a particular public improvement was likely to increase the fair market value of property. If so, the City then would need to determine which properties actually increased in value and by how much. Following those determinations, the tax (presumably a percentage of the increased value) could be calculated and imposed. The council could require that collection of the tax occur immediately, or be delayed until the property is transferred. The City likely would need to rely on certified appraisers in order to determine whether property increased in value as the result of a public improvement, and if so, by how much. A property owner would have the right to challenge the City’s determination (including going to court to contest it); therefore, the City would need to have substantial evidence to support its L:\CMO\2006 Council Agendas\M060125\S060125A.doc