Item 5: Ratification of IGR Actions of Feb. 27, and Mar. 6, 2013

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Voter Control Referral SJR 10/HJR 8 Description The League’s proposed constitutional referral would allow local voters the ability to consider a temporary tax outside of compression. The referral would not raise anyone’s taxes, but would empower voters to authorize a tax for local operations. Background Under Oregon’s current system, statewide limitations can prohibit local voters from having the ability to raise their own taxes to support services they demand. Measure 5 limitations restrict general governments (cities, counties and special districts) and schools to levying no more than $10 and $5 per $1,000 of real market value respectively. Any taxes levied in excess of those limitations are reduced until the limitations are met, a process known as compression. Temporary taxes that are in addition to the municipality’s permanent rate that are approved by voters to provide funding for operating expenses are compressed first under this system. As a result, voters residing in a municipality in compression are limited in their ability to raise revenue to support services they desire. Example Sweet Home, a timber-dependent community of roughly 9,000 residents in Linn County, has a low permanent tax rate for a city of its size. As a result, the city has provided essential police protection and library services via voter- approved temporary taxes since 1986. In 2010, voters in Sweet Home approved these temporary taxes with 60 and 55 percent of the vote respectively. However, Linn County has its own voter-approved temporary tax that competes against Sweet Home’s, and property values in Sweet Home have fallen in recent years. As a result, temporary tax revenue losses due to compression have increased from $300,000 to $730,000 – nearly a third of what the levy was supposed to collect. As a consequence, the public safety and library services are not being provided at the level local citizens wanted. Statewide Impacts DEOH6WDWHZLGHFRPSUHVVLRQORVVHV 7 Compression is becoming a growing problem for local governments statewide. Since 2008-09, total revenue lost to compression has increased from $51 million, or ͚͙͙͙͚͘ȋȌ ͚͘͘͘͠͡ 1.13 percent of property tax collections, to $144 million, ͆ȋ͟͜Ǥ͘͝Ȍ͚͙͞ά or 2.8 percent of collections (see Table 1). All counties are in compression, as are half of all cities and more than ͆ȋ͛͜Ǥ͛͘Ȍ͙͜͝ά 90 percent of all school districts. ͆ȋ͚͠Ǥ͚͘Ȍ͙͙͞ά Last May, local voters approved 18 of 21 (86 percent) temporary taxes, including six out of six city tax levies and four out of five county tax levies. While voters may still be concerned about the state of the economy, in many instances they clearly realize the value of local government services and are willing to tax themselves to provide those services. Whether or not any local voters approve temporary taxes outside of compression limitations is irrelevant. What matters is that voters currently do not have the freedom and opportunity to do so. For more information, visit www.orcities.org/toolkit or contact Chris Fick at (503) 588-6550 or cfick@orcities.org.