HomeMy WebLinkAboutItem 2G: Approval of Construction Excise Tax
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Approval of Construction Excise Tax – Bethel School District
Meeting Date: February 25, 2008 Agenda Item Number: 2G
Department: Central Services, Finance Division Staff Contact: Larry Hill
www.eugene-or.gov Contact Telephone Number: 682-5722
ISSUE STATEMENT
Bethel School District 52 has passed a resolution regarding a new Construction Excise Tax. The district
has asked the City of Eugene to engage in discussions towards an intergovernmental agreement under
which the City would collect the tax on behalf of the district and remit the proceeds to the district. It is
possible that similar requests may be made in the future by Eugene School District 4J and Junction City
School District. All three school districts include territory that is within the city limits of Eugene.
BACKGROUND
In 2007 the Oregon Legislative Assembly passed and the Governor signed SB 1036, relating to local
government construction excise taxes. SB 1036 prohibits any local government, except school districts,
from imposing a tax on the privilege of constructing improvements to real property. School districts are
specifically permitted to levy these taxes, but only for capital improvements within a long-term facilities
plan and only within certain restrictions. Improvements to agricultural buildings, private school,
hospitals, religious facilities, low-income housing and public improvements may not be taxed. The tax
may not exceed $1 per square foot for residential structures, nor may the tax exceed $0.50 per square
foot for nonresidential structures up to a limit of $25,000.
SB 1036 provides that construction excise taxes levied by a school district may be collected by one or
more other local governments under intergovernmental agreements (IGA). Logically, these would be the
local governments that issue building permits for the territory within the school district. Once agreement
is reached these governments would then act as agents for the school district, collecting the tax and
remitting the revenue to the district.
SB 1036 does not require local governments to collect the tax. Collection would be pursuant to an
intergovernmental agreement that the local government voluntarily enters into with the district. A
government may decline to agree to collect the tax.
In December, the governing board of Bethel School District 52 adopted a resolution to implement a
construction excise tax. Bethel will need IGAs with both Eugene and Lane County in order for the tax to
be imposed and collected equitably across the district’s territory. Bethel is currently negotiating towards
an IGA with Lane County, and Eugene staff is following these negotiations. The City of Eugene cannot
collect the tax unless Lane County agrees to as well.
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Eugene City staff has determined that it may be feasible to collect a construction excise tax on behalf of
a school district but potential administrative costs are a concern. Under SB 1036, governments are
allowed to retain up to 1% of the tax revenue to cover administrative costs. It is the City’s intention to
recover 100% of the actual costs for administering this tax. Any administrative costs above 1% would
need to be reimbursed from other school district revenues besides the construction excise tax.
RELATED CITY POLICIES
The City has no specific policy concerning collection of taxes for other agencies. There are precedents;
the City collects Transient Room Taxes on behalf of Lane County and other local governments.
COUNCIL OPTIONS
The council has the following three options:
1.Direct the City Manager to engage in discussions towards an intergovernmental agreement with a
school district and, if agreement is reached, to collect the tax on behalf of the district; or
2.Direct the City Manager not to engage in discussions towards an intergovernmental agreement with
a school district; or
3.Take no action on this topic.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends that the City engage in discussions towards an intergovernmental
agreement regarding a construction excise tax upon request by a school district and, if agreement is
reached, to collect the tax on behalf of the district.
SUGGESTED MOTION
Move to direct the City Manager to engage in discussions towards an intergovernmental agreement
regarding a construction excise tax upon request by a school district and, if agreement is reached, to
collect the tax on behalf of the district.
ATTACHMENTS
None.
FOR MORE INFORMATION
Staff Contact: Larry Hill
Telephone: 682-5722
Staff E-Mail: larry.k.hill@ci.eugene.or.us
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