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HomeMy WebLinkAbout05/21/1979 Meeting . M I NUT E S EUGENE CITY COUNCIL Special Meeting May 21, 1979 Special meeting of the City Council of the City of Eugene, Oregon, was called to order by City Council President Jack Delay at 7:30 p.m., Council Chambers, with the following Councilors present: Betty Smith, D. W. Hamel, Eric Haws, Scott Lieuallen, Brian Obie, Gretchen Miller, and Emily Schue. Mayor Gus Keller was absent. I. PUBLIC HEARING--BALLOT MEASURES RE: 1979-80 TAX RATE e lit A. Levy For General City Operating Budget Manager reviewed the history of the 1979-80 proposed budget. Origi- nally, the staff asked the Budget Committee for a 7.I-percent budget increase over the previous year's spending. This represented $600,000 in cuts in personnel services and programs. When considered in light of the II-percent inflation and 2.5-percent city growth, it was an austere budget. It was discovered, however, that because non-property tax revenues were expected to grow only one-half percent this year, it would mean heavy reliance on the property tax. The second recommen- dation of the staff to the Budget Committee was to seek a new source of revenue, i.e., the real estate transfer tax. A total reliance on the property tax would increase that tax by 18 percent for operating purposes. If the real estate transfer tax is put into effect, it is estimated that it will produce $1.6 million in revenue. This would have reduced the property tax for operations to a $100,000 increase. The second, less desirable suggestion was to raise the property tax to a nine-percent level. This would require another $900,000 be cut from the budget and from the current service level. The Budget Committee, by a split vote, took two actions. They increased the proposed expenditures by $400,000 to an 8.6-percent level, restoring some of the cuts, and they accepted the transfer tax as well as pro- posing a tax on the gross receipts of business. At the last Council meeting, the Manager proposed some cuts which brought the figure to $7,504,210 or 7.8 percent above the current year's operating expenditures. The required operating property tax for operating purposes for the City's share is a 20-percent increase over 178-79. If the transfer tax were approved by the voters, the net increase in property taxes for operating purposes would be $300,000 or 2.8 percent. If the business .tax were passed (without the transfer tax), $600,000 would be needed in the operating levy, or 6.2 percent. 5/21/79--1 ZKJ Due to recently-voted bonds, debt service is added to the property tax levy in the amount of about $1,600,000. So, when debt service is combined with the operating levy (without the supplemental taxes), there is a $3.5-million addition to the levy which is a 30-percent .. increase for the City part, which constitutes about one-third of the property tax bill. If non-property tax levies were to pass and were to be subtracted from the property tax, the transfer tax would result in a 12.4-percent property tax increase. The business tax would result in a 16.2-percent increase in the property tax levy. If both non-property tax levies were enacted, there would be only a 4.7-percent increase in the total property tax levy. Manager compared the various tax options on a $50,000 house ($65,000 with increase in assessment of property value); whereas the property owner paid $364 last year, their bill would be $449, an $85 increase (23 percent) if no non-property tax measures were authorized. With the transfer tax, the owner would pay $399, a $35 increase (9.6 percent). With the business tax, the owner would pay $409, a $45 increase (12.4 percent). With both taxes, the owners would pay $359, a decrease in property tax over the previous year. Manager noted that May 22 is the last day to submit to the County what is to be on the June 26 ballot. Mr. Obie presented the minority report from the Budget Committee to the City Council and the citizens of Eugene. It was from Boyd Engelcke, chairman of the Budget Committee, Joe Soderburg, Jack Pyle, lay members; D. W. Hamel, Betty Smith, Brian Obie, City Councilors. They ~ objected to the request from the Budget Committee to a 23-percent ,.., increase in the property tax. They further objected to the haste and lack of study on the part of the Budget Committee in recommending the transfer and business gross receipts tax. They felt these taxes take away from the voter their right to approve the City expenditures beyond the six-percent limitation and this right would be gone forever. They urged reduction of the property tax levy using ability, to pay as the criteria and to reject the two new forms of taxing. Public hearing was opened. Ron Schmaedick, 1742 West 34th Place, said 1978 was a record year for building in Eugene. There are more properties to share the burden. Assessments are increased. The citizen's tax bill has not gone up that much unless the house was recently sold or reappraised. The increases are not as great as the income of the people who own those houses. This year is a greater increase, but the City has kept spending down for the past three or four years. Public hearing was closed, there being no further testimony. 5/21/79--2 '~ Z82 - C.B. 1902--0rdering a Special Election to be conducted by the Lane County Election Department on the 26th day of June, 1979, for the purpose of submitting to the legal voters of the City of Eugene a measure authorizing the Eugene City Council to levy throughout the city $7,504,210 more in tax revenues than is now authorized by the Oregon Constitution, Article XI, Section 11; adopting polling places and provi- ding for all acts necessary for the carrying on of said election; and declaring an emergency was read by council bill number and title only, there being no Councilor present requesting that it be read in full. Ms. Smith moved, seconded by Mr. Lieuallen, that the bill be approved and given final passage. Ms. Smith questioned the budget process that would recommend a 23- percent increase in property taxes. She noted her opposition with that process, and with presenting a budget that she could not support. Mr. Haws said it is not certain what the voters want until said that people who come to him want more City services. City services is still a good bargain. He felt the Budget did not act in haste. asked. He The cost of Committee Roll call vote. All Councilors present voting aye except Hamel, Smith, and Obie voting no, the bill was declared passed and numbered 18398. - Res. No. 3145--Authorizing the City Council to levy for the city in general $7,504,210 more in tax revenues than the City is authorized to raise throughout the City by taxation within the six-percent limitation upon the City's tax levy as contained in Article XI, Section 11, of the Constitution of the State of Oregon was read by number and title. Ms. Smith moved, seconded by Mr. Lieuallen, to adopt the resolu- tion. Roll call vote. Motion carried, all Councilors present voting aye except Hamel, Smith, and Obie voting no. B. Measure Imposing a Tax on Gross Receipts of Businesses, and Measure Imposing a Tax on Transfers of Interest in Real Property Council president asked that both tax bills be considered at the same time. Manager said the Real Estate Transfer Tax was formerly a federal tax removed in 1967 by Congress, who deemed it a more appropriate tax for state and local governments. The ordinance would levy one dollar per - 5/21/79--3 ze3 hundred with exemptions outlined in the distributed material. With information taken from the Records Office, it is estimated that the transfefr dta~ ~ould :aise ovetrh$3.mthil~ifonl a.year. dThe ladlvafntfagtes arteh ~ ease 0 a mlnlstratlon, grow Wl ln atlon, an sma e ec on e homeowners. It is considered by some to be a good curb on speculation. The disadvantages are that it adds to the cost of buying and selling a house and the income from the tax is not steady, but based on the housing market. Manager noted the Gross Receipts of Business Tax was developed three or four years ago by a Revenue Subcommittee of the Budget Committee. It was rejected by that committee. The tax is based on gross receipts of businesses. The tax rate is by category of business, depending on profits-to-receipts ratio. There is a minimum $25 fee and an initial $10 registration fee. The advantages are that it is a stable source of income, it can be collected indirectly throughout the trade area, and it can be deducted from income tax. The disadvantages are busi- nesses feel that it hurts them competitively, and it has high adminis- trative costs in record keeping and auditing. Mr. Lieuallen noted that this was not a decision on the merits of the taxes, but whether to put the measures on the ballot. Public hearing was opened. Those speaking in favor of placing the tax measures on the ballot were: Janet Calvert, League of Women Voters of Central Lane County, urged ~ the Council to place the measures on the ballot. She asked the City to provide a clear education program and said the League would help in providing education to the citizens. Those speaking against placing the tax measure on the ballot were: William Neal, American Institute of Architects, felt the building industry now carries a great deal of tax burden, and additional fees were being added to the overburdened segment of the population. In the three-legged stool of taxation, he felt several legs were the building community. Mike Schwartz, 2390 Lariat, urged the Council to vote against the gross receipts tax on business. He felt it would put Eugene businesses at a competitive disadvantage. Emerson Hamilton, 3232 West 5th, urged the Council to vote against both tax measures, to cut spending, and to use the property tax for revenue. He cited the unfairness of averages in determining tax rates, the individual business expense, the competitive disadvantage - 2g~ 5/21/79--4 . (businesses would operate outside Eugene), the administrative diffi- culties, the policing difficulties, and the problems with taxation and determining if sales volume determines the profit of a company. Nancy Nurenburg, 2565 Portland, was concerned that business tax would force the businesses out of Eugene. Dick Vanberg, 2565 Chaucer Court, administrator of Eugene Hospital and Clinic, favored putting the measures on the ballot but explained the effect of the business tax on patients that pay their own bills would be substantial, since all such costs are passed on to the patient. Larry Hughes, 2580 East 10th, dentist, felt the property tax was visible and understandable. The business tax was devious, inefficient, and inflationary. He urged a Council vote against placing it on the ballot. John Boyer, 1185 Fairfield, Association of General Contractors, illustrated the cost of both these taxes to the contractor of a $200,000 restaurant would be $7,545 (omitting fees, permits, and interest). For a $1.6 million school, the total taxes would be $41,700. This would be paid by the consumer. He asked the Council to defeat the tax measures. - Richard Hansen, Eugene Chamber of Commerce, was concerned with the haste with which this matter came before the Council. He noted that Chamber had opposed it in 1976 (business tax). He questioned why the taxing rate had gone from 12 percent in 1976 to 33 percent in 1979. He felt the transfer tax would be difficult for older and younger citizens. He urged defeat of both measures. Harry Sheppard, 1465 West 7th, said the gross receipts tax is regres- sive and difficult to administer and will cause businesses to leave the city. It will deter new businesses from coming to Eugene. Joe Romania, 2150 Stone Crest Drive, noted that these taxes could be raised at any time without a vote of the people. He said eggs were cheaper in the country because taxes were less. He asked that both measures be defeated. Jeff Johnson, 65 Centennial Loop, felt the tax was inequitable, inflationary, and hard to administer. He urged defeat of the measures. Dr. Schuster, Lane County Dental Society, said the business receipts tax was unacceptable because the businesses are already overtaxed. He urged defeat of the business receipts tax. ~ 5/21/79--5 2~ Judith Saccett, 2169 Brittany, urged defeat of the business gross receipts tax because the voter will be confused by its purpose and might feel that it would be a relief to property tax. She urged it ~ not be put on the ballot. ,., Deryl Huling, 2200 West 7th, president of the New Car Dealers Associa- tion, noted with the competition of his business, the cost of book- keeping, the gas shortages, the public riding of mass transit, the car dealer is at a disadvantage. He would urge defeat of the business gross receipts tax. Tom Hoyt, 460 Palomino Drive, noted the defects in the gross receipts tax and urged its defeat. He felt that policing would be a problem. Also, the problem of liens on property when citizens did not pay their gross receipts tax was noted. He likened the hearing process to a kangaroo court (three paid by the City and two citizens-at-large). Either party could appeal to the City Council. He felt that City Council would be a permanent hearing body. He urged defeat of the gross receipts tax. As to the transfer tax, he noticed that there were statutes that are indicators of the value of property. This was passed when the Federal Stamp Act was repealed. He urged defeat of both measures. John Hollingsworth, 1067 Cinnamon, supported the minority report. Hugh Johnston, 633 East 11th Avenue, Lane County Medical Society, urged defeat of the gross receipts of business tax. He noted the differences in overhead costs for different doctors. He felt that these taxes would be passed on to the sick. ~. Richard F. Freeman, 1140 West 6th Avenue, urged defeat of both taxes and referred to the Chamber of Commerce presentation. George Boehnke, Lane County Printers Association, asked the Council to reject the tax measures until they can be studied and considered at a later date. He noted how difficult the gross receipts tax would be to police, citing the example of Portland. Gerry Allenbaugh, assistant administrator for Sacred Heart Hospital, was not clear where a non-profit hospital would be taxed under the gross receipts tax. The additional expense to Sacred Heart Hospital would amount to $82,000 to $87,000, which would be passed on to the patient. They felt this sort of tax was not appropriate. James Reinmuth, 580 East 40th Avenue, opposed the business gross receipts tax as inflationary. It would boost the local inflation rate .05 to .1 percent on top of one of the highest inflation rates in the U.S. (12 percent). He noted Eugene has a delicate economic base. In the last 15 years, the area has added 80,000 people, 30,000 . 5/21/79--6 Z8~ e additional jobs. Of these jobs, only 436 are in stable wood products. The rest are in the service industry. These service industries could relocate in Springfield. The City would lose. He urged the Council to oppose the business gross receipts tax. Gloria Thatcher, Weyerhaeuser Company, felt the voter would not understand the full ramifications of the gross receipts tax, and urged its defeat. Maurie Brooks, 3351 Franklin Boulevard, spoke about how difficult it would be to administer the gross receipts tax. He urged that it be defeated. Roger Schmaedick, 1734 West 34th Place, spoke in opposition to the gross receipts tax and to the real estate transfer tax. He noted that homes are sold every three to five years to families and to businesses every 10 years, so this is taxing families. He wondered what would happen when a house is passed through four people in an afternoon, as sometimes happens, would they all be charged the tax? Trish Provenski, owner of OH SHIRT!, said the business will suffer from outside competition. It hires five people. She is against the gross receipts tax. Donald Mortenson, 2363 Todd, Georgia-Pacific, said 25 percent of total gross sales are outside Eugene. The gross receipts tax will penalize the large companies. Georgia-Pacific is opposed to the tax. e Donald Husband, Husband, Johnson, Fechtel & Goff, noted that, as the city grows, there is nothing cheap about bigness. Public hearing was closed, there being no further testimony. Manager, in answer to the question of how value would be determined in the property transfer tax, read from the ordinance. The cost of a deed changing hands three or four times in an afternoon would be determined by whether it was recorded or not. Revisions could be made at a later date, he noted, as far as the elderly, homesteaded, and the young homeowner. Mr. Flogstad reviewed the history of the gross receipts of business tax. He recognized that in Portland there were some problems collec- ting from outside Portland business. He said six percent of revenues would be administrative costs. Mr. Obie asked Mr. Flogstad about the increase from 12 percent to 33 percent that was brought out in Mr. Hansen's testimony. Mr. Flogstad told him it was a third schedule out of three. It was decided by the staff to use that schedule, and it was presented to the Budget Committee. e 5/21/79--7 281 , Mr. Haws asked if Sacred Heart was covered or exempted. Mr. Flogstad replied that Sacred Heart would not be exempted, but many charitable organizations would be. . Mr. Haws asked how they could assure the voter that the tax established would not be raised without a vote of the people. City Attorney said that referendum was available. He said, however, the Council could not bind a future council. He said the tax could be increased by a council, but not without notification to the people. C.B. 1904--A measure submitting to the voters an ordinance amending the Eugene Code, 1971, which imposes tax on transfers of interest in real property was read by number and title only, there being no Councilor present requesting that it be read in full. Ms. Smith moved, seconded by Mr. Lieuallen, that the bill be approved and given final passage. Roll call vote. All Councilors present voting aye, except Hamel, Smith, and Obie voting no, the bill was declared passed and numbered 18401. Res. No. 3147--Submitting to the voters an ordinance amending the Eugene Code, 1971, which imposes tax on transfers of interest in real property was read by number and title. Ms. Smith moved, seconded by Mr. Lieuallen, to adopt the resolution. Roll call vote. Motion carried, all Councilors present voting aye except Hamel, Smith, and Obie voting no. ~ C.B. 1908--Concerning taxing transfers of real property: and adding Sections 3.840, 3.842, 3.844, 3.846, 3.848, 3.850, and 3.852 to the Eugene Code, 1971, and providing an effective date was read by number and title only, there being no Councilor present requesting that it be read in full. Ms. Smith moved, seconded by Mr. Lieuallen, that the bill be approved and given final passage. Roll call vote. All Councilors present voting aye, except Hamel, Smith, and Obie voting no, the bill was declared passed and numbered 18402. Ms. Smith asked for a show of hands of the audience opposed to the two tax measures. She noted the quantity of testimony by people who have served the community, in the legislature, in the schools, and on the Council--people concerned. It is premature to put these measures on the ballot, she said. Mr. Lieuallen said that he wanted the Council and the public to understand the non-property tax situation where .05 percent had been received in revenues. He noted there was no other way but to cut e 5/21/79--8 2~ . - severely or to find other sources of revenue. Businesses come to Eugene because it is attractive and has superior city services. Businesses will not move; let the voters decide if services should be cut back. "I am not sure that is what the voters want," he said. Mr. Obie did not feel there had been a fair hearing. He agreed with Jim Reinmuth that these measures would increase the local inflation rate and it would add to business costs. It would take away from the voter's basic right to approve the property tax. Ms. Schue said that the assessments of tbe new homeowner go up faster than the assessments of a business. They need relief from those taxes. Business is better able to pay. She told of the need in her area for extra police to monitor the "gut" activity. Ms. Miller asked the audience to come to the Budget Committee meetings and tell the Budget Committee where to cut. "Peopl e do not come to tell us where to cut," she said. "We are trying to provide property tax relief; increasing property tax is unpalatable. These two taxes are subject to amendments. They have been studied. We have a budget crisis," she said. Mr. Haws said it was the first time in four or five years that the Council has asked the public to decide on the way they will be taxed. Mr. Delay said it is an austere budget; a cut in Police would not solve problems. Alternate sources will offer property tax relief and he approves of taking it to the voters and letting them decide. - C.B. 1905--Submitting to the voters an ordinance amending the Eugene Code, 1971, which imposes tax on gross receipts of busi- nesses was read by number and title, there being no Councilor present requesting that it be read in full. Ms. Smith moved, seconded by Mr. Lieuallen, that the bill be approved and given final passage. Roll call vote. All Councilors present voting aye, except Mr. Hamel, Ms. Smith, and Mr. Obie voting no, the bill was declared passed and numbered 18399. Res. No. 3148--Submitting to the voters an ordinance taxing businesses and adding Sections 3.810, 3.812, 3.814, 3.816, 3.818, 3.820, 3.822, 3.824, 3.826, 3.828, 3.830, and 3.992 was read by number and title. Ms. Smith moved, seconded by Mr. Lieuallen, to adopt the resolution. Roll call vote. Motion carried, all Councilors present voting aye except Hamel, Smith, and Obie voting no. e 5/21/79--9 2.8 'I ... C.B. 1907--Taxing Businesses: Adding to the Eugene Code, 1971, Sections 3.810, 3.812, 3.814, 3.816, 3.818, 3.820, 3.822, 3.824, 3.826, 3.828, 3.830, and 3.992 was read by number ~ and title only, there being no Councilor present requesting that it be read in full. Ms. Smith moved, seconded by Mr. Lieuallen, that the bill be approved and given final passage. Roll call vote. All Councilors present voting aye, except Hamel, Smith, and Obie voting no, the bill was declared passed and numbered 18400. C. Levy on Property Within the Downtown Development District C.B. 1903--0rdering special election to be conducted by Lane County Election Department on the 26th day of June, 1979, for the purpose of submitting to the legal voters of the City of Eugene a measure authorizing the Eugene City Council to levy on the ownership of real property in the Downtown Development District $211,568 more in tax revenues than is now authorized by the Oregon Constitution, Article XI, Section 11; adopting polling places and providing for all acts necessary for the carrying on of said election; and declaring an emergency was read by number and title only, there being no Councilor present requesting that it be read in full. Ms. Smith moved, seconded by Mr. Lieuallen, that the bill be approved and given final passage. Roll call vote. All Councilors present voting aye, the bill was declared passed and numbered 18403. Res. No. 3146--Authorizing the Council to levy on the ownership of real property in the Downtown Development District $211,568 more in tax revenues than is now authorized by the Oregon Constitution, Article XI, Section 11 was read by number and title. '. Ms. Smith moved, seconded by Mr. Lieuallen, to adopt the resolution. Roll call vote. Motion carried unanimously. Upon motion duly made, seconded, and passed, the meeting was adjourned. c~nJ~ City Manager (Beth Conant, Minutes Recorder) CTH:BC:pm/CM8a15 e 2..90 5/21/79--10