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Local Budgeting Manual, 150-504-420 - Oregon State Library - State ...

Local Budgeting Manual, 150-504-420 - Oregon State Library - State ...

that publication

that publication occurred and that the correct numbers were published. Errors in the published budget summary are bound to occur. Correctable errors include typographical errors, failure to mail or hand deliver the notice and summary to each street address, arithmetic errors, errors in calculation of tax revenues and failure to publish within the time periods required by law (ORS 294.425). It should be noted that these errors are errors in the published documents. The budget officer cannot change the expenditures, revenues or taxes approved by the budget committee. 36 If an error occurs, the budget officer can correct the error as follows. At the first regularly scheduled meeting of the governing body after the error occurs, the budget officer informs the governing body in writing of the error. The budget officer corrects the error in testimony before the governing body. If the error relates to the tax amount certified to the assessor, the budget officer notifies the assessor in writing that an error occurred. The budget officer submits a corrected tax certification document with the notification. Corrections must be submitted to the assessor before October 1.

Chapter 9—Estimating Property Taxes to be Received Operating Taxes—Permanent Rate Most local governments’ operating tax revenue comes from its permanent tax rate limitation. In general, the simplest way to estimate the amount of tax revenue that will be generated by the permanent rate is to multiply the permanent rate by the estimated assessed value of the local government for the upcoming year. For a listing of permanent rates by district, see Appendix D. If the local government has annexed new territory during the current year, the estimated assessed value of that territory should also be included in the calculation of tax revenue. The local government’s permanent rate is multiplied by the estimated assessed value of the annexed territory for the coming year to determine the amount of tax revenue that will be generated by the annexed territory. This amount is added to the amount of tax revenue to be raised for the existing territory. Assessed value of most property within the local government will grow at approximately 3 percent each year. In areas with substantial new construction, the annual increase in assessed value will be higher than 3 percent. In areas where the real estate market is stable or declining the assessed value may not increase. The county assessor can help project an estimate of assessed value. The amount of tax that will be raised by the permanent rate is not the amount of tax that will actually be received by the local government. There are three reasons for this. First, not all taxpayers pay their taxes in the year billed. Second, discounts are given for timely property tax payments. Third, the Oregon Constitution sets limits on the amount of property tax that can be collected from an individual property. To estimate the tax revenue that will actually be received, subtract from the amount to be raised by the permanent rate amounts for “loss due to constitutional limit” and “discounts allowed, other uncollected amounts” [ORS 294.381(3)]. (More details on computing these amounts are given later in this chapter.) This is the estimated amount of tax revenue that will actually be available. The estimate of property taxes not to be received is shown only on the publication forms. This estimate is never shown in the budget as a negative resource [OAR 150-294.361(1)-(B)]. Imposing Less Than Full Taxing Authority A local government may need less tax revenue for operating purposes than its permanent rate is estimated to raise. The local government may choose to certify less than its full taxing authority to the assessor. When this is done, the assessor computes a tax rate based on the 37 dollar amount requested in the certification. The computed rate will be used on the tax roll unless it is more than the local government’s permanent rate. If the computed rate is higher, the lesser, permanent rate will be used on the roll. The taxes imposed under this method will never be more than the amount requested, even though the permanent rate could raise more tax revenue. The amount of tax revenue that is needed for operating purposes is computed by adding together the amount of revenue needed to balance the budget, the amount of tax that will not be collected because of discounts and failure to pay, and the amount that will not be received because of the constitutional limit. This step is done, as mentioned above, because the amount of the tax that will be certified to the assessor is not the amount of tax that will actually be collected. If the local government intends to certify a rate, the tax amount for operating purposes is then divided by the estimated assessed value of the local government for the coming year. This will result in an operating rate which is carried out to the seventh decimal place and multiplied by 1,000. This is the rate that is certified to the assessor in place of the local government’s permanent rate. Example: operating taxes $100,000 = estimated assessed value $17,000,000 .0058823 × 1,000 = operating rate $5.8823 In this example, the local government’s permanent rate limit is $7.15. It was estimated to generate $121,550 in tax revenue using the same estimated assessed value. It is possible that the actual assessed value for the upcoming fiscal year will be greater than the assessed value estimated. If this is the case, more tax revenue will be generated than the local government needed to balance its budget. This additional revenue can be held to make up for other revenue shortfalls and become cash carry-forward or it may be appropriated through a supplemental budget. Constitutional Limit Article XI, section 11b, of the Oregon Constitution limits the amount of taxes that can be collected from an individual property. The constitution breaks property taxes down into categories based on the kind of services that the taxes are supporting—education services, including support services, and general government services. It also provides that certain property taxes will not be limited. The Department of Revenue refers to the tax categories as education, general government, and excluded from limitation. Governing bodies must determine into which

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