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

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

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categories their property taxes should be placed. This is done by a resolution or ordinance at the same time the budget is adopted (ORS 294.435). The tax categories are also certified to the county assessor when the tax certification documents are submitted (ORS 310.060). Once the tax categories have been determined, the local government can estimate the loss of tax revenue, if any, that will result because of the constitutional limits. Figuring Loss Due to Constitutional Limit Determining the amount of property taxes that will be lost because of the constitutional limit can be a complicated process. The simplest method is to use the prior year’s loss with an adjustment for anticipated tax revenue growth and value increases. Late in October or early November each year, the tax collector sends local governments information on how much tax was actually billed (imposed) for the government (ORS 311.391). The “loss” is the difference between the amount of the tax revenue estimated to be raised and the amount of tax actually imposed. If the taxing situation for the local government and all the other governments with which it shares territory remains the same, the percent of loss due to the constitutional limits should remain stable. However, if the taxing situation is changing, such as other local governments losing or gaining taxing authority, the percentage of loss will change for each government. Also, if real market value (the value on which the limits are tested) is declining, more loss could be experienced. Discounts and Other Amounts Not Collected Some taxpayers fail to pay their property taxes on time. Others pay on time and receive a discount. It happens each year in all of Oregon’s 36 counties. As a result, local governments that impose property taxes must consider the amounts for nonpayment when they estimate the taxes to be received. The amount of tax revenue lost varies from year to year and from county to county. There is no formula to determine the exact amount that will not be collected each year. If the estimate is too high, the amount of taxes received will be higher than the amount estimated in the budget. If the estimate is too low, not enough tax will be collected to meet the requirements in the budget, and a shortfall in total resources could occur. If a local government has more than one fund receiving tax revenue, all of its taxing funds should use the same percentage for taxes to be collected. Figuring Loss Due to Discount and Uncollectibles The amount of tax that will be lost because of the discounts and failure-to-pay is determined by using a per- 38 centage of taxes anticipated to be collected. This percentage is developed from historical data. The county tax collector may be able to provide tax collection percentages. Start with the amount of taxes estimated to be raised by the permanent or operating rate. If the local government receives tax “offset” revenue, the amount of the offset is subtracted from the taxes estimated to be raised. Loss due to discount and uncollectibles is not computed for offset amounts [ORS 294.381(4)] because these amounts are not billed with the property taxes. The offset moneys come from either Eastern Oregon Privilege Tax (EOPT) or Western Oregon Privilege Tax (WOPT) collected on harvested timber. They are called “offsets” because they are subtracted, or offset, from the local government’s permanent or operating tax rate before taxes are imposed on each property tax account. The timber tax offsets are applied only to the permanent rates or operating rates of noneducation local governments. Offset amounts do not reduce the tax rates for general obligation bonds, local option taxes, or other taxing district obligations. Next, multiply the taxes estimated to be raised, adjusted if necessary for offsets, by the tax collection percentage. This gives the amount of taxes estimated to be received. Example: The county budget officer is estimating the taxes that will be received. The amount of tax estimated to be raised for the county is $890,448. This amount is based on the estimated tax that the permanent rate will raise, and includes tax amounts for local option taxes and bonds. From this, subtract the amount of the county’s offset of $20,000 from WOPT. The county-wide collection rate is 90 percent. $890,448 estimated to be raised (20,000) offset amount $870,448 taxes estimated to be billed × .90 collection rate for county $783,403 estimated taxes to be received $870,448 (783,403) $87,045 loss due to discount and uncollectibles Legislation enacted in 1999 changed the way timber tax offsets will be distributed in the future. Beginning in tax year 2000-01, WOPT offsets will only be distributed to the county. Beginning in tax year 2001-02, EOPT offsets will only be distributed to the county. Other taxing districts will no longer receive WOPT or EOPT offsets. Publishing Property Taxes Not to be Received The only place that the amount of taxes estimated not to be received is shown is on the publication forms, LB-1

and LB-3, or ED-1 and ED-3. Chapter 8 explains publication requirements. When publishing the budget and financial summary, the local government is showing the tax approved by the budget committee. It is also showing its patrons how much money is estimated to be received from the tax imposed. Note: the amounts received from timber tax offsets are not shown separately in the publication forms. Example: Total property taxes estimated to be received $803,403 Plus: estimates taxes not to be received —Loss due to constitutional limits -0- —Discounts allowed, other uncollected amounts 87,045 Total tax $890,448 39 Tax Elections and Estimate of Tax Not to be Received When planning to take a local option tax question to the voters, remember to include an estimate of the amount not to be received when determining the amount of taxes or rate to be requested. This also applies when new districts are seeking voter approval for a permanent rate limit or bonds. You may use the same method of estimating taxes not to be received as discussed above. The amount of taxing authority asked for in a ballot is not the amount of tax revenue that will actually be received for the same reasons that the amount of tax imposed is not the same as the amount actually received. If the tax or rate in the ballot is for a specific purpose, such as purchase of a piece of equipment, the budget officer will need to ask for more than the exact price of the equipment. Otherwise, insufficient revenue for the purchase will be received.

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