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

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

Chapter 10—Types of

Chapter 10—Types of Property Taxes Many local governments rely heavily on local property taxes to finance the services they offer. In some cases, services are paid for entirely by property taxes. Property taxes, or ad valorem taxes, are available to all local governments that have the power to impose taxes. Each local government should refer to its enabling statutes to determine its statutory taxing authority. Four types of property tax are available, each fulfilling a specific purpose or function. • Permanent rate limit taxes. • Local option taxes. • Bonded debt taxes. • Other qualified obligations. Definitions of these taxes are found in Oregon Administrative Rule (OAR) 150-294.311. Both the Oregon Constitution and Oregon law limit the amount and type of tax a local government may impose. The constitution allows a local government to annually collect through its permanent rate limit the amount of property taxes generated when that rate is applied to the assessed value of the local government. Revenue from the permanent rate can be used for any legal purpose. When a local government has no permanent rate or when the permanent rate does not provide enough revenue to meet estimated expenditures, the local government may ask voters to approve a local option tax. Education service districts are not authorized by law to impose local option taxes [ORS 280.040(2)]. Local option taxes can be used for general or specific purposes. Local option taxes used for general operating purposes can be imposed from one to five years. Local option taxes used for capital projects may be imposed for the expected useful life of the capital project, or 10 years, whichever is less. The Oregon Revised Statutes allow local governments to impose taxes for general obligation or limited tax bond principal and interest without annual voter approval. Levy approval is considered to have been gained when voters originally approved the bonds. The debt service levy amount is limited to the repayment of principal and interest necessary to retire the bonds. An election on a tax measure is approved if 50 percent of the registered voters cast a ballot in favor or the election is in November of an even-numbered year and a majority of those voting approve the measure. This is referred to as the “double majority” requirement. Statutory Tax Limits Some local governments are subject to statutory tax limitations. The maximum amount of tax that these cer- 41 tain local governments can impose for general operations is the lesser of the amount their permanent rate will raise, plus any local option taxes, or the tax allowed under the statutory limit. Statutory limits are usually a percentage of the local government’s real market value. For a listing of local governments with statutory tax limits, see Appendix C. Statutory limits do not authorize a local government to impose a tax. Taxing authority comes from voter approval. Local governments with permanent rates received voter approval at some point in the past. New local governments must seek voter approval to impose a permanent tax rate; local option taxes must also receive a nod from voters. The assessor is prohibited from extending on the tax roll any tax that exceeds statutory or constitutional limits (ORS 310.070). Permanent Tax Rates A permanent rate is an ad valorem property tax rate expressed in dollars per thousand of assessed value. No action of the local government can increase this limit. This rate is levied against the assessed value of property to raise taxes for general operating purposes. Permanent tax rate limits were either computed by the Department of Revenue for districts existing prior to 1997-98; were established by formula for merged, divided, or consolidate districts; or are voter-approved for districts formed in or after 1997-98. Only new local governments or local governments that have never levied a property tax before can seek voter approval of a permanent tax rate. These local governments can take the question to the voters on any special or regular election date. See Chapter 11 for details on tax elections. Consolidation or Merger If two or more local governments consolidate or merge, the newly combined local government is given a calculated permanent rate limit. A merger occurs when two or more districts formed under the same statutory authority, providing the same services, agree to operate as one district. One of the districts is the “surviving” district. A consolidation occurs when two or more districts agree to dissolve and form a new district providing the same services as the old districts. The constitutional limitation in section 11 (3)(d), Article XI, applies to the new district. The amount raised by the new district cannot exceed the amount that would have been raised by the separate districts using their permanent rate authority.

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