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

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

To estimate the

To estimate the permanent rate of the new district: Step 1. For each district, multiply the permanent rate of that district by its estimated taxable assessed value to determine the amount that could have been raised. Use the estimated taxable assessed value for the first tax year following the merger or consolidation. Step 2. Total the amounts calculated in Step 1 to arrive at the total taxes that could have been raised if the merger or consolidation had not taken place. Step 3. Total the estimated taxable assessed values used for each district in Step 1 to arrive at the total assessed value of the new district. Again, use the estimated taxable assessed value for the first tax year following the merger or consolidation. Step 4. Divide the total estimated taxes that could have been raised as calculated in Step 2 by the total estimated assessed value of the new district as calculated in Step 3. The result is the estimated new permanent rate of the new district. This is the rate the new district uses during budget preparation. Step 5. The assessor will repeat the above calculation when the actual assessed value is known. The assessor notifies the district of the permanent rate limit calculated. For budgeting and certifying a rate for the new district in the first year, the district will estimate the rate using Steps 1-4 above. The estimated rate will be extended over the value of the new district as long as it is equal to or less than the permanent rate calculated by the assessor. Using this calculated permanent rate does not require an election. Division When a local government divides, the new entities resulting from the division are limited to a rate that is the same as the rate of the local government before it divided. In addition, the rates cannot raise more tax revenue than would have been raised by the local government in the year of division if it had not been divided. For more information on boundary changes, see the Department of Revenue publication Boundary Change Information. Local Option Taxes When approved by the voters, local option taxes can be imposed in addition to the taxes generated by the local government’s permanent rate. Local option taxes used for general operations can be imposed for up to five years. If the local option taxes are to be used for capital projects, they can be imposed for up to 10 years or the useful life of the project, whichever is less. “Capital project” is defined in ORS 280.060. It means: • the acquisition of land upon which to construct an improvement, 42 • the acquisition of buildings, • the acquisition or construction of improvements, • additions to a building that increase its square footage, • construction of a building, • the acquisition and installation of machinery and equipment which will become an integral part of a building, or • the purchase of furnishings, equipment or other tangible property with an expected useful life of more than one year. Determining the useful life of a capital project is not complicated when only one type of capital project is to be financed by the local option tax. For example, if the tax is requested to purchase a fire truck with a useful life of nine years, the local option tax can be imposed for no more than nine years. However, if the proposed local option tax is to pay for several capital projects with different useful lives, then the following formula is used to determine the maximum number of years the local option tax can be imposed. Average useful life × Cost = Weight Total weight ÷ Total cost = Maximum years allowed for tax Example: Item Cost × Useful Life = Weight 2 computers $10,000 2 years 20,000 2 patrol cars 80,000 5 years 400,000 10 work stations 50,000 5 years 250,000 Totals $140,000 670,000 670,000 140,000 = 4.78 or rounded down to 4 years which is the maximum number of years the local option tax can be imposed. Local option taxes for capital projects with a term of more than 5 years must be submitted to voters separately from local option taxes with a term of 5 years or less. If a school district imposes a local option tax and the resulting revenue exceeds the amount determined by the formula in ORS 327.013(10), the district’s State School Fund grant will be reduced. General Obligation Bond Taxes Approval of a general obligation or Bancroft bond issue by the voters carries with it authority to levy taxes to pay the bond principal and interest. However, a local government cannot impose a tax that exceeds the amount necessary to: 1. meet the principal and interest of a single fiscal year, plus 2. any unappropriated ending fund balance necessary to meet principal and interest payments between

July 1 and the first tax revenue receipts (turnovers) in November of the following year. The total tax must include an estimate of taxes not to be received due to the discount and uncollectible amounts. (ORS 287.006, 287.072, 328.260, etc.). There is no loss from the constitutional limit on tax collections because these types of bond levies are not limited. If other resources are available to the Debt Service Fund, the local government can impose only the taxes necessary to balance the fund. Local governments with questions about their bonding authority and limitations should refer to the Oregon Revised Statute under which they are organized. Other Qualified Obligations Taxes A few local governments are able to impose taxes to pay for other qualified taxing district obligations. This debt is often referred to as “gap bonds.” To qualify, the obligations had to have been in existence before December 5, 1996, and meet the requirements specified in statute. No new gap bonds can be created. The portion of the taxing authority being used to repay the qualified obligations was not reduced when Measure 50 was implemented in 1997-98. Local governments that identified gap bonds when certifying taxes in 1997-98 are the only ones that can impose this type of tax. This tax authority can continue to be imposed until the debt it is repaying is satisfied. The amount of tax that can be imposed in any year to repay gap bonds is limited to the amount of principal 43 and interest due on the debt, or the amount of obligation required by the City of Portland’s pension and disability plan. When the debt is satisfied, the taxing authority for the debt will be incorporated into the local government’s permanent rate. Local governments should contact the Department of Revenue when “gap bonds” are satisfied so the permanent rate can be recalculated. For a listing of qualifying gap bonds and the permanent rates that will replace them when they are satisfied, see Appendix F. Urban Renewal Taxes When an urban renewal agency adopts a renewal plan and selects tax increment financing (TIF), the taxable value of the property within the urban renewal plan area is identified. This value is referred to as the “frozen” base value. The growth in value above the frozen base is called “increment” or “excess” value. The amount of revenue available to the urban renewal agency is the amount determined by multiplying the “excess” value by the combined billing tax rates of taxing districts which overlap the plan area. This is known as the “division of tax” or “tax increment” revenue. The 1997 legislature created what is called a “special levy” in addition to TIF for “existing” plans. An “existing plan” is defined as a plan that existed in December 1996, and, 1) chose an option, and 2) established a maximum amount of indebtedness by July 1998. For existing plans, an additional amount may be generated through a special levy up to the plan’s maximum authority (ORS 457.435).

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