Oregon property owners who lost their homes or businesses to wildfires now face another challenge – paying property taxes based on the pre-fire value of what was destroyed. It may ultimately take state legislation to provide adequate tax relief.
Wildfire victims can apply for relief by showing how damage has affected the real market value of their property. However, that may not produce the relief homeowners want because the taxable values of their homes and land is substantially lower than the real market value, thanks to a ballot measure Oregonians approved in 1997 to limit the growth in property taxes.
County assessors will send property tax bills next week, which are due November 15 and will reflect pre-fire property valuations. Property owners can apply for a revaluation in light of the devastation, but that may not come in time or provide enough relief for beleaguered homeowners and businesses that have a sizable bill to pay. If they can’t pay their property taxes, they could be subject to late fees of 1.3 percent per month.
Even if property values are reduced, the reduction may not cover the loss because of a wrinkle in Oregon property tax law dating back to Measure 50 in 1997. Marion County Assessor Tom Rohlfing explains why:
- To qualify for tax relief, property owners with property badly damaged or destroyed by fires, tornadoes, lightning or an “act of God” must show the negative impact on the property’s real market value.
- However, many property owners pay taxes based on a property’s taxable value, which can be substantially lower than its real market value.
- That means in some cases a reduction in real market value may not differ that much from the taxable value.
Rohlfing, in an interview with the Salem Reporter, provided an example:
For instance, a single-family home in Detroit on a quarter acre, with a finished attic and garden shed had a taxable value of $120,870 for last year’s taxes. The property’s total tax of $1,829 for both the land and the structures helped pay for local school bonds, the library, the fire district, as well as city and county governments., the property had a market value of $217,79, so the fire would have to reduce the overall taxable value by more than $97,000 for the property owner to see any tax relief.
If land represents the largest part of a property tax valuation, then it may be even harder for a property taxpayer to realize any meaningful tax relief, Rohlfing said.
Legislation may be needed to provide wider leeway for impacted property owners and some assurance for public entities that depend on property tax revenues, which could be reduced. Lawmakers also may play a role in dispersing wildfire relief funds from the Federal Emergency Management Agency.
However, any legislative change faces a variety of challenges heading into the 2021 session. With a virtual session all but guaranteed, most advocates expect little to no in-person interactions with policymakers, creating significant problems messaging potentially complicated and dense property tax legislation. Far from a simple “elevator speech” conversation, property tax bills have the habit of causing glazed over looks and lack of attention from even the most veteran lawmakers, let alone the 15-20 percent of freshman legislators expected next year.
In addition, with 2020 showing no signs of relaxing its ability to throw emergencies in our collective path, lawmakers may be focused on yet another new crisis by the time February 2021 and the new session rolls around. Bitter 2020 legislative campaigns could yield increased partisanship in next year’s session that makes relief for wildfire victims in largely rural areas political pawns in partisan battles.
Voters Altered Oregon’s Property Tax with Two Ballot Measures
Oregonians approved two ballot measures in the 1990s that fundamentally changed Oregon’s property tax system.
Measure 5, which passed in 1990, placed dollar limits on the amount of property taxes that go to public schools and general government operations. The limitation on school funding from the property tax forced the state to pick up the slack. Before Measure 5, local property taxes contributed 70 percent of public-school funding and the state paid the remaining 30 percent. Afterward, roles were reversed with the state picking up 70 percent of the cost of public schools. One side effect of the switch was state approval of a school funding equalization formula.
Measure 50 passed in 1997 to correct flaws in a property tax limitation measure that voters approved in 1996. Whereas Measure 5 limited the property tax as a percentage of real market value, Measure 50 constrained assessed values by placing a 3 percent limit on how much a property could appreciate annually for tax purposes. That produced what is called “taxable value”, which is distinct from “real market value” or what a willing buyer would pay for a property.
Over time, the gap between taxable and real market values has widened, especially for rapidly appreciating property. It also has created a patchwork of values. Measure 50 allows taxable value to be adjusted to equal fair market value when a property is transacted to a new owner. That means next-door neighbors with identical houses could have significantly different taxable values and property taxes, determined by when they bought their homes.
Constrained taxable values relative to real market values could compound efforts to provide property tax relief for many wildfire victims, especially long-time homeowners who benefit from lower taxable values and smaller property tax payments.