Illinois Valley News

Illinois Valley resident Jim Valentine still recalls the sticker shock he felt when receiving his most recent property tax bill from Josephine County.

Valentine, 55, has been living in the valley for 37 years. But the bill for his three adjoining properties off Westside Road has him wondering if he will be able to pass his estate on to his three children.

“Every time I turn around, it’s a dime here and a dime there,” Valentine said. “I’m fed up with what the system is doing.”

Valentine’s struggle is familiar to many property owners throughout the state. It is indicative of larger issues surrounding Oregon’s tax structure and its reliance on property taxes to fund local government services.

In 1990, Oregon voters approved Measure 5, which amended the state’s Constitution to put limitations on property taxes. Measure 47 was an initiative passed by Oregonians in 1996, revised by the Legislature the next year, and approved by voters as Measure 50 during a May 1997 special election.

Both measures have helped shape the state’s tax policies, and limit property tax increases to 3 percent per year for existing parcels.

Said Josephine County Assessor Connie Roach: “Part of the structure of the tax law is that new construction goes on the roll at a ratio of real market to tax value as similar type properties. It looks at unchanged properties that already had their tax values set and matches that for new construction.

“For example, this year, the unchanged properties ratio average was about 60 percent on urban residential properties. New construction gets its value at 60 percent of what would be the tax value.”

But in a time when property owners like Valentine see their values decreasing, tax hikes can be met with tremendous anguish and anxiety.

“Right now, the only person making money off my property is the county,” Valentine said. “I don’t even feel like this property belongs to me.”

Roach is fully aware of the difficulties with the state’s tax structure. Other issues help complicate the situation, including the fact that most of the county is owned by the federal government.

That fact, Roach said, “really squeezes the ability to tax private ownership.”

“They have to take on a greater burden,” she said.

Another factor is Oregon’s comprehensive land-use system, which limits development outside of each city’s Urban Growth Boundary.

In Josephine County, much of the privately held land is zoned for either woodlot resource or exclusive farm use, both of which are taxed at lower levels than residential, commercial or industrial parcels.

Despite the 3 percent annual increases in property taxes, Josephine and many other counties throughout the state struggle to maintain basic services such as rural law enforcement patrols.

“It’s not indexed for inflation or anything of that nature,” Roach said. “If inflation is increasing more rapidly, it isn’t going to keep up.”

Mandates from state government also help raise the cost of those services, especially since local municipalities are expected to experience increased contributions toward Oregon’s Public Employees Retirement System during the next few years.

Josephine County government traditionally was funded through timber receipts, but that began to change significantly in the mid-1990s following the passage of the Northwest Forest Plan. That Clinton-era policy dramatically reduced the amount of logging allowed on public land throughout the region.

It led to the establishment of “safety net” programs, by which counties began receiving federal funding to stay afloat.

Those federal safety nets have received a series of extensions since they began, but it’s anticipated that they eventually will end. That leaves few options for sustainable long-term funding, and Josephine County voters have traditionally trounced property tax increases and levies put forth by their elected officials. That is despite the fact that the county’s rate, at 59-cents per $1,000 of assessed value, is among the lowest in the state.

“A lot of people move here because of the low taxes, and are not eager to increase them,” Roach said. “It’s up to the voters and whether they’re willing or not to increase the amount. It’s not something we have any control over. But when we’re at the same permanent rate and the cost of doing business goes up, it does become an issue.”

Valentine doesn’t consider himself to be anti-government, and said that he appreciates the need for much of what the county government provides to its citizens.

“Taxes are an evil necessity,” he said. “We need to support the schools, and kids have to have an education. We need police protection in this valley.”

However, like many in these difficult economic times, Valentine worries about his ability to make it from month-to-month.

Valentine lives on a fixed income, largely derived from the disability insurance that he receives. All that money goes straight to his mortgage, Valentine said.

And even though his wife works full time, Valentine said it is getting difficult to make ends meet.

The home that Valentine shares with his wife is a 1967 mobile. He has made some improvements to make it look like more of a stick-built home, including the addition of shingles on the outside and building new kitchen cabinets and countertops.

Those improvements add to the assessed value of the property, thus increasing Valentine’s tax liability.

But because the home itself is a mobile unit, Valentine can’t use it as leverage for securing any kind of a loan. Mobile homes also depreciate more rapidly than stick-built houses, especially if they’re older.

“You can’t even give them away anymore,” Valentine said.

Roach acknowledges the depreciation of mobile structures, but said that issue also cuts both ways.

“For example, when we were looking at a very hot market and homes were going up, manufactured structures also went up in price,” she said. “People who couldn’t afford a stick-built home turned to manufactured structures. With the market turning down and people can buy a stick-built house, that’s probably going to change.”

Theoretically, it should be easy for Valentine to sell one of his parcels to pay for his taxes and other expenses. But doing that is actually much more difficult than it sounds.

Valentine said that before he could subdivide and sell a parcel, he has to make improvements to the property. That includes the costs of permits, surveys, inspections, approaches, culverts, septic installation and other miscellaneous expenses, which add up in a hurry.

He estimates that obtaining a final plot for a 5-acre piece of property would cost around $10,000.

“I didn’t want to develop the property, I wanted to sell it,” Valentine said. “They’re taxing me on what they made me improve.”

Roach said that citizens upset about their tax bills can petition her office for an internal review.

“A lot of times, people do request a review through our office, they’ll be satisfied with the results and that’s the end of it,” she said.

If that fails, Roach said, cases can be taken to the property tax board of appeals, which meets in late February and early March.

“It’s an independent board that looks at both sides of the situation and makes a determination,” Roach said. “Beyond that, they can go to magistrate court if they’re not satisfied with the results about the hearings.”

Property tax deferrals also are available as an option, and residents can apply for those between January and April for the coming tax year.

“Basically, it’s a loan from the state,” Roach said. “What the state does is pay the taxes for them and either the estate has to pay the taxes back, or if they sell the property or change ownership in any way, they have to pay that back. It’s simply 6 percent interest per year that the state charges for doing that program.”

Even though concerns about Oregon’s tax structure persist among persons at every end of the political spectrum, there appears to be little will among the state’s leaders to address the issue.

Some have advocated for instituting a sales tax, or its use as a replacement for property or income taxes. However, Oregon voters routinely have rejected such concepts, contributing to the reluctance to discuss tax reform.

For the most part, Roach said, voters are responsible for the tax structure currently in place at the local and state levels.

“Measure 50 got a slow, steady increase that they know that unless they’ve done something major to the property, they have a good sense of where their taxes are going to be from year-to-year,” Roach said. “The system is working the way the voters want it to.”

Valentine said that he has no immediate plans to appeal his tax bill, and likely will not seek a deferral. Instead, he said, he would like to see a hard ceiling put on the overall amount that the county can charge in property taxes.

“They’ll tax the whole valley right out of their homes,” he said. “Then where is everybody going to go?”

Oregon voters, especially those in rural areas, may have some tough decisions ahead of them as the cost of government increases and the economy continues sputtering along. Statewide, a Jan. 26 referendum on a pair of tax increases passed by the Legislature may be an indicator of voters’ moods in the current climate.

But Roach said that with the possible discontinuation of federal safety net funds, “something has to be decided. Either services will become less or there will have to be some way to fund them.”

Property tax reform may be an unlikely prospect in the short-term, but Roach said that it may figure into discussions down the line.

“There is some unfairness built into the way the property tax system is. I think I’d like to see something that would bring more fairness within that,” Roach said. “Beyond that, I don’t know what the options are.

“That’s something that the citizens as a whole need to address, is how we need to approach financing government in the future.”

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