Property Tax System
In Oregon, property taxes help support police, fire protection, education and other public services provided by local taxing districts, such as cities, counties and schools. Oregon’s property tax system represents one of the most important sources of revenue for local governments. Polk County is one of these local governments that receive property tax revenues of approximately 15 cents out of every tax dollar. Cities receive 28 cents, 49 cents goes to all forms of Education, 4 cents goes to Fire Districts, and 4 cents goes to Special Districts.
Oregon’s property tax system changed and significant limitations on property taxes were put in place twice around 25 years ago. These two significant changes were:
- Ballot Measure 50 – This measure for fiscal year 1997-98 redefined each property’s assessed value as 90% of the 1995-96 property assessed value. Also each tax district was limited to a permanent tax rate.
- Ballot Measure 5 – Taxes from fiscal year 1991-92 to 1995-96 were increasingly limited. The rate assessed for education is limited to $5.00 while the rate for all general government service can not exceed $10.00 per $1000 RMV.
Currently, the amount of property taxes you pay is based on two things:
- The assessed value of the property; and
- The amount of taxes that each taxing district is authorized to raise.
The Oregon Constitution places limits on both of these factors.
Your Property Assessment
Property is taxed on its assessed value. A property’s assessed value is the lower of its real market value or its maximum assessed value. Each year, the county assessor determines the property’s real market value and calculates its maximum assessed value. You are taxed on the lessor of the two, which is called the assessed value. Real market value and maximum assessed value are defined below.
Real Market Value
Oregon law says the assessor must value all property at 100 percent of its real market value. Real market value (RMV) is typically the price your property would sell for in a transaction between a willing buyer and a willing seller on January 1, the assessment date for the tax year. To estimate the initial RMV for your property, your county assessor appraises your property using a physical inspection and a comparison of sales from similar properties. For ensuing tax years, your county assessor studies trends of similar properties to update the RMV for your property. Some property, such as farm or forest property, may be subject to special valuation processes.
Maximum Assessed Value
A property’s maximum assessed value (MAV) is the taxable value limit established for each property. The first MAV for each property was set in the 1997-98 tax year. For that year, the MAV was the property’s 1995-96 real market value minus 10 percent. For example, if a residential property had a real market value of $100,000 for the 1995-96 tax year, its 1997-98 MAV would have been $90,000. MAV can increase for only two reasons: a three (3) percent annual increase or specific property events called exceptions.
- Three Percent Increase
For tax year 1997-98, MAV is defined as the greater of the prior year’s MAV or the prior year’s assessed value increased by 3 percent. This means that MAV may increase 3 percent per year. There are two exceptions to the 3 percent increase. If the RMV is less than the MAV for two years, the MAV will not increase. Certain property events, such as new construction, can cause the MAV to increase more than 3 percent.
- Exceptions
The MAV can increase by more than 3 percent for any of the following property events:
- Changes in the property value as the result of new property or new improvements to property;
- The property is partitioned or subdivided;
- The property is rezoned and the use is changed consistent with rezoning;
- The property is first taken into account as omitted property, or
- The property becomes disqualified from exemption, partial exemptions or special assessment.
New construction affects MAV if it increases the value of the property by more than $10,000 in any one-year or $25,000 within any consecutive five years. These changes will always have an affect on RMV, although they may not have a dollar-for-dollar impact on MAV.
