Washington County school districts will lose $18.5 million to property tax limits this year
PORTLAND (The Oregonian) - Although voters approved a local option levy to hire more teachers in May 2013, the Beaverton School District will collect about $10 million less than it could have due to state caps on property taxes.
The good news for the school district is that the sum it will collect this fiscal year – almost $20 million – exceeds initial estimates. That's mainly because the economy has started to recover and there is more activity on the real-estate market.
The tax limitations, also known as compression, keep some homeowners' tax bills lower. But they also take an increasingly higher toll on school districts statewide. This year, Oregon schools will lose about $110 million to compression, 525 percent more than in 2008.
Washington County schools will lose out on $18.5 million because of the caps.
The limits apply to the share of property taxes each account can pay toward education and government, and were established after the passage of Measure 5 in 1990.
The measure limits education apportionment to $5 and government to $10 per $1,000 of real market value. If the property tax bill exceeds those limits, it becomes "compressed," or reduced to fit below the ceiling.
Compression is only applied to permanent tax rates, which were established through Measure 50, in 1997, and to local options levies. It does not affect bonds, which governments rely on for large capital investments. For example, the $680 million Beaverton schools construction bond that voters passed in May will not be affected by compression.
Oregon cities, counties and school districts will lose a total of $212 million this fiscal year, according to a League of Oregon Cities report. The group proposed a bill last year to allow voters to pass local levies that are exempt from compression, but it died in the Legislature.
Washington County schools and governments' compression tab comes to $19.3 million this year. Of that pool, more than half, $10.7 million, would have gone to the Beaverton School District, followed by the Tigard-Tualatin School District ($5.6 million) and the Hillsboro School District ($1.5 million).
Nevertheless, Beaverton schools will collect nearly $20 million from the local option levy, exceeding expectations.
The district initially estimated it would raise about $15 million – a projection made prior to the county's fall property assessments, said Claire Hertz, Beaverton School District chief financial officer.
"In 2013 is when the houses started to sell, so we collected higher than estimated," Hertz said.
As long as the economy stays strong and construction is increasing, Beaverton schools will collect even more from the local option levy next year, Hertz said.
But compression is hard to predict, said Washington County Director of Assessment and Taxation Rich Hobernicht. In the end, it's a matter of applying the math formulas, account by account.
The math behind compression
Two calculations are at the basis of compression, as it applies to school funding.
First, a home’s real market value is multiplied by $5 per $1,000, which is the maximum amount of property taxes that can go toward education under Measure 5. If, for example, a home’s real market value were $350,000, the result of the first calculation would be $1,750.
In the second calculation, the home’s assessed value is multiplied by the total tax rate for education.
• The assessed value (AV) is the lower of the real market value (RMV) and the maximum assessed value (MAV). The maximum assessed value is the greater of the prior year’s assessed value plus 3 percent, and the prior year’s maximum assessed value.
• The total tax rate was established through Measure 50, which designated permanent rates for various districts, including school districts.
The results of the two calculations are compared, and if the first result is greater, compression does not occur. If the second result is greater, the amount will have to be compressed until it reaches the first result.