Homeowners with similar properties in Oregon often face much different property tax burdens, and that inequity has a significant influence on the housing market, according to a recent report commissioned by the League of Oregon Cities.

The report was produced by Portland State University’s Northwest Economic Research Center and former state economist Tom Potiowsky, who concluded that property owners with arbitrarily low taxes receive a “hidden subsidy” in the form of a boost in property values, according to a news release from the League of Oregon Cities.

The report focused on neighborhoods in Portland, but local officials say the laws also result in inequity for homeowners in Bend and Deschutes County. The report examined the effects of Measures 5 and 50, which voters passed in the 1990s.

“In Measure 50, there’s this rollback provision where when a new property comes online, you roll back (to) what that property would be worth in 1995, 1996,” Bend City Manager Eric King said Thursday.

“You can have a brand new house in NorthWest Crossing that would be paying less because of that rollback provision than a house that was built in ’98, in southeast Bend. That is a little more amplified in Bend because of all that new growth. In more established communities where you’ve had an established housing stock for a long time, you’re not as penalized by that rollback provision.”

Under Measure 50, tax bills are calculated using what is known as the assessed value of a property, which is often less than its real market value. Measure 50 also capped the annual growth of assessed value at 3 percent, and it established a rollback provision to calculate the assessed values of new construction or remodeled properties.

The Northwest Economic Research Center report is the latest development in an ongoing educational campaign by the League of Oregon Cities, whose members want to highlight problems with Oregon’s existing property tax system in hopes of encouraging voters to consider changes.

“We want (the system) to be fair, understandable and democratic,” said Chris Fick, a policy analyst for the League of Oregon Cities. “And right now, the system isn’t even one of those things.”

Deschutes County Assessor Scot Langton said the ballot measures did bring stability to Oregon’s property tax system.

“I’ve heard it said that there are three things you can have in a tax system,” Langton said. These are equitability, stability and transparency, meaning that people can understand the system. “And of those three, you can have two,” Langton said. “Until the recession, we had some predictability on it. We definitely didn’t have equitability, and we definitely didn’t have an easy-to-understand system.”

Property taxes are the largest source of revenue for cities around the state, and the 1990s ballot measures restricted the ability of cities and other taxing entities to raise tax rates. “We wanted to communicate to people the way the system is not functioning fairly now, in the hopes that they’ll be open to making some tweaks to improve the system in the future,” Fick said. The League of Oregon Cities commissioned the Northwest Economic Research Center’s report in order to determine whether the property tax laws are affecting the affordability of housing, Fick said.

King said he would like to see changes in property tax law to allow more freedom for voters to determine their local tax rates. Bend officials have complained for years that the city’s permanent tax rate of $2.80 per $1,000 of assessed property value is among the lowest in the state for a city of its size.

Langton said voters in the 1990s were frustrated by the constant fluctuation in their property tax bills, and the measures offered a solution. “You had this uncertainty on your property tax bill, where I think people didn’t like that volatility; they wanted more stability,” Langton said.

King said the predictability in Oregon’s property tax laws does benefit city governments. Specifically, the cushion between the real market values of properties and the lower value on which government can assess a tax, resulted in relatively stable revenue for many cities during the real estate market crash.

— Reporter: 541-617-7829, hborrud@bendbulletin.com