Taxing Time

By Jayson Jacoby November 15, 2013 09:16 am

Baker City residents could see larger changes on their property tax bills due to once-every-six-years reappraisal 


Kathy Orr/Baker City Herald There are about 5,000 tax parcels in Baker City, with a total real market value of $579 million.
Kathy Orr/Baker City Herald There are about 5,000 tax parcels in Baker City, with a total real market value of $579 million.

By Jayson Jacoby

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Property tax bills tend to catch their recipients’ attention under any circumstances but Kerry Savage figured this year’s batch of statements would prompt a larger volume of questions than usual.

Savage is Baker County’s Assessor.

The key difference this year is that, for the first time in six years, Savage and his staff reappraised properties within the Baker City limits.

The county is divided into six zones, with properties in only one zone appraised each year.

Baker City, which has about 60 percent of the county’s population, also boasts the largest share of the county’s residential properties — close to 5,000 separate accounts, Savage said.

By sheer volume, then, Baker City accounts tend to generate quite a few questions and complaints.

But in years such as this one, when city properties were appraised, more owners are apt to scrutinize their bills because the numbers are likely to change more dramatically than in non-appraisal years, Savage said.

In particular, a property’s real market value generally fluctuates more in appraisal years.

(Tax statements show both real market values and assessed values; more about the difference between those values later.)

That’s because county officials, in addition to setting a “benchmark” based on the prices paid for property sales in the past year, actually visit properties, and in some cases go inside with the owner and have a brief look around, Savage said.

In the other five years of the cycle, the county relies mainly on those benchmark sales values to determine real market values.

For instance, if a home that was dilapidated the last time it was appraised was greatly upgraded during the ensuing six years, its real market value could rise substantially when it is reappraised.

This doesn’t mean the tax bill would go up, though — your taxes are based on the property’s assessed value, not its real market value.

Oregon law allows what’s known as the property’s “maximum assessed value” to rise by no more than 3 percent per year, although there are exceptions — if, for instance, the property owner builds a new structure, that structure’s value would be added and the total tax bill likely would increase by more than 3 percent.

Another exception, and one that’s fairly rare, Savage said, involves a property for which the real market value and assessed value are equal, but that amount is well below the maximum assessed value.

(Maximum assessed values were set in 1997-98 after voters approved Measure 50, and are based on a formula; structures built since then had their maximum assessed value set after construction.)

In that case, a reappraisal could boost the property’s real market and assessed value by more than 3 percent, and the tax bill would rise by an equal percentage, so long as the new real market value remains below the maximum assessed value.

Generally speaking, real market values for residential properties in the city didn’t rise or fall drastically this year despite the reappraisals, Savage said.

With 5,000 properties involved there are, of course, exceptions.

Probably the most noteworthy exception is manufactured homes, Savage said.

Their real market values dropped considerably in many cases, by 10 percent or more.

Generally speaking, real market values for residential properties in the city didn’t rise or fall drastically this year despite the reappraisals, Savage said.

With 5,000 properties involved there are, of course, exceptions.

Probably the most noteworthy exception is manufactured homes, Savage said. Their real market values dropped considerably in many cases, by 10 percent or more.

This doesn’t necessarily mean that owners of manufactured homes saw a commensurate cut in their tax bills, although some did, Savage said.

The determining factor here, with all types of properties, is the difference between the property’s real market value and its assessed value.

Typically the real market value is higher than the assessed value.

In some cases, though, these values are identical. In that case the tax bill dropped along with the real market value because the assessed value, which is used to calculate the bill, also went down.

Another factor is what’s known as “compression.”

Compression began after Oregon voters in 1990 approved Measure 5, a property tax limiting initiative.

Measure 5 set maximum tax rates, per $1,000 of real market value (not assessed value), for both education, which includes school districts, ESDs and community colleges, and for “general government,” which includes cities, counties and special districts with tax levies such as libraries, weed control and vector control.

The limits are $5 per $1,000 of real market value for education, and $10 per $1,000 for general government.

Remember, though, that actual tax bills are based on the property’s assessed value.

That means that if a property has a much higher real market value than assessed value, the property owner will stay well below the Measure 5 limits and thus will not be “compressed.”

However, if the real market value is only slightly higher than the assessed value — or if, as we’ve seen happens, the values are identical — then the property is likely to be affected by compression.

What that means, basically, is that the property owner pays less than the full amount of taxes that are actually levied on the property because that full amount would exceed the Measure 5 limits.

Because those limits are based on real market values, when those values drop there is a smaller cushion, and compression is more likely.

Districts that have voter-approved (also known as local option) tax levies, including the library, weed and vector control districts, are the first to be affected by compression.

A property owner who is in compression might not pay any taxes to these districts, Savage said.

(Your tax statement would still list those districts, but there would be no dollar amount shown.)

If a property is still in compression even after the taxes to those districts are removed, then the amount the owner owes to districts with permanent tax levies — cities, the county and school districts — are proportionately reduced until the tax bill no longer exceeds the Measure 5 limits, Savage said.

Savage said this year’s decline in the real market values of manufactured homes and some other properties means cities, counties and other taxing districts took a bigger “loss” from compression — the amount of taxes they would have received had Measure 5 never been passed — than the previous year.

In Baker City the total real market value of properties dropped from $593 million to $579 million — 2.4 percent.

The total amount of taxes not collected due to compression increased from $831,000 to $1,040,000.

Most of that money would have gone to Baker City, Baker County or the Baker School District — the three biggest property tax collectors, Savage said.

Yet despite the larger “losses” due to compression, those districts actually realized a net gain in property tax collections, he said, because the increase in assessed value of other properties more than made up the declines in other properties.

In Baker City, even though the total real market value dropped by $14 million, the assessed value — the figure by which actual tax bills are figured – increased from $484 million to $494 million, about 2.1 percent.

Baker City government, for instance, saw its compression “loss” rise from $76,800 to $115,000.

But overall the city will collect more in property taxes this year, $3,016,000 compared with $2,991,000 last year. 

Properties within the Baker City or Huntington city limits are more likely to be under compression, Savage said.

Those two cities have higher tax rates for city government than other incorporated cities in the county. 

Baker City’s rate is $6.33 per $1,000, and Huntington’s is $9.60. That puts a property much closer to the Measure 5 limit than, say, Haines, where properties pay just $1.75 per $1,000 for city government, or Halfway, where the rate is $1.03 per $1,000.

Also, properties inside any city pay taxes both to that city and to the county, both of which count toward the Measure 5 limit of $10 per $1,000 of real market value for the general government category.

Owners of property outside any city’s limits are less likely to be in compression because they pay taxes to the county, but not to a city, so they generally stay below the Measure 5 limit.

Baker County government’s tax rate is $3.73.

Most rural property owners pay taxes to a fire protection district, a cost that for Baker City residents is included in the city tax rate.

However, the tax rates for rural fire districts are comparatively low — most are less than 75 cents per $1,000 of assessed value.

 

THINK YOUR PROPERTY VALUE IS TOO HIGH?

Property owners who believe their property’s value is too high can appeal to the county Board of Property Tax Appeals (an exception is for certain industrial parcels, which are appraised by the state).

Appeals must be filed by Dec. 31 with the county clerk. Forms are available at the clerk’s office in the Courthouse, 1995 Third St. or online at www.bakercounty.org/clerks/tax.html