Tax Computation Manual

Transcription

1 Tax Computation Manual 2010 Published by Property Tax Division (Rev )

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3 Table of Contents Introduction...ii Key Dates...iii Property Tax Computation Flowchart...iv Chapter 1 Certification and Joint Districts... 1 Chapter 2 Value Component Chapter 3 Tax Computation Chapter 4 Constitutional Limitation Chapter 5 Tax Increment Financing: Urban Renewal Chapter 6 Finalizing the Roll Glossary Appendix A Gap Bonds Appendix B Bond Pockets Appendix C Boundary Changes Appendix D District Formation Chapters (Taxing Authority Limitations) Appendix E Urban Renewal Plan Areas Certified to the Assessor Appendix F Community College Local Option Limits Index Taxpayer Assistance (Rev ) i

4 Introduction Purpose. The county assessor is required by law to compute and extend taxes against property (ORS and ). The same steps necessary to compute and extend taxes occur in each county. The assessor must set policy and establish procedures so that statutory deadlines are met and legal compliance is achieved in this process. This manual is written to help the assessor achieve these results. This manual answers questions and provides guidance regarding tax extension and computation. It also provides a detailed explanation of the process used to bring values and tax certifications together to produce the tax statement. The manual must be used in conjunction with Oregon Revised Statutes and Oregon Administrative Rules. History. Oregon s property tax system, which began in 1846, provides the primary source of funding used by local governments to perform their mandated responsibilities. In recent years, citizen initiatives have been used to limit the property tax system. The first of these was passed in 1990 and is referred to as Measure 5. The main purpose of this initiative was to limit taxes by category. The categories are Education, General Government and Non-Limited. This initiative also created the term Real Market Value. In the November 1996 election, Oregonians passed another initiative. This initiative was known as Ballot Measure 47. The legislature, while writing implementing legislation, determined that Ballot Measure 47 was substantially flawed and it placed Ballot Measure 50 before voters. Ballot Measure 50 was written to provide the same tax relief that Ballot Measure 47 would have provided, but in a slightly different manner. Ballot Measure 50 changed the property tax system from a levy-based system in which districts had to certify an amount to levy in dollars and cents, to a modified tax rate system. This means that the districts now certify levies in dollars and cents for some items and tax rates for others. Under the new system, there are tax rates for a district s Permanent Tax Rate and Local Option Tax Rates. There are dollar levies for bonded debt and for some Local Option Levies. There also may be dollar levies within the district s permanent rate limitation. When a district certifies a dollar levy, the assessor must calculate the tax rate necessary to raise that amount. A district can decide to certify a rate that is less than the full taxing authority available under its permanent rate limit. A district can certify less than its permanent rate limit each year without losing its permanent rate limit authority. In addition, a district can choose to certify a dollar amount under its permanent rate limit authority. When this happens, an operating rate is calculated. The 2009 Legislature enacted HB 3056, which made significant changes to the way urban renewal division of tax is calculated. The new law allows an urban renewal agency to request less that 100 percent of the division of tax amount that could otherwise be raised using the full increment (excess) value that has accrued since a plan s inception. In certain circumstances, the law allows an agency to request that a lesser amount of increment value be used to calculate division of tax, and thereby release some of the accrued increment for use in calculating the amount of tax to be raised for the taxing districts. The calculation of urban renewal taxes is covered in Chapter 5. In addition to the main part of the manual, which focuses on the tax calculation process, we have included a glossary and several appendices. The glossary is designed to help you with understanding the terminology and jargon relating to tax computation. ii Introduction (Rev )

5 Key Dates January 1 Assessment date (ORS ). Second Tuesday in March March 31 Third Tuesday in May June 30 Regular election date for local districts. Local option levies and bonds may be approved. Double majority is required (Section 11(8), Article XI). Maps and descriptions of all boundary changes ( annexations, new districts, or divisions) must be filed in final form with the assessor and the Department of Revenue by this date for the change to be recognized on the roll in the tax year beginning July 1 (ORS ). Local option levies and bonds may be approved. Double majority is not required (Section 11k, Article XI). Last day of fiscal year for local governments. Budgets for the next fiscal year must be adopted. July 1 Lien date (ORS ). July 15 Local districts give notice of tax levy to county assessor by submitting two complete copies of certification form (LB/ED/ UR 50). July 15 The county assessor may grant an extension of time to no later than October 1 for filing tax information after July 15 [ORS (8)]. Third Tuesday in September September 25 Regular local district election date. Local option levies and bonds may be approved. Double majority is required (Section 11(8), Article XI). With few exceptions, the assessor may not make changes to the roll after this date (ORS ). September 25 Assessor certifies value of joint taxing districts (ORS ). Early October Assessor certifies and turns roll to tax collector in time to enable tax statements to be mailed by October 25. (ORS and ). October 25 Last day to mail tax statements (ORS ). Nov. 4 (or 10 days after roll turn) 1st Tuesday after 1st Monday in November November 15 Within 10 days of roll turn, and no later than November 4, the Assessor certifies a summary of the assessment roll (SAL tables) to the Dept. of Revenue (ORS and ). Regular local district election date. Local option levies, a new district s permanent rate at general election, and bonds may be approved. Double majority is not required (Section 11k, Article XI). Property taxes are due (Rev ) Key Dates iii

6 Property Tax Computation Flowchart Update code areas Rate Computation Value Spread values by district and code area Apply adjustments for Fish and Wildlife, nonprofit homes, and urban renewal Review levies and tax rates submitted by districts Separate taxes by type and category for each district Levies and Rates Submitted by Districts for Tax Calculation Compute tax rates for levies by type and category for each district Compute district billing rate by type and category Rate Compute amount district billing rate will raise by type and category Add other amounts to be collected. Amount Raised Compute and apply limits Finalize roll iv Flowchart (Rev )

7 Chapter 1 Certification and Joint Districts 1.1 Tax Certification Each taxing district that intends to impose a tax on property must certify its taxes or tax rates to the assessor s office by July 15 of each year [ORS (2) & (4)]. In addition, non-governmental entities that have statutory authority to place amounts on the tax roll also must certify those amounts to the assessor s office by July 15 [ORS (5)]. Each tax or amount certified to the assessor (or portion thereof) must be listed under its appropriate Measure 5 category [ORS and ]. 1 Urban renewal agencies also must certify the amount of urban renewal tax increment financing they want to receive by July 15 [ORS (2)]. Extension of Time to Certify The assessor can grant an extension of time for the municipal corporation to file the certification if there is good and sufficient reason. A written request for an extension must be submitted to the assessor s office by July 15. The assessor confirms the request in writing. Extensions can be granted until October 1 [ORS (9)]. Amounts not certified by July 15 or the extension date shall not be included on the roll (ORS ). Certification Documents The Department of Revenue (DOR) supplies the certification forms to all of the districts and entities that use the tax roll. Separate forms are provided for education districts ( ED-50), general government (non-education) districts ( LB-50), and urban renewal agencies ( UR-50). Every taxing district that is imposing an ad valorem property tax or another assessment, fee or charge that is considered a tax on property must submit to the assessor two copies of the certification form and the resolution categorizing the taxes or other amounts. Districts subject to local budget law that certify taxes or other charges to the assessor must also file two copies of their resolutions that adopt the budget, make appropriations and impose the tax or other charges along with the categorizing resolution and the certification form [ORS (6)]. The following districts are not subject to local budget law: Diking districts, ORS Chapter 551 District improvement companies, ORS Chapter 554 Drainage districts, ORS Chapter 547 Export trading corporations, ORS to Health districts, ORS to Highway lighting districts, ORS Chapter 372 Hospital financing authorities, ORS to Housing authorities that do not run urban renewal activities using division of tax financing, ORS to and ORS Chapter 456 Irrigation districts, ORS Chapter 545 P ublic utilities that do not impose an ad valorem tax, ORS Chapters 225 and 261 Road districts (other than county road districts that impose an ad valorem tax), ORS Chapter 371 Soil and water conservation districts that do not impose an ad valorem tax, ORS Chapter 568 Water control districts that do not impose an ad valorem tax, ORS Chapter Categorization of portions of taxes may be required depending on the intended uses of the portions as found by the Oregon Supreme Court in Urhausen v. City of Eugene in declaring subsection (3) of ORS unconstitutional. A general government district levy is no longer fully categorized in the general government category if a portion is for education (Rev ) Chapter 1 Certification and Joint Districts 1

8 Intergovernmental entities created under ORS , including councils of governments described in ORS to are generally exempt from regular local budget law. However, they are subject to local budget law when creating the budget for any year in which they impose ad valorem taxes. Review Timing One of the most important parts in the taxing process is the review of a district s certification documents. It is critical that the assessor completes all the review steps outlined in this chapter as soon as he or she receives a district s documents. By April of each year, the Department of Revenue provides the counties with Tax Levy Certification Transmittal Sheets. The Transmittal Sheets are sent to the counties by but are also available in hard copy by mail upon request. There are two boxes at the top of the Transmittal Sheets. Please check one to indicate whether the certification documents are OK or if you need DOR to review them. Please write detailed comments on the Tax Levy Certification Transmittal if you are requesting department review. Your comments help the department s analysts understand your concerns and help them decide if any action is needed. The assessor should send the department a copy of the certification documents for each district. Multiple districts documents may be sent under one transmittal sheet if they are all OK. If DOR attention is required to resolve a problem with a district, send its certification documents under a separate transmittal. Under local budget law (ORS ), the department has 30 days after the submission of the district s levy certification to challenge the budget process in Tax Court. Failure to comply with local budget law could result in tax being withheld from the roll. Forward the certification documents and the transmittal sheets to the department within seven days from the day you receive them from the district [OAR (A)]. If you are unable to obtain complete documentation, please forward what is submitted as soon as possible after review. Please do not hold the certification documents until all of them have been reviewed. District History You should create a history file for each district. The history file should contain, at minimum, the permanent rate limit certified by DOR in May 1998, any other operating tax-rate limit established under law, or documentation of the voter-approved permanent rate. You should retain copies of the voter-approved ballot title for each local option tax during the life of the tax. In addition, the history file may include copies of prior years certification documents, merger, or annexation information, and any other data or correspondence pertaining to that district. This type of file and documentation will be helpful during the tax certification review process. What to Look for When Reviewing Certification Documents: Form LB-50 District Name and Contact - Check that the district s name and address information is filled in the top portion of the form, and that a contact person and phone number is shown. Certification - If the district is subject to Local Budget Law, check one box. Only one of the two boxes should be checked. If neither box is checked, or if both are, contact the district for a corrected form. 2 Chapter 1 Certification and Joint Districts (Rev )

9 Part I: Total Property Tax Levy Line 1: This is the tax rate or amount the district is imposing for the year under its permanent rate limitation. Is the rate equal to or less than the permanent rate shown on line 7? If it is a levy amount, you need to make an additional check after the rate is computed in October. The computed rate before offsets cannot exceed the permanent rate limit. Lines 2 and 3: These lines are for the local option taxes the district is imposing for the year. Either an amount of tax or a tax rate may be shown. The amount or rate cannot exceed the amount or rate that was authorized by the voters. The amount or rate must be equal to or less than the amount or rate shown in the schedule in Part III of the form. If this is the first year the tax is imposed, the district must include a copy of the approved ballot question. Keep the ballot measure in your history file throughout the life of the local option tax. The amount or rate shown on lines 2 or 3 must be equal to or less than the amount or rate in the ballot measure in your files. Line 4: Only the City of Portland uses this line. (Lines 5a 5c: See the worksheet on the back of the LB-50 for an explanation.) Line 5a: Make sure voters approved the bonds prior to October 6, Advanced refunding issues are treated as if they were approved on the same date as the original issue which they are refunding. Line 5b: Make sure voters approved the bonds after October 6, Line 5c: This is the total amount necessary for the district to make its bonded debt payment (the sum of lines 5a and 5b). This must be a dollar amount; it cannot be a rate. Make sure the district has a bond levy or levies if they fill in this box. All of the rates or amounts on lines 1 through 5 must match the rates and amounts in the resolution levying tax. If they do not match, contact the district so it can correct the certification to match the resolution or correct the resolution to match the certification. The resolution can be changed only by official action of the governing body unless the problem is just a clerical mistake. Part II: Rate Limit Certification Line 6: For most districts, this should be the permanent rate limit DOR certified to the district in May Verify the permanent rate limit by checking your records or refer to Appendix D of the Local Budgeting Manual. Exceptions: 1. Districts in Linn and Deschutes counties that received new rate limits in Refer to the June 17, 1999 mailing from DOR to verify the rate limits. 2. Districts that have merged or consolidated (see line 9). 3. Increases due to expiring gap bond levies. The district should have notified you and the department that its gap bonds have expired and the department should have responded with a notification of the correct permanent rate limit. 4. New districts that have voter-approved permanent rate limits. Line 7: This is the date a new permanent rate was approved by the voters (Rev ) Chapter 1 Certification and Joint Districts 3

10 If line 7 is used, there also should be a ballot measure included with the documents submitted to you. If a district has levied an ad valorem property tax in the past, they cannot have a new permanent rate. Line 8: This is the new permanent rate limit for the district that remains after a merger or consolidation. It is limited by section 11(3)(d), Article XI of the Oregon Constitution to the rate that will raise the same tax revenue as the districts would have cumulatively produced in the year of merger if the merger had not occurred. This rate is estimated before final district values are known. The assessor must compute the actual permanent rate after final values are known in October. Notify the district and DOR when the actual permanent rate has been calculated. The rate to use on the roll is the smallest rate (i.e., the estimated rate certified or the permanent rate you calculate with the value used to compute taxes). Part III: Schedule of Local Option Taxes If there are entries on lines 2 or 3, this section must be completed. The amounts or rates shown on lines 2 or 3 must be equal to or less than those in the last column here. Check the first year levied and the final year to be levied columns to determine if the taxes can be imposed again this year. To verify this information, compare it with the authorizing ballot measure in your files. Part IV: Special Assessments, Fees, and Charges Review the charges that are listed and if they are subject to constitutional limitations or not. Make sure the district certifying these assessments, fees, or charges has cited the statutory authority to place these charges on the rolls. Form ED-50 Certification - Check one box. Only one of the two boxes should be checked. If neither box is checked, or if both are, contact the district for a corrected form. Part I: Total Property Tax Levy Line 1: This is the tax rate or amount the district is imposing for the year under its permanent rate limitation. The rate must be equal to or less than the permanent rate limit shown on line 5. If the school district has certified a rate less than the maximum allowed, see ORS for required reporting to Department of Education. If it is a levy amount, you need to make an additional check after the rate is computed in October. The computed rate before offsets cannot exceed the permanent rate limit. Lines 2 and 3: These lines are for the local option taxes the district is imposing for the year. Either an amount of tax or a tax rate may be shown. The amount or rate may not exceed the amount or rate that was authorized by the voters. The amount or rate must be equal to or less than the amount or rate shown in Part III of the certification. Education service districts (ESDs) cannot use these lines. 4 Chapter 1 Certification and Joint Districts (Rev )

11 If this is the first year the tax is imposed, the district must include a copy of the approved ballot question. Keep a copy of the ballot measure in your files through the life of the local option tax. The amount or rate shown on lines 2 or 3 must be equal to or less than the amount or rate shown in the ballot measure. (Lines 4a 4c: See the worksheet on the back of the ED-50 for an explanation.) Line 4a: Make sure voters approved the bonds prior to October 6, Advanced refunding issues are treated as if they were approved on the same date as the original issue which they are refunding. Line 4b: Make sure voters approved the bonds after October 6, Line 4c: This is the total necessary for the district to make its bonded debt payment (the sum of lines 4a and 4b). This must be a dollar amount; it cannot be a rate. Make sure the district has a bond levy or levies if this box is filled. All of the rates or amounts on lines 1 through 4 must match the rates and amounts in the resolution levying tax. If the two documents do not match, call the district for clarification. They may need to submit a revised Form ED-50 that matches the resolution. All of the rates or amounts on lines 1 through 4 must match the rates and amounts in the resolution levying tax. If they do not match, contact the district so it can correct the certification to match the resolution or correct the resolution to match the certification. The resolution can be changed only by official action of the governing body unless the problem is just a clerical mistake. Part II: Rate Limit Certification Line 5: For most districts, this should be the permanent rate DOR certified to the district in May Verify the permanent rate limit by checking your records or refer to Appendix D of the Local Budgeting Manual. Exceptions: 1. Districts in Linn and Deschutes counties that received new rate limits in Refer to the June 17, 1999 mailing from DOR to verify the rate limits. 2. Districts that have merged or consolidated (see line 7). 3. Increases due to expiring gap bond levies. The district should have notified you and the department that its gap bonds have expired and that the department should have responded with a notification of the correct permanent rate limit. You may check this new rate in Appendix A of this manual or Appendix E in the Local Budgeting Manual. Line 6: This is the date voters approved a new permanent rate. If line 6 is used, there also should be a ballot measure included with the documents the districts submit to you. If a district has levied an ad valorem property tax in the past, there cannot be a new permanent rate. Line 7: This is the new permanent rate limit after a merger or consolidation. This rate is estimated before final district values are known. Compute the actual permanent rate after final values are known in October. Notify the district and DOR when the actual permanent rate has been calculated. Use the smaller of the two rates to compute taxes (Rev ) Chapter 1 Certification and Joint Districts 5

12 Part III: Schedule of Local Option Taxes If there are entries on lines 2 or 3, this section must be completed. The amounts or rates shown on lines 2 or 3 must be equal to or less than those shown in the last column here. Check the First year levied and the Final year to be levied columns to see that the taxes still qualify to be imposed this year. Verify this information by comparing it to the authorizing ballot measure in your files. Form UR-50 The following general discussion outlines the differences between the various plan types. Bear in mind that, under the new law passed in 2009 (HB 3056), every type of plan may now request less than 100 percent of the division of tax amount they are entitled to, by specifying an amount of increment (excess) value to use that is less than the full amount of increment value. Part 1: Option 1 Plans: These plans receive the full amount of division of tax from all levies except local option or bond levies approved by vote after 10/6/2001. A special levy is allowed. If a special levy is requested, a dollar amount or the word remainder should be shown under Special Levy Amount. Check that any special levy, when added to the division of tax amount, does not exceed the plan s maximum authority. Be sure to recompute each plan s maximum authority each year. See Chapter 5, section 5.5 (Determining Maximum Authority) of this manual. If the total exceeds the maximum authority, the assessor must reduce the special levy amount so that the total extended on the roll is equal to the plan s maximum authority. You will not be able to do this until the tax rate calculation is run during roll turn. If an amount of increment value to use is entered, the 100 percent of division of tax box should not be checked, and no special levy is allowed. Part 2: Option 3 Plans: These plans divide taxes from all levies. Division of tax may necessitate the use of less than the whole amount of the excess value. A special levy is allowed. If an amount of Increment Value to Use is entered, check that it is less than or equal to the amount necessary to raise the amount of division of tax stated in the agency s ordinance adopting Option 3 in If a special levy is requested, a dollar amount or the word remainder should be shown in Special Levy Amount. If an Option 3 plan enters both an amount of increment value to use and a special levy amount, the amount of special levy cannot exceed the amount of special levy that would have been available within the plan s maximum authority, had the plan requested the amount of division of tax stated in the ordinance adopting Option 3. If the plan requests 100 percent from division of tax, check that any special levy, when added to the division of tax amount, does not exceed the plan s maximum authority (as computed for the year). If the sum of the special levy plus the division of tax amount exceeds the maximum authority, the assessor must reduce the special levy amount so the total extended on the roll does not exceed the plan s maximum authority. You will not be able to do this until the tax rate calculations are run in September/October. 6 Chapter 1 Certification and Joint Districts (Rev )

13 Part 3: Other Standard Rate Plans: These plans receive division of tax revenue from all levies. They may request 100 percent of division of tax available, or they may specify an amount of increment value to use that will raise a lesser amount of division of tax. Part 3 plans were adopted prior to October 6, 2001, do not qualify as existing plans, and had not been Option 1 or 2 Plans on October 6, 2001 prior to losing existing status. No special levy is allowed. Part 4: Other Reduced Rate Plans: These plans exclude from the calculations any local option or bond levies that were approved after October 6, Part 4 plans may request either an amount of increment value to use, or 100 percent from division of tax. All plans adopted after October 6, 2001 should be certified in this category as well as plans that had been Option 1 or 2 Plans on October 6, 2001 prior to losing existing status. No special levy is allowed. Things to Look for When Reviewing the Resolution Statements Are all resolutions present? Every district that imposes a tax on property must submit a resolution that states the measure 5 category of the tax or other charge. Districts that are subject to Local Budget Law must also provide resolutions that adopt the budget, make appropriations and impose the tax. Urban renewal agencies must submit a resolution to request division of tax or a special levy. Is the tax amount or tax rate on the LB-50, ED-50 or UR-50 the same as the amount or rate in the resolution imposing the tax? If the two documents do not match, call the agency or district for clarification. They may need to submit a revised form that matches the resolution. The resolution can be changed only by official action of the governing body unless the problem is just a clerical mistake. 1.2 Joint Districts A joint district is a taxing district with boundaries that cross county lines. A joint county is a county that shares a district with one or more other counties. Joint district apportionment is the process of allocating the tax levy or tax offsets of a joint district to all the counties in which the district lies (as required by ORS and ). Counties must exchange assessed values by September 25 each year to enable the apportionment. Joint district apportionment ensures that the taxpayers in the district are taxed using the same tax rate, regardless of county boundaries. Taxes that require apportionment are bond levies, local option tax levy amounts, urban renewal special levies, and dollar amount levies certified under permanent rate limitation. Taxes certified as rates are not apportioned. Each county sharing a joint district is responsible for the accuracy of the tax rate computation. The tax levy is apportioned for collection to each county involved based on the share of rate computation value (RCV) of the district in each county. Because apportionment is based on RCV, this step cannot be done until RCV is known. This means if an Option 3 urban renewal plan is in a district, the iterations described in Chapter 5, example 2 must be run through first and communicated between counties. Note also that the RCV is net of the urban renewal increment value used, not necessarily net of the entire increment value. So if an urban renewal agency requests less than the full increment value be used, determine the RCV of the portion of a district inside the plan area by adding the increment not used to the frozen value. Share both this frozen value plus increment not used and also the RCV of any portion of the district outside of the plan area. See Chapter 2, section 2.4 for more information on how RCV is determined. Following is an example of joint district apportionment: (Rev ) Chapter 1 Certification and Joint Districts 7

14 Joint District Apportionment Example County A Joint District RCV $21,600,000 RCV $10,800,000 RCV $3,600,000 County B County C Levies to be Apportioned R ate Computation Value (RCV) Excluded from Limit General Government In County A $21,600,000 J oint district bonds $41,250 In County B 10,800,000 Joint district local option $25,000 In County C 3,600,000 District RCV $36,000,000 The joint counties shared the RCV of $36 million for the district on September 25. The tax information comes from the districts certification form. In this example, it is an L B-50 showing a local option tax amount certified under the Measure 5 category for general government and a bond tax amount certified under the category e xcluded from limitation. Chapter 4 explains more about Measure 5 limits. Step 1. Percent of RCV in Each County Compute the percent of the district s RCV in each county by dividing each county s RCV by the total RCV of the district. The total of all the percentages must be 100 percent. Carry the percentages out far enough to reach 100 percent. County RCV Total RCV Value Percentage County A $21,600,000 $36,000,000 = 60% County B 10,800,000 $36,000,000 = 30% County C 3,600,000 $36,000,000 = 10% Total $36,000, % Step 2. Portion of Levy to be Raised by Each County Calculate the portion of the levy to be raised by each county by multiplying the total levy by each county s value percentage. Value Percentage Levy Certified Levy to be Raised County A 60% $41,250 = $24,750 County B 30% $41,250 = 12,375 County C 10% $41,250 = 4,125 Bond Levy Total $41,250 County A 60% $25,000 = $15,000 County B 30% $25,000 = 7,500 County C 10% $25,000 = 2,500 Total Local Option Tax $25,000 8 Chapter 1 Certification and Joint Districts (Rev )

15 Step 3. Joint District Rate Computation Once the tax levy is apportioned among the joint counties, compute the tax rate. Figure rates by dividing the portion of the tax levy apportioned to a county by the RCV of the district in that county. Each joint county must perform this calculation. All counties must arrive at the same tax rate. If the rates are not the same, repeat Steps 1 and 2 to reapportion the levy. Levy to RCVBond Rate be Raised County A $24,750 $21,600,000 = County B 12,375 10,800,000 = County C 4,125 3,600,000 = Bond Total $41,250 $36,000, Local Option Rate County A $15,000 $21,600,000 = County B 7,500 10,800,000 = County C 2,500 3,600,000 = Local Option Total $25,000 $36,000, (Rev ) Chapter 1 Certification and Joint Districts 9

16 10 Chapter 1 Certification and Joint Districts (Rev )

17 Chapter 2 Value Component 2.1 Determine Account Value for All Accounts in the County In order to calculate taxes, the assessor must determine a minimum of three values for each account. These are: a market value ( Real Market Value; RMV), a limitation value ( Maximum Assessed Value; MAV), and the lesser of these which is the Taxable Assessed Value (TAV). If the account has special assessments, such as farm or forest special assessment, these accounts also will have a Maximum Specially Assessed Value ( M SAV) and a Specially Assessed Value ( SAV). Refer to the glossary for more information on these terms. The values on every account must be adjusted each year to reflect that account s value as of January 1 (ORS ). Property and property tax account are defined as everything included within a single property tax account. A property tax account is the administrative division of property for listing on the assessment roll. The following key value definitions are used in the process of computing property taxes: Real Market Value ( RMV) The value the property would sell for on the assessment date in a competitive market between a knowledgeable buyer and seller without compulsion if the property were used at its highest and best use. (ORS ). Measure 5 Value (M5V) The value that was taxed under the Measure 5 (Section 11b, Article XI of the Oregon Constitution) system. For property assessed at its full market value under Measure 5, M5V will be equal to RMV. For specially assessed property, such as farm and forest property, M5V is the statutorily set value used to calculate the limits under Measure 5. It also is called Specially Assessed Value ( SAV). For partially exempt property such as property subject to the veterans exemption, M5V is the taxable value after the exempt amount has been subtracted. (ORS ). Specially Assessed Value ( SAV) The statutorily set value determined for specially assessed property. It applies only to specially assessed property and is the same as M5V for those properties. Rate Computation Value (RCV) The total value of the property in a district used to compute the district tax rate. This is the TAV with additions for State Fish and Wildlife Commission and nonprofit housing properties, less urban renewal excess value used. This value has been called value to compute the rate and appears on the Summary of Assessments and Levies (SAL) that way. Taxable Assessed Value (TAV) The value to which the tax rates are applied to calculate taxes. In the statute and the constitution, TAV is referred to as assessed value (AV) (ORS ). TAV is equal to AV after reduction for all exemptions. 2.2 Establish and Update Code Areas The property account is the basic building block of the property tax system. Each property account exists in a particular code area. Code areas are the puzzle pieces that, when put together, form a county. Each code area is a unique and distinct geographic grouping of taxing districts in a county (ORS ). Code area boundaries do not overlap, except to facilitate calculating some partial exemptions. The map below is an example of code area divisions in a fictitious county. The county has two school districts and a city that straddles each of the school districts. In order to segregate district groupings in this county by district boundaries, code areas 5-2 and 11-1 identify the city portion of each school district and code areas 5-1 and 11-2 separate the school districts outside the city. Multiple property tax accounts exist within each code area (Rev ) Chapter 2 Value Component 11

18 Sample County Code Areas Code Area 5-1 County RFPD ESD School No. 5 TAV $21,000,000 M5V $26,250,000 Code Area 5-2 County City ESD School No. 5 TAV $45,000,000 M5V $56,250,000 Code Area 11-1 County City ESD School No. 11 TAV $33,000,000 M5V $41,250,000 Code Area 11-2 County RFPD ESD School No. 11 TAV $18,000,000 M5V $22,500,000 The assessor must consider district boundary changes when updating code areas. District boundaries may change for several reasons: territory may be annexed or withdrawn from a district; a district may form or dissolve, or districts may consolidate or merge. See Appendix C. In each of these cases, code areas may need to be created or changed to reflect a new mix of districts. The assessor may change the boundaries of a district only if the changes are filed with DOR by March 31 (ORS ). For more information on boundary changes see DOR s Boundary Change Information manual. Once the code area boundaries have been determined, the values of property located in each area can be totaled to determine the code area values. Use the TAV to calculate the tax. Use the M5V by code area to determine bonding limits and for reporting purposes. Value Code Area TAV M5V Code 5-1 $21,000,000 $26,250,000 Code 5-2 $45,000,000 $56,250,000 Code 11-1 $33,000,000 $41,250,000 Code 11-2 $18,000,000 $22,500, Spreading the Value Spreading the value means assigning the code area value to each district that taxes in the code area. For example, in Sample County the ESD is in each of the four code areas. Therefore, the value of the ESD would be the total of the values of the four code areas. In Sample County, the ESD TAV is $117 million. (See chart below.) The chart below provides an example of spreading the values for each district in Sample County. To determine a district s value, add all of the code area values in which the district exists. This sum provides the value for each taxing district. 12 Chapter 2 Value Component (Rev )

19 Code Areas Code Area TAV County TAV City TAV RFPD TAV ESD TAV School #5 TAV School #11 TAV 5-1 $21,000,000 $21,000,000 0 $21,000,000 $21,000,000 $21,000, $45,000,000 $45,000,000 $45,000,000 0 $45,000,000 $45,000, $33,000,000 $33,000,000 $33,000,000 0 $33,000,000 0 $33,000, $18,000,000 $18,000,000 0 $18,000,000 $18,000,000 0 $18,000,000 Total District TAV $117,000,000 $78,000,000 $39,000,000 $117,000,000 $66,000,000 $51,000, Establish Value to Compute the Rate Rate Computation Value (RCV) There are three adjustments that must be made to calculate the rate computation value. Certain State Fish and Wildlife Commission (SFWC) values and nonprofit housing (NPH) values are added to the spread value. Excess urban renewal values are subtracted from the spread value [OAR (9)]. These adjustments affect specific code areas and may not occur in every county or for every district. 1. SFWC properties discussed in ORS are known as funded exemptions. Certain properties owned by the SFWC are exempt from property taxes but the state pays an amount equal to the tax that would have been due if the property were taxable. The values for these properties are separately added to the code areas and spread to the districts in which the property is located. A signed notice of the tax amount due, value and explanation of how the value was arrived must be mailed to the SFWC by October Nonprofit housing properties discussed in ORS also are funded exemptions. ORS specifies that the Department of Revenue pays the taxes that would have been due had these properties not been exempted from taxation. The values for these properties are separately added to the code areas and spread to the districts in which the property is located. 3. Urban renewal, also known as tax increment financing, establishes a base or frozen value used when computing tax rates. The rolls contain only current values of individual properties. Any value increase (aka increment) over the base or frozen value has to be subtracted from the current values before computing the tax rates. But, only subtract the increment value actually used for division of tax in the case of Option 3 plans or a plan for which the agency has specified an amount of increment value to use. For an in-depth discussion on this, see Chapter 5. In Sample County, we find that the county has nonprofit housing in code area 5-2 in the amount of $400,000 and State Fish and Wildlife Commission property in code area 11-2 in the amount of $50,000. There is no excess urban renewal value in the example. Code Areas Code Area TAV Value County City RFPD ESD School #5 School # $21,000,000 $21,000,000 0 $21,000,000 $21,000,000 $21,000, $45,000,000 $45,000,000 $45,000,000 0 $45,000,000 $45,000, $33,000,000 $33,000,000 $33,000,000 0 $33,000,000 0 $33,000, $18,000,000 $18,000,000 0 $18,000,000 $18,000,000 0 $18,000,000 District TAV $117,000,000 $78,000,000 $39,000,000 $117,000,000 $66,000,000 $51,000,000 Nonprofit Housing 400, , , ,000 0 State Fish & Wildlife 50, ,000 50, ,000 Rate Computation Value (RCV) $117,450,000 $78,400,000 $39,050,000 $117,450,000 $66,400,000 $51,050,000 After making adjustments for nonprofit housing and SFWC, we now have the values to use to calculate taxes or the RCV. (ORS ) (Rev ) Chapter 2 Value Component 13

20 14 Chapter 2 Value Component (Rev )

21 Chapter 3 Tax Computation 3.1 Computing District Tax Rates (ORS to ) Taxing districts may certify to the assessor a permanent tax rate for operations. Some districts will have rate-based local option taxes, for which the districts will certify tax rates. These rate-based taxes must be within their respective authority. Some districts will not certify a rate, but rather a dollar amount under their permanent rate limitation. Some local option taxes will be fixed-dollar levies, rather than rate-based levies. Bond and gap bond taxes always will be certified as dollar amounts, rather than rate taxes. For these dollar amount levies, the assessor will need to calculate a tax rate. Because each type of tax is treated differently, the assessor will need to keep track of tax rates and levies made under various authorities. Taxing districts may certify taxes under permanent operating rate, local option, gap bond, general obligation bond, or urban renewal special levy authority. (Urban renewal special levies are explained in Chapter 5). The assessor will handle each type of authority separately in the rate computation process. The previous chapters have shown how tax levy and rate information is certified to the assessor. This manual also has explained how to determine each district s taxable value. Given these pieces of information, the assessor can calculate tax rates for each district that has certified a dollar amount. This must be done for any district that certifies bonds, has fixed-dollar local option taxes, or certifies a dollar amount under its permanent operating rate authority. Example 3.1 This example shows a fictitious county with six taxing districts. Three are categorized as education by Measure 5 (Section 11(b), Article XI of the Oregon Constitution). These are the taxes for School, ESD, and Community College. Three are categorized as general government by Measure 5 and include County, City, and Transit District. In this example, the boundaries of all of these districts are completely within the boundaries of the county (no joint districts). There is no urban renewal agency operating within this county. District Name Permanent Rate Tax Certification Local Option Tax Certification Gap Bond Levy Certification Excluded Bond Levy Certification County $ NA- $250,000 $25,000 City $ $ NA- -NA- Transit $4,250,000 -NA- -NA- -NA- School $ NA- $80,000 $135,000 ESD $ NA- -NA- -NA- Community College $ NA- -NA- $285,000 In this example, each taxing district has permanent operating rate authority. All but the transit district certified a rate using this authority. Except for the transit district, the assessor will not need to calculate a rate for this type of tax. The transit district certified a $4.25 million amount to be levied under its permanent operating rate authority. The records in the assessor s office show that the permanent rate limit for the transit district is $ per $1,000 of taxable assessed value. The assessor must calculate a tax rate for this district. If the calculated rate is equal to or less than $4.6000, the assessor will use the calculated rate in extending operating taxes for the transit district. If the calculated rate is higher than $4.6000, the assessor will use the permanent rate limit ($ in this case) for extending taxes. This will reduce (Rev ) Chapter 3 Tax Computation 15

22 the levy of the district because the certified amount would have exceeded the constitutional limitation. The assessor should contact DOR before making the reduction (ORS ). The city has a local option tax that is rate based. The city has certified a rate of $ The assessor will need to verify that this rate does not exceed the rate approved by the voters. The assessor will not calculate a rate for this tax. The county has submitted two dollar-amount tax levies, one using its gap bond authority, and the other using excluded bonded debt authority. The school district and the community college have submitted fixed dollar amounts using excluded bonded debt authority. The school also certifies a gap bond amount. Tax rates must be calculated only if the taxing district certifies a dollar-amount levy. In this example, the districts and levies that require rates to be calculated are: District Name Permanent Rate Tax Certification Gap Bond Levy Certification Excluded Bond Levy Certification County $250,000 $ 25,000 Transit $4,250,000 School $ 80,000 $135,000 Community College $285,000 The assessor must determine the value for each district and establish two code areas. The following table shows the breakdown of taxing district and code area values. Code Area 1 County School ESD Community College Nonprofit Home 0 Fish & Wildlife $10,000 TAV $356,176,440 Code Area 2 County City Transit School ESD Community College Nonprofit Home 290,000 Fish & Wildlife 0 TAV $940,890,500 These values are displayed in the following table: Values by Code Area Code Area Code 1 Code 2 Totals Taxable Assessed Value $356,176,440 $940,890,500 $1,297,066,940 Nonprofit Home Value 0 290, ,000 Fish & Wildlife Value 10, ,000 Urban Renewal Excess Value Rate Computation Value $356,186,440 $941,180,500 $1,297,366,940 The values are spread to the districts as follows. Note that there is no urban renewal excess value. Chapter 3 Tax Computation (Rev )

23 District Name Taxable Assessed Value Nonprofit Home Value Fish & Wildlife Value Rate Calculation Value County $1,297,066,940 $290,000 $10,000 $1,297,366,940 City $940,890,500 $290,000 0 $941,180,500 Transit $940,890,500 $290,000 0 $941,180,500 School $1,297,066,940 $290,000 $10,000 $1,297,366,940 ESD $1,297,066,940 $290,000 $10,000 $1,297,366,940 Community College $1,297,066,940 $290,000 $10,000 $1,297,366,940 Now that district values have been spread, rates can be calculated. The formula for the calculation of tax rates is: Tax Amount (levy) = Tax Rate (per dollar) Rate Calculation Value The rate calculation is truncated at seven decimal places [OAR , section (1)]. This rate may be converted to a rate per $1,000 of taxable assessed value by multiplying the rate by 1,000. This formula is: Tax Rate (per dollar) x 1,000 = Tax Rate Per $1,000 In this example, the tax rate for the transit district would be as follows: $4,250,000 $941,180,500 = This rate is truncated resulting in a rate of x 1,000 = $ per $1,000. The following table shows the calculated rates for this example: County Gap Bond Levy County Excluded Bond Levy Transit Permanent Rate Levy School Gap Bond Levy School Excluded Bond Levy Comm Coll Excluded Bond Levy Permanent Levy (if dollar amount) -NA- -NA- $4,250,000 -NA- -NA- -NA- Local Option Levy (if dollar amount) -NA- -NA- -NA- -NA- -NA- -NA- Gap Bond Levy $250,000 -NA- -NA- $80,000 -NA- -NA- Urban Renewal Special -NA- -NA- -NA- -NA- -NA- -NA- Bond Levy -NA- $25,000 -NA- -NA- $135,000 $285,000 Total Levy $250,000 $25,000 $4,250,000 $80,000 $135,000 $285,000 Minus Amt. Raised by Joint County Net Levy $250,000 $25,000 $4,250,000 $80,000 $135,000 $285,000 Taxable Assessed Value 1,297,066,940 1,297,066, ,890,500 1,297,066,940 1,297,066,940 1,297,066,940 Plus: Nonprofit Homes 290, , , , , ,000 Plus: Fish & Wildlife 10,000 10, ,000 10,000 10,000 Less: UR Excess Assessed Value Rate Calculation Value (RCV) $1,297,366,940 $1,297,366,940 $941,180,500 $1,297,366,940 $1,297,366,940 $1,297,366,940 Tax Rate (per $1,000) The formula is: Net Levy RCV = Rate. (Results are converted into a rate per 1,000.) County Gap Bond: $250,000 $1,297,366,940 = $.1926 County Excluded Bond: $25,000 $1,297,366,940 = $.0192 Transit Permanent Rate: $4,250,000 $941,180,500 = $ School Gap Bond: $80,000 $1,297,366,940 = $.0616 School Excluded Bond: $135,000 $1,297,366,940 = $.1040 Community College Bond: $285,000 $1,297,366,940 = $ (Rev ) Chapter 3 Tax Computation 17

24 The assessor now has rates for each type of tax for all ad valorem taxing districts. The following table shows the tax rates for each type of Measure 50 taxing authority for each district, both calculated and certified. District Name Permanent Rate Tax Certification Local Option Tax Certification Gap Bond Levy Certification Excluded Bond Levy Certification County $ NA- $ $ City $ $ NA- -NA- Transit $ NA- -NA- -NA- School $ NA- $ $ ESD $ NA- -NA- -NA- Community College $ NA- -NA- $ The amounts in bold are the rates calculated by the assessor to raise the amount certified. The assessor must ensure that the calculated transit district rate of $ is within the permanent tax rate limitation ($4.6000). 3.2 Computing Billing Rates Now that the assessor has established rates for each type of Measure 50 tax, the next step is to establish the rates that will be used to extend these taxes on the tax statement against individual properties. The rates to be used on the tax statement are called billing rates. In most cases the billing rate for all levies, except the county operating levy, will be the same as the rate certified or calculated with no adjustment. However, offsets may occur if a district dissolves. Offsets If a special district dissolves, the treasurer applies any remaining funds of the dissolved district toward the remaining indebtedness of the district. If there are excess funds available after making the indebtedness payments, those funds are certified to the assessor, and offset amounts may be calculated for the districts that shared territory with the dissolved district. If offsets are calculated, the funds are then distributed to the districts (ORS ). If the assessor chooses to use the offset option in ORS , then the offset amounts are calculated according to OAR (3)(a). If an offset affects code areas in multiple counties of a joint district, contact the Finance and Taxation Unit for clarification of how to apportion the offset across the joint district. These offset amounts are applied against the operating taxes under the permanent rate limitation of each district that shared value with the dissolved district. Use the following method for calculating the offset rates. Example 3.2 Shared District Value / Total Shared Value = District Multiplier District Multiplier x Total Shared Value = District Offset Amount District Offset Amount / Rate Computation Value = Offset Rate (per dollar) Offset Rate (per dollar) x 1,000 = Offset Rate per Thousand Chapter 3 Tax Computation (Rev )