PUBLIC HEARING HJR 30,

HB 2951, HB 3466 HCR 6

 

TAPE 104, 105 , AB

 

HOUSE REVENUE COMMITTEE

APRIL 2, 2003   8:00 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Wayne Scott, Vice Chair

                                                Representative Joanne Verger, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams

 

Members Excused:                      Representative Phil Barnhart

                                                Representative Pat Farr

 

Witness Present:                        Representative Jackie Dingfelder, District 45

                                                Kris Nelson, Genomics Consulting

                                                Rex Burkholder, Metro Counselor-Downtown, North and Northeast Portland

                                                Tom Gihring, Seattle Planning Consultant

                                                Representative, Tom Butler, District 60

                                                Bob Siewart, Oregon Department of Education

                                                Debra Buchanan, Department of Revenue

                                                Representative Wayne Scott, District 39

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Mazen Malik, Legislative Revenue Office

                                                Steve Meyer, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 104, SIDE A

004

Chair Shetterly

Calls meeting to order at 8:05 a.m.

 

PUBLIC HEARING ON HJR 30

006

Mazen Malik

Provided background and description of HJR 30, (Exhibit 1).  Described -1 amendment, (Exhibit 2).

 

095

 

 

 

 

 

 

122

 

 

 

130

 

133

 

 

150

Rep. Jackie

Dingfelder

 

 

 

 

 

Dingfelder

 

 

 

Dingfelder

 

Dingfelder

 

 

Dingfelder

Spoke in favor of HJR 30. Land value taxation is a mechanism to encourage economic development in targeted areas and reduce the use of idle buildings. Where this legislation has been instituted it has brought market improvements in property values and economic conditions.  It is currently not available to planners and policy makers at city, county and regional level because of current constitutional tax codes.

 

This measure is not a tax increase but A shift in tax base of property tax.  Instead of falling equally on buildings and land, it is a tax on a value of the location.

 

Proposal fits well with current land use system. 

 

Adoption will require approval of Oregon voters and would provide a tool to be used in spurring local economies.

 

Discussed written testimony in support of HJR 30 (Exhibits 3-4)

 

167

 

188

Kris Nelson

 

Nelson

Spoke in favor of HJR 30.  Described bill as an enterprise incentive.

 

Discussed disincentives for investment.

 

220

Nelson

Discussed non-taxation of improvements, stable finance by collection of taxes on land value “Principles of Land Value Taxation”, (Exhibit 5).

 

230

Nelson

Discussed two rate tax, “Top 12 Tax Shift Stats: Sources”, (Exhibit 6, 7).

 

257

Nelson

Tax on land is lowest cost to administer and collect.  Discussed land assessment Computer Aided Mass Appraisal (CAMA) tool, fewer disputes over land values, fewer appeals, less litigation, less staff.

 

275

 

 

Nelson

Discussed weakness to split rate tax, 5% hardship cases and deferments.

 

Discussed study on property tax splits on land, completed with Tom Gihring, for Salem, Oregon, (Exhibit 8).  Industrial and multi-family housing sectors receive tax break as do downtown businesses, and office buildings. Developers, remodelers, realtors, architects, designers and landlords would receive more business by reducing disincentive to invest.

 

295

Nelson

Important economic tool should be available to all communities statewide.

 

300

Rep. Scott

If everyone pays less, who pays more?

 

330

Nelson

Non-building intensive uses would likely pay more, for example downtown surface parking lots.  In Salem 85% of tax base is through residential sector, person who has a small house on a large lot.

 

357

Rep. Scott

Land and tax development is taxed at a 50/50 ratio? I don’t think they are equally taxed.  It puts a different value on the land based on the surroundings of the area.

 

372

Nelson

Valuation of land would not change; the assessments are not affected by the bill, just the rate that is applied to the assessments that would change.

 

377

Rep. Scott

Which ultimately changes the value?

 

388

Nelson

Deferred to Tom Gihring.

 

396

Chair Shetterly

Pittsburgh had this for 100 years until two years ago, what happened 2 years ago and why?

 

399

Nelson

Complex story, changed by political shift.

 

407

Rex Burkholder

Metro supports HJR 30 based on results (Exhibit 9-10).  Discussed challenges to Oregon economy.  Discussed voluntary option to counties.

 

500

Rep. Scott

What other states?

 

505

Burkholder

Cities in Virginia, Pennsylvania, Cities within New York.

 

 

TAPE 105, SIDE A

 

020

Rep. Scott

How will this help vacancies?

 

047

Burkholder

HJR 30 is a tool that has encouraged economic activity in other places, would assist with problems of unemployment and vacancies.

 

059

Tom Gihring

Spoke in support of HJR 30, (Exhibit 11), Discussed Urban Renewal District, no difference in the application of taxes in a two rate system; in an URD it is uniformly applied.  The difference is the incentives that are created in an URD to encourage development and capital investment.

 

072

Gihring

Discussed Salem metro study, in conjunction with international land value taxation.  Discussed purpose of the study to examine distortions in conventional tax burden caused by skewed assessments under Measures 5 and 50. It also examined tax burden shifts that would occur in changing back to real market assessments.

 

098

Chair Shetterly

Assume revenue neutrality?

 

100

Gihring

Answered affirmatively.  Tax rate, not assessment, would change, built range simulating a phase in period.

 

114

Rep. Scott

If you change tax rate on land so that it is improved, the surrounding piece around bare land which has a higher rate, would they have a disincentive to have to equal rate to their improved land that has an existing structure?

 

Questions and discussion regarding tax rate as it affects property with or without improvement.

 

271

 

287

 

299

Gihring

 

Gihring

 

Gihring

Incentive effects take place at 75-80% of land value tax rates. 

 

Discussed uniqueness of Salem tax structure.

 

Assessments need to be true market value for this to work properly. 

 

302

Gihring

Discussed Salem negative tax shift on assessments.  There would be significant tax shift in the range of 120-150%, on vacant sites, and surface parking lots, including strip malls.  Where there is intensive use of land there will be a decrease.

 

390

Rep. Hass

Regarding surface parking lots, there could be an argument that parking lots are improvements, for example Washington Square.  What would be the impact of raising the rate on that land? Are they supposed to build parking garages?

 

421

Gihring

Biggest tax shift is in central areas where land values are high.  In outlying areas, land values are not as high, tax shift will not be that heavy. Incentives result in changes in land use.  Downtown locations are where incentive affects will be the greatest.

 

 

TAPE 104, SIDE B

 

020

Burkholder

The conversion of surface parking to structured parking can accommodate many thousands of cars in a small area. Would prefer to see the land used for offices, residential uses, this is in line with the goals of the area.

 

030

Rep. Scott

What happens to industrial sites with requirements for parking?  What happens to lumber yards, storage company?

 

042

Gihring

Lumber yards are legitimate land uses, but costly to remain in central locations where there is demand for higher density.  Will find it to their advantage to move outlying areas.

 

053

Rep. Scott

Which then would be used to develop offices spaces?

 

055

Gihring

It would free the land up for more intensive uses.

 

058

Burkholder

Zoning by local jurisdiction and will affect local decisions.  Those decisions would not be affected by this bill.

 

065

Rep. Verger

I presume there is an incentive here to change behavior?

 

069

Burkholder

Investment behavior, yes.

 

071

Rep. Verger

Is there incentive to have a house with a very small yard?

 

072

Gihring

Yes, in Portland, lots are getting smaller, because the cost of land is high, that builders find it unprofitable to build on large sites in central locations.

 

081

Gihring

Two rate tax encourages same sort of market activity that is already occurring to use sites more effectively, intensively.

 

084

Rep. Verger

For a decade with good economy there were still vacancies. If people sell off their parking lots what happens to the vacancy rate in central areas, they move closer to Washington Square?  How is that economic development in an urban area?

 

101

Burkholder

Connection with HJR 30 is to encourage investment; it will make economy work better, employment work better.

 

115

Rep Verger

Define development, are you speaking about real estate development?  Economic development is in providing jobs, not just buildings.

 

119

Burkholder

Owners are not improving land because people are landbanking for future needs, because carrying costs are low.  In Portland land is sitting idle, this would encourage people to get it on the market to revitalize.  Choice is to take farms and develop them or encourage improvement of land that is closer in or within city and develop it.

 

157

Rep. Verger

Where businesses require good size property to function, did you say that increase is marginal?

 

163

Gihring

Depends on assessment. In Salem, industrial land is assessed at a low level, there is hardly a tax shift.

 

179

Chair Shetterly

The bill talks about taxing districts, generally speaking of cities?

 

184

Burkholder

There are unincorporated counties that are urbanized such as Clackamas and Washington Counties.

 

189

Nelson

Clarified where assessments are done based on current use, there would be no impact.

 

193

Chair Shetterly

Closed Public Hearing on HJR 30.

 

 

OPENED PUBLIC HEARING ON HB 2951

 

200

Steve Meyer

Provided description of HB 2951. 

 

221

Rep. Tom Butler

Spoke in favor of 2951.  The issue is where the student is receiving the education is where the dollars should flow.

 

263

Chair Shetterly

In his district, parents prefer to send children to small school in Perrydale, rather than Dallas.  Would the money go to Perrydale?

 

269

Rep. Butler

Answered affirmatively.  Concern not just for convenience of selecting best school, also in the case of boarding schools distances are 125-140 miles one-way.

 

309

Chair Shetterly

Recessed Public Hearing on HB 2951 for purposes of taking testimony from Rep. Butler for HB 3466.

 

 

OPENED PUBLIC HEARING ON HB 3466

 

316

Rep. Butler

Described and spoke in favor of HB 3466, and supported the Department of Revenue in the management and sale of research and development credits.

 

352

Chair Shetterly

Recessed Public Hearing on HB 3466

 

REOPENED PUBLIC HEARING ON HB 2951

 

355

Siewart

Spoke in opposition to HB 2951.  Discussed two issues:  language of bill leaves open unresolved questions with dire consequences. Discussed federal requirements for special education and school distribution formula.

 

446

Chair Shetterly

Don’t school fund dollars follow the students by agreement of districts?

 

452

Siewart

Answered affirmatively.

 

455

Chair Shetterly

Is there a way to get at some of the smaller issues?

 

019

Siewart

There is a system in place that already allows the dollars to transfer to the attending district; it is an in district transfer agreement.

 

489

Chair Shetterly

Close public hearing on HB 2951

 

REOPEN PUBLIC HEARING ON HB 3466

TAPE 105, SIDE B

 

037

Debra Buchanan

The Department of Revenue may not have the expertise for HB 3466.

 

 

 

053

Lizbeth Martin-Mahar

Not prepared to discuss at this time.

 

060

 

 

070

Chair Shetterly

 

 

Chair Shetterly

 

For the record, received written testimony from Oregon Revenue Coalition in opposition to HB 3466, (Exhibit 12).

 

Closed Public Hearing on HB 3466.

 

PUBLIC HEARING ON HCR 6

 

072

Steve Meyer

Provided description of HCR 6, (Exhibit 13).

 

081

Rep. Scott

Supported HCR 6 as it reaffirms legislative commitment to education in Oregon.  It recognizes the right to free, high quality education and the importance of education for preparing children for tomorrow’s work force.  It also is an important first step in meaningful education funding reform.

 

100

Rep. Berger

 

This bill is timely, described discussion with a school district employee troubled by budget process.

 

121

Chair Shetterly

Discussed history of budgets; last session had agreement from beginning; this time can’t identify.  This resolution pinpoints logistical problems of school districts in session years.

 

140

Rep. Williams

Historically districts were able to plan based on local tax, now tied to 2-year cycle and funding from the state.  This measure is well-intended, it requires structural changes that need to be reflected in long term planning.

 

180

Chair Shetterly

Discussed effects of outside elements even when able to provide funding figures.

 

186

Rep. Verger

Education needs funding stream, should be funded before other things, but hate to have priorities in competition.

 

199

Chair Shetterly

Close Public Hearing on HCR 6

 

200

Chair Shetterly

Meeting adjourned at 9:42 a.m.

 

Tape Log Submitted by,

 

 

Kathy Tooley, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.       Malik, “Staff Measure Summary HJR 30”, 1 page

2.       Malik, “HJR 30-1 Amendment”, 1 page

3.       Russell, “Written Testimony HJR 30”, 1 page

4.       Mazziotti, “Written Testimony HJR 30”, 2 pages

5.       Nelson, “Principles of Land Value Taxation”, 3 pages

6.       Nelson, “Top 12 Tax Shift Stats: Sources”, 6 pages

7.       Nelson, “The Geonomist”, Vol. 11, No. 4, 12 pages

8.       Nelson and Gihring, “Tax Shift – Sequential To a Land-Based Property Tax System in Salem, Oregon”, 8 pages.

9.       Burkholder, “Testimony HJR 30”, 1 page

10.   Burkholder, “2001 Mid-Year Economic and Financial Report- City of Philadelphia”, 60 pages

11.   Gihring, “Testimony HJR 30”, 1 page

12.   ORC, “Written Testimony HJR 3466”, 3 pages

13.   Fiscal, Revenue Impacts HCR 6”, 2 pages