PUBLIC HEARING, SJR 25, SJR 1

 

TAPES 81 A-B, 82 A

 

SENATE REVENUE COMMITTEE

MARCH 30, 2005   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                  Senator Ryan Deckert, Chair

                                                Senator Rick Metsger

                                                Senator Floyd Prozanski

                                                Senator Charles Starr, Vice Chair

           

Members Excused:                 Senator Gary George

 

Witnesses Present:                Rex Burkholder, Metro, Portland

                                                Sunny Condor, Metro

                                                Kris Nelson, Geonomics Consulting, Portland

                                                Reed Wagner, Metro

                                                Jeffrey J. Smith, Geonomy Society, Portland

                                                John F. Williams, Jr., Oregon City former mayor

                                               

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Mary Ayala, Economist

                                                Barbara Guardino, Committee Assistant

 

 

TAPE 81, SIDE A

005

Chair Deckert

Calls meeting to order at 8:38 a.m. Announces next week will be busy with working urban renewal, gift cards and rainy day fund bills.

 

PUBLIC HEARING, SJR 1

025

Mary Ayala

Gives overview of SJR 1. Proposes an amendment to the Oregon Constitution that will allow a local taxing district to adopt a site value taxation system that taxes land at one rate and all other property at a lesser rate. See Staff Measure Summary and Revenue Impact Statement (EXHIBITS 1, 2).

 

050

Rex Burkholder

Testifies in favor of SJR 1. Asks, how does Portland accommodate growth over the next 20 years, and protect values that Oregonians hold dear, such as quality cities, easy transportation and undeveloped countryside? Metro has done research on site value taxation. See written testimony (EXHIBIT 3). The current system punishes people who invest in their property by raising their taxes.

 

084

Burkholder

Taxes have two purposes: to generate revenue and to influence behavior. Tax breaks are used to lure companies to Oregon.

 

117

Burkholder

Gives brief history of site value taxation, an idea that originated in the early 1800s. It can be adopted as an option. Site value tax shifts some taxes off construction and onto land. Metro considers outcomes, and believes it provides incentives for wanted behaviors; it also gets a higher level of investment and better quality of development. It is a fair system.

 

171

Burkholder

SVT could help reduce pressure for expansion of the urban growth boundary. It also increases economic prosperity through incenting investment instead of penalizing it. Gives overview of a two-part study that analyzes the impact of adopting this policy.

Phase one: General impact on property tax payers. Conclusion was a significant impact on vacant properties, depending on zoning. There was a significant decrease in property taxes paid by multi-family residential and industrial.

 

210

Burkholder

Phase two: Focuses on specific corridors. It is entitled, Effects of Land Value Taxation in Metropolitan Portland Commercial Corridors (EXHIBIT 4).

 

215

Burkholder

Concluding remarks: Site value taxation shifts taxes from buildings onto land. Studies show higher taxes paid by under-utilized cites, giving them incentive to come on the market, and lower taxes on fully developed sites. Explains benefits that have occurred cities in Pennsylvania. Social benefit without raising overall taxes. Requests to continue to work with the committee on this issue, does not urge passage.

 

241

Chair Deckert

Asks if he foresees this as a tool for whole cities to revitalize vacant land.

 

260

Burkholder

Responds, it provides an option – or permission – for cities and counties to decide how they would use this tool. It is not a revenue generating tool.

 

295

Kris Nelson

Begins PowerPoint presentation (EXHIBIT 5) Incentive Effects of Land Value Taxation in Metropolitan Portland Commercial Corridors. Explains, he and his colleague, Tom Gihring, conducted a study looking at six commercial corridors in Metro’s commercial region. Two are zero setback developments; four are automobile oriented commercial strips.

Page 1, slide 4: Comparison of two property tax systems

 

335

Nelson

Page 2 slide 5: The Land Value Tax as a Split-Rate Tax

 

350

Nelson

Slide 8: Question: How can a differential tax – based on monetary values influence physical development decisions?

 

353

Nelson

Slide 10: The LTV (Land Total Value) Ratio is a fulcrum for tax shift

 

370

Nelson

Slide 12: Corridor Study Highlights

 

 

Slide 13: Tax Shift Effects of Increasing BRR Rate Levels on General Land Use Classes

 

 

Slide 14: Tax Shift Under a Graduated LVT – Single family, manufactured home site

 

 

 

TAPE 82, SIDE A

017

Nelson

Slide 19: Surface parking

 

020

Sen. Prozanski

Asks since so much has been developed around surface parking lots, do we force it into elevated parking to accommodate existing growth as well as new growth?

 

025

Nelson

Responds, that is the likely effect – a more efficient use of land.

 

 

Sen. Prozanski

Comments on Top 12 Shift Stats: Sources (exhibit 6).

 

059

Nelson

Continues slide presentation.

Slide 23: Comparing Tax Effects: Fully Developed and Underutilized Parcels

 

080

Nelson

Slide 24: Redevelopment Scenario: What if – All Underdeveloped Parcels were Redeveloped into Mixed-Use Buildings

Slide 25: Redevelopment Scenario – Capacity: Building Floor Space and Assessed Value

 

 

Slide 26: Redevelopment Scenario: Tax Effects on Redeveloped Parcels

 

099

Nelson

Slide28: Illustration of Tax Incentive Effects

Slides 29-31: Shopping Plaza in Hillsboro photographs

 

 

 

112

Nelson

Photos and explanations of properties in Beaverton shopping plaza.

 

125

Nelson

Photo examples of properties on Southeast Division Avenue in Portland. Photos on Southeast Hawthorne. Discusses land values, improvement values.

 

161

Nelson

Photos on Southeast Stark, Southeast 82nd Avenue in Portland.

 

179

Nelson

Concludes, if there’s a market for development, this acts as an incentive.

 

185

Nelson

Slide 90: In Summary & More Information

Building intensive uses are encouraged by application of a split-rate tax.

 

 

 

231

Chair Deckert

This is an intriguing concept. Opponents might argue this is a Portland-style development and exporting it all over the state might be a problem.

 

265

Burkholder

Responds, most important is that this is a local option. The same type of development is desired in areas other than Portland. Washington County is one example. Most of these areas are smaller parcels of 10-20 acres. The question is, are these parcels developed at the level they can be, and are cities getting the taxes they could be getting?

 

283

Chair Deckert

Comments on how to work with landowners to give them incentives to make those parcels more attractive.

296

Burkholder

Comments on Sen. Prozanski’s questions on transportation issues. These areas already have bus service. If redeveloped, people could walk instead of drive.

 

312

Sen. Prozanski

Asks, where is the opposition going to come from? Is this something that can be taken to the voters this cycle or should it be developed and evolved further?

 

335

Burkholder

Responds, the idea is to bring forth ideas with potential. There is a huge market demand throughout Oregon because of its rapid growth rate. The question is how to develop without destroying what is here? How do lawmakers get this through, since it would require a constitutional amendment? This bill is a tweak; it’s not a revolutionary change.

 

382

Nelson

Oregon has long practiced a form of incentive taxation, known as current use assessments versus real market value. This extends that model. One question is the effect on urban renewal districts. If Measures 5/50 limits can be retained but redefined, that would also be another area for research. Also, whether this kind of taxation can work as a non-regulatory approach to achieving land use goals. Contends more study is necessary. Points out examples of successes in Pennsylvania cities.

 

456

Chair Deckert

Because this is a local option, people can make decisions within their communities. Maybe this is the strongest attribute.

 

TAPE 81, SIDE B

025

John Williams

This is not a new idea in Oregon. It was one of the first initiatives on the Oregon ballot, about 1905, but it failed after extensive debate. In downtown Oregon City there have been some “slum lord” situations. The owners would be penalized for improving their property. This would help those problems. Oregon City is interested from an urban renewal perspective. SJR 1 appears to work for residential as well.

 

055

Williams

This does what urban renewal is supposed to do but doesn’t tax people who do it. Has studied cases in Pennsylvania.

 

060

Chair Deckert

Sees the parallels between this tax and urban renewal.

 

070

Jeffrey Smith

Directs members’ attention to Top 12 Tax Shift Stats: Sources (EXHIBIT 6). Oregon is one of five states to look at similar bills. This tax shift can be used to change dependency on the automobile. Cites Harrisburg, Pa. and other sample cases. It helped get these cities through the last recession. Would amend this bill to allow not just cities and counties, but the entire state to adopt it. Also, it can be made revenue-positive rather than revenue-neutral.

 

112

Smith

Cites case of Dorothy English and Measure 37. Instead of motivating everyone to develop everything, it creates a situation where all would benefit from optimal land value.

 

147

Smith

Recommends passing this bill to the Senate floor and then letting the public decide.

 

150

Sen. Prozanski

Comments on a country where they take a holistic approach.

 

155

Chair Deckert

Advises Burkholder that the more this is talked about as an option for incentive, the more attractive it will appear. The revenue neutrality doesn’t hurt.

 

169

Sen. Prozanski

Agrees. Hesitates to run this bill out prematurely. Advises, get major players involved in promoting it.

 

189

Vice Chair C. Starr

Owns a small parcel that could be subdivided under Measure 37. With this policy that might not be to his benefit. Others with similar situations could get behind this measure. Agrees with Sen. Prozanski that it’s too soon to run this bill out, but having a Senate floor debate might be helpful.

 

219

Chair Deckert

Agrees, a floor debate could be helpful. This would help people keep farming by lowering their tax burden.

 

249

Vice Chair C. Starr

Continues comments on his property tax load.

 

259

Sen. Prozanski

Asks Commissioner Burkholder to set up a presentation for interested groups on this topic.

 

268

Burkholder

Agrees to do this.

 

281

Chair Deckert, Sen. Prozanski

Continue discussion on how to get interested parties together during session.

 

333

Chair Deckert

Asks Ayala to work with Councilor Burkholder on this issue. Closes public hearing on SJR 1. Opens public hearing on SJR 25.

 

PUBLIC HEARING, SJR 25

341

Ayala

Gives overview of SJR 25. See Revenue Impact of Proposed Legislation (EXHIBIT 7) and Staff Measure Summary (EXHIBIT 8). Proposes an amendment to Oregon’s constitution that enables a taxing district to propose, and voters to adopt, a rate limit on property taxes that is less than the district’s permanent rate limit.

 

390

Chair Deckert

Closes public hearing on SJR 25. Adjourns meeting at 9:57 a.m.

 

 

Tape Log Submitted by,

 

 

Barbara Guardino, Committee Assistant

 

Exhibit Summary:

1.      SJR 1, Revenue Impact of Proposed Legislation, 3/29/05, Ayala, 1 pp.

2.      SJR 1, Staff Measure Summary, 3/30/05, Ayala, 1 pp.

3.      SJR 1, Metro Senate Joint Resolution 1: Site Value Taxation, 3/30/05, Burkholder, 1 pp.

4.      SJR 1, Incentive Effects of Land Value Taxation in Metropolitan Portland Commercial Corridors, February 2005, Nelson, 80 pp.

5.      SJR 1, PowerPoint slide show presentation, Incentive Effects of Land Value Taxation in Metropolitan Portland Commercial Corridors, February 2005, Nelson, 28 pp.

6.      SJR 1, Top 12 Tax Shift Stats: Sources, Smith, 2 pp.

7.      SJR 25, Revenue Impact of Proposed Legislation, 3/30/05, Ayala, 1 pp.

8.      SJR 25, Staff Measure Summary, 3/29/05, Ayala, 1 pp.