PUBLIC HEARING: HB 2776-A, HB 3358

PUBLIC HEARING & WORK SESSION:

HB 2950-A

WORK SESSION: SB 479, SB 412-A

 

TAPES 131, 132 A-B

 

SENATE REVENUE COMMITTEE

JUNE 2, 2005   9:00 AM   STATE CAPITOL BUILDING

 

Members Present:                  Senator Ryan Deckert, Chair

                                                Senator Gary George

                                                Senator Rick Metsger

                                                Senator Floyd Prozanski

                                                Senator Charles Starr, Vice Chair

 

Witnesses Present:                Rep. Tom Butler, District 60

                                                Roger Roper, State Historic Preservation Office (SHPO)

                                                Michelle Deister, League of Oregon Cities

                                                Marge Kafoury, City of Portland

                                                James Hamrick, OPRD

                                                John Williams, Oregon City former mayor                                        

                                                Tom Hughes, Hillsboro mayor

                                                Joe Schweinhart, Associated Oregon Industries

                                                Larry Pederson, City of Hillsboro

                                                Hasina Squires, Special Districts Association of Oregon

                                                Alec Jenson, Tualatin Valley Fire and Rescue          

                                                Lynne Angland, Bend

                                                Jana Jarvis, Oregon Association of Realtors

                                                John Fletcher, Oregon Housing and Community Services

                                                Dexter Johnson, Legislative Counsel

 

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Mary Ayala, Economist

                                                Lizbeth Martin-Mahar, Economist

                                                Barbara Guardino, Committee Assistant

 

 

TAPE 131, SIDE A

005

Chair Deckert

Calls meeting to order at 9:20 a.m. Opens public hearing on HB 2776-A.

 

PUBLIC HEARING, HB 2776-A

010

Mary Ayala

Gives overview and background of HB 2776-A (EXHIBIT 1). Eliminates the calendar year 2010 sunset date for the historical property, special assessment program which has a 15-year term for each property.

 

057

Ayala

Discusses revenue impact, two estimates (EXHIBIT 2).

 

076

Rep. Tom Butler

Testifies in favor of bill. This is a local government option which replaces a program that is being sunset. Because the 15-year period is nontransferable, if new owners want to apply the updated values would come back onto the record. This makes it less lucrative, but these properties would still be subject to a high level of oversight.

 

The standards provided by the U.S. Secretary of the Interior are elements in maintaining these properties when they come in for re-application. By using those standards, local governments will still be able to attract tourists to view these historic properties.

 

112

Sen. George

Notes, the bill only received four “no” votes in the house. Asks how many of these properties would fall into disrepair without this incentive to maintain them.

 

118

Rep. Butler

Responds, those “no” votes were mostly a result of a second vote on a Portland option. That is a separate issue; this is a local option. A number of people have testified that they would not be able to maintain their historical properties without this program. The owners are spending money at the local stores to maintain these properties in their historic form. Because the properties are so expensive to keep up, there will be less and less of them.

 

192

Roger Roper

Reads testimony which details concerns about HB 2776-A (EXHIBIT 3) on behalf of the State Historic Preservation Office.

 

233

Chair Deckert

Asks if Roper testified in the House Revenue Committee about his concerns on Section 3.

 

236

Roper

No, SHPO was not asked to testify.

 

248

Roper

Asks Roper to give examples of problems with Section 3.

 

255

Roper

Gives example of selling to a business partner. Does not anticipate this happening often.

 

259

Sen. Prozanski

Comments, this sounds similar to enterprise zones when companies come in and get the benefit, then move out. There should be a call-back.

 

267

Sen. George

Once property is designated historic, is it that easy to get out from under that designation?

 

277

Roper

Yes, it is easy to opt-out of this benefit by writing a letter and paying the back-taxes.

 

290

Sen. George

Asks, what are the odds of opting out and putting in condominiums? Would think the chances of that would be zero.

 

295

Roper

Responds, this occurs more often than people think.

 

308

Chair Deckert

Asks for suggestion of language to Section 3 that would resolve this.

 

314

Roper

Responds, the simplest solution is to take out the phrase (page 3, lines 2 and 3).

 

347

Sen. Prozanski

Summarizes Roper’s testimony: If someone opts into the program they are in for the duration.

 

355

Roper

Very much so. The new owner could opt-out, but would have to pay back the tax benefit.

 

359

Vice Chair C. Starr

Asks Rep. Butler to respond to this new information.

 

379

Rep. Butler

The likelihood of this happening is close to zero. There is a diminishing group of owners who continue to maintain these properties in such a fashion that they’re spending more than they would save in property taxes. Wishes SHPO had commented sooner. The maximum value a person would receive would be only the incremental increases in property values, and they would have been spending dollars to save dimes. Does not see this as a threat to the program.

 

468

Chair Deckert

Asks who Rep. Butler worked with in developing this legislation.

 

483

Rep. Butler

The cities and others interested in historic preservation. SHPO was aware of this bill. To replace a residence with a condo would entail a major change in zoning laws.

 

TAPE 132, SIDE A

034

Marge Kafoury

Responds to scenario of a new owner wanting to tear down a federally designated historic property. The local government could intervene if federally designated property was threatened. The city could lose, but could negotiate an alternative use.

 

049

Michelle Deister

Speaks to the original intent of the amendments that passed out of House Revenue Committee. The amendments did not reflect the intentions of SHPO. Explains the intended changes, which were supposed to apply to residential only, not commercial.

 

072

James Hamrick

Responds, SHPO was asked to participate in the amendment writings, and told the League of Oregon Cities it had problems with the commercial property language. SHPO failed to relay this concern to Rep. Butler. SHPO can make it work; it will just create administrative difficulties.

 

095

Chair Deckert

Would have preferred SHPO’s comments earlier in the process.

 

099

Sen. George

Does not draw the same conclusion from reading Section 3. Asks for clarification. Follow-up questions.

 

106

Hamrick

Responds, if the special assessment ends and no back-taxes are owed, the owner can apply to the local jurisdiction to have the designation removed. Would like to see Section 3 changed to not apply to commercial or depreciable properties.

 

141

Chair Deckert

Committee will move this bill next week to allow time for parties to settle this issue. Closes public hearing.

 

 

 

WORK SESSION, SB 479

165

Ayala

Summarizes SB 479-4 amendment (EXHIBIT 4). Adds a provision that seeds and grains will be added to the list of food products for which processors will be exempt on purchases of new machinery (EXHIBIT 5). Contains clarifying language. Discusses revenue impact (EXHIBIT 6).

 

 

 

177

Vice Chair C. Starr

MOTION: MOVES ADOPTION OF THE SB 479-4 AMENDMENTS.

 

180

Chair Deckert

ORDER: THERE BEING NO OBJECTION THE CHAIR SO ORDERS. VOTE: 4-0-1. VOTING AYE: GEORGE, METSGER, C. STARR, DECKERT. EXCUSED: PROZANSKI

 

182

Vice Chair C. Starr

MOTION: MOVES SB 479 AS AMENDED TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

 

 

189

Chair Deckert

ORDER: THERE BEING NO OBJECTION THE CHAIR SO ORDERS. VOTE: 4-0-1. VOTING AYE: GEORGE, METSGER, C. STARR, DECKERT. EXCUSED: PROZANSKI

 

WORK SESSION, SB 412-A

220

Chair Deckert

Today the committee’s big decision is whether to keep the opt-out language from urban renewal projects in special districts such as police and fire districts.

 

225

Ayala

Notes, Sen. Schrader has drafted the SB 412-A5 amendment (EXHIBIT 7) to address this. Also, the SB 412-A4 amendment (EXHIBIT 9) takes the A-engrossed bill and includes the elimination of school district taxes from the financing.

 

230

Chair Deckert

Would prefer to keep SB 412-A5 amendment and add schools to the list.

 

239

John Williams

Speaks in favor of opt-out language for schools. The original intent of the bill was to help school funding. The other districts got added later. Calculates at least $33 million is going from school funds into urban renewal projects. Gives an example of an Oregon City school bond. Urges the committee to return schools to the bill so residents can know where their school money is going.

 

274

Sen. George

If a company moves in to revitalize a deteriorating area, newcomers will buy homes and jobs will be created. Does this mitigate the loss in school revenue?

 

286

Williams

Responds, not in smaller towns. Gives an economic development example in Oregon City. It takes too long to pay off the debt. Urban renewal agencies don’t end, and the money keeps going into urban renewal. Urban renewal doesn’t work the way it is intended. Schools in Oregon City have gotten no benefit. The diversion of money has driven the city almost into bankruptcy.

 

340

Sen. Prozanski

Asks for a review of the differences between the amendments. Follow-up discussion.

 

365

Ayala

Responds, Sen. Schrader’s SB 412-A4 amendment will eliminate school taxing districts, whereas the opt-out provisions in SB 412-A5 amendments deal mainly with special districts and the ability of a governing authority to consider whether to exclude them.

 

436

Tom Hughesills

Advocates for SB 412-A5 amendment which removes the opt-out language. Gives a success story of urban renewal in Hillsboro, where the land became Intel and Orenco Station. This type of project would not occur with the opt-out provision because it would create a risk for the city.

 

 

 

TAPE 131, SIDE B

030

Hughes

Continues comments on Hillsboro urban renewal, which created thousands of living-wage jobs. Local governments have very few tools to do the type of development done there. Urges the committee to omit the opt-out provision.

 

062

Chair Deckert

All the City of Hillsboro would have to do would be to say “no.” What makes that so difficult?

 

065

Hughes

Responds, perhaps Oregon City should change its leadership. For Hillsboro, the problem is less than for other cities.

 

080

Joe Schweinhart

Reiterates Mayor Hughes’ comments. Urban renewal has been a major device for cities to push for new development. Property values go up and jobs are added. When you try to cut the plan apart it creates problems. Cannot understand why anyone would want to opt-out. This is a tremendous economic benefit across the state. The opt-out provision will hurt communities.

 

103

Sen. George

Comments on whether investors would go elsewhere if the opt-out provision were in place. Follow-up questions.

 

127

Hughes

Believes what Hillsboro has accomplished has been “with certainty” in the land use laws, financing and urban renewal. It is the certainty that gives Hillsboro that competitive edge.

 

136

Schweinhart

Concurs. It is important to weigh the benefits against the costs.

 

 

 

177

Larry Pederson

Comments, in addition to political uncertainty, there is the financial uncertainty of opt-out in regard to bonding capacity for an urban renewal district. Pinching cash flow will raise the cost of money.

 

192

Hasina Squires

Introduces panel that will testify in favor of SB 412-A4 amendment.

 

209

Alec Jenson

Defends the existing bill. This is not a debate about urban renewal; it is all about local control. Responds to comments by Mayor Hughes. There is no provision in the bill that allows anyone to opt-out in the future. Does not understand why the bill's opponents can’t trust themselves to make the right decision. This puts the decision in their hands and brings an element of increased transparency.

 

236

Chair Deckert

Is there an assurance that there will be enough votes (16) to pass this in the Senate?

 

250

Jenson

Yes, as of yesterday.

 

256

Chair Deckert

Asks committee for input and discussion on the two amendments.

 

259

Sen. Prozanski

Summarizes, the committee has three options: Leaving the bill as is, or the two amendments.

 

276

Sen. George

Worries that not passing SB 412-A5 would hurt a community’s ability to bring in high-paying jobs. It is critical to tip the balance towards investment.

 

294

Vice Chair C. Starr

This has been a struggle. Not all urban renewal projects have been successful. What happens if the committee doesn’t pass a bill?

 

313

Chair Deckert

It’s not necessary to pass it, but there are good things in it for urban renewal.

 

319

Sen. Prozanski

It appears there should be another option on the table. The committee might consider the other work that his work group did and leave this as one of the options. In regard to the elimination of school districts, we are not funding schools and this is one way that money can stay within the school system. Is surprised to see SB 412-A4 amendment that takes schools completely out of the picture. It is another tool in the tool box for local control. Will go either way in order to move the bill, but favors looking at other options. Suspects this is a split vote.

 

361

Chair Deckert

Would reluctantly prefer to keep the SB 412-A5 amendment because this is a split issue in the Senate.

 

378

Sen. Metsger

Wonders if those 16 votes are there for SB 412-A5 amendment.

 

392

Sen. Prozanski

Asks the chair not to move the bill today and to look at another option.

 

423

Chair Deckert

Will hold this bill for another week.

 

 

PUBLIC HEARING, HB 2950-A

TAPE 132, SIDE B

020

Lynne Angland

Testifies in favor of HB 2950-A, which deals with dependent care compensation. See written testimony paraphrased (EXHIBIT 12). We need more quality child care in Oregon, and it costs more to provide quality child care than middle class employees are able to pay. Explains the IRC Section 129 plan. This benefit is not for employers, it is for employees.

 

091

Angland

“Oregon’s reserves are sound and there is no reason to single out this area for disconnect.” Quality care is very needed in Oregon. She has spoken to chambers of commerce and other groups. Complexity is the big problem for smaller employers. Asks for exclusion of Section 129 payments as part of clean-up in language. This is a benefit for the middle class, not the wealthy.

 

129

Chair Deckert

Likes this bill.

 

131

Sen. Metsger

Asks if this is covered in the reconnect bill.

 

135

Lizbeth Martin-Mahar

The employment department doesn’t connect to all the federal law changes each session. The reconnect bill connects to federal law changes pertaining to taxable income. This is not a definition of taxable income, it is a definition of wages. This will conform to federal law. It will be a loss in payroll tax revenue, as shown in the revenue impact statement (EXHIBIT 13).

 

158

Sen. George

Asks if it is correct that Oregon’s reserves are sound and there’s no reason to single out this area for disconnect.

 

160

Martin-Mahar

Correct. This won’t have an impact as far as overall solvency.

 

 

 

WORK SESSION, HB 2950-A

175

Vice Chair C. Starr

MOTION: MOVES HB 2950-A TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

177

Chair Deckert

ORDER: THERE BEING NO OBJECTION THE CHAIR SO ORDERS. VOTE: 4-0-1. VOTING AYE: GEORGE, METSGER, C. STARR, DECKERT. EXCUSED: PROZANSKI

 

PUBLIC HEARING, HB 3358

180

Jana Jarvis

See written testimony (EXHIBIT 16), on behalf of the Oregon Housing Lobby Coalition which advocates for housing for low-income individuals. Oregon is 42nd in the nation for home ownership. That rate is declining steadily. HB 3358 targets a narrow group of people by expanding a program that is already in place.

 

213

John Fletcher

This bill is targeted for a very narrow group to help with home ownership. The Housing Lobby Coalition is interested in a much wider group, but is starting at the bottom income range and is a first step. They are looking at existing programs. This program has been in place since 1999, and has had three good years of a pilot stage. About 500 people have been through the program. Explains how the program works – it sets participants up with a caseworker and they get matching funds for every dollar saved.

 

274

Sen. Metsger

Asks how this tax credit can be claimed by a nonresident, since it is for primary residents.

 

282

Fletcher

This is typical tax credit language. In practice eligibility does not apply to nonresidents. You can’t distinguish between residency and non-residency.

 

292

Martin-Mahar

Concurs. This is common language. Legislative counsel will tell you nonresidents must have the opportunity to take the credit.

 

309

Sen. Prozanski

Asks how many people would be living in these residences as compared to living somewhere else. Sounds like the program does not allow a nonresident to apply.

 

 

 

322

Fletcher

That is correct. Nobody can just walk in and qualify.

 

337

Dexter Johnson

The issue is, if a bill requires the primary residence be in Oregon, why all the nonresident language? The answer is, the U.S. Constitution requires equal treatment between residents and nonresidents. The federal government requires this language.

 

345

Chair Deckert

Closes public hearing on HB 3358. Adjourns meeting at 11:05 a.m.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Barbara Guardino, Committee Assistant                                                      

 

Exhibit Summary:

1.      HB 2776-A, Staff Measure Summary, Ayala, 6/2/05, 1 pp.

2.      HB 2776-A, Revenue Impact of Proposed Legislation, Ayala, 6/2/05, 1 pp.

3.      HB 2776-A, testimony of Roger Roper, 6/2/05, 1 pp.

4.      SB 479, Amendment SB 479-4, Legislative Counsel, 6/1/05, 4 pp.

5.      SB 479, Staff Measure Summary, Ayala, 6/2/05, 1 pp.

6.      SB 479, Revenue Impact of Proposed Legislation, Ayala, 6/2/05, 1 pp.

7.      SB 412-A, Amendment SB 412-A5, Legislative Counsel, 6/1/05, 1 pp.

8.      SB 412-A, Staff Measure Summary for SB 412-A5, Ayala, 6/02/05, 1 pp.

9.      SB 412-A, Amendment SB 412-A4, Legislative Counsel, 6/1/05, 20 pp.

10.  SB 412-A, Staff Measure Summary for SB 412-A4, Ayala, 6/2/05, 1 pp.

11.  SB 412-A, Approximate Urban Renewal Division of Tax by Fire District: Fiscal Year 2003-04, Ayala, 4 pp.

12.  HB 2950-A, notes for testimony of Lynne Angland, 1 pp.

13.  HB 2950-A, Revenue Impact of Proposed Legislation, Martin-Mahar, 4/27/05, 1 pp.

14.  HB 2950-A, Staff Measure Summary, Martin-Mahar, 6/2/05, 1 pp.

15.  HB 2950-A, Staff Measure Summary, Martin-Mahar, 4/27/05, 1 pp.

16.  HB 3358, testimony of Jana Bader Jarvis, 6/2/05, 5 pp.

17.  HB 3358, Staff Measure Summary, Martin-Mahar, 6/2/05, 1 pp.

18.  HB 3358, Revenue Impact of Proposed Legislation, Martin-Mahar, 4/19/05, 1 pp.

19.  HB 3358, Staff Measure Summary, Martin-Mahar, 4/28/05, 1 pp.