An Oregon Property Tax Primer

It’s nearly Halloween and there’s a knock at the door. It’s not a kid in costume…it’s the tax man.

It’s property tax time in Oregon. For new and potential residents of the metro area, Oregon’s property tax methodology can seem a little bit like black magic. This post is not meant to be a definitive guide by any means, but property taxes are a common question for home buyers in Portland. For the uninitiated, Oregon property is

…taxed on its assessed value. A property’s assessed value is the lower of its real market value or its maximum assessed value. Each year, the county assessor determines the property’s real market value and calculates its maximum assessed value. You are taxed on the lesser of the two, which is called the assessed value. (From the State’s explanation of property taxes.)

In essence the real market value is what someone would pay for it under today’s market conditions. Maximum assessed value (MAV), on the other hand, is based on the assessed value of the property as determined in the mid 90’s plus 3% annual increases since then.

Controversial tax limitation measures in the late ’90’s capped the annual assessment increases to 3%, and set their basis level at 1995 valuations, less 10%. Since we haven’t had any market crashes lately with real market prices dipping below mid-90’s valuations, the MAV basis is most often used for most Portland metro residences.

(See, I told you it was black magic.)

Answers to a few questions I receive frequently:

• Aren’t property taxes limited to a 3% increase annually? No. The increase in your property’s assessed value cannot go up more than 3%, but if your tax districts have passed revenue-generating levies and bond measures for public safety, schools, libraries, etc, it will be reflected on your bill. Multnomah County residents are taking on a healthy increase to pay for shortfalls in Portland Public School budgets. Clackamas County residents passed 11 revenue-generating measures for this tax year.
• Are taxes reassessed when the property changes hands? No. But they can be affected by new construction or improvements. Remember, in most cases, the tax is not driven by the real market value.
• Why is there such a disparity in property taxes from neighborhood to neighborhood, even house to house? On top of the basic property tax assessment by the county, each home is taxed according by other taxation districts, including fire, safety, schools, and more.

A few more generalizations to help homebuyers in in the Portland metro market:

• Most homes are generally assessed by the maximum assessed value method, not the real market value method.
• You will pay more in property taxes the closer to the city enter you get.
• You will pay more taxes in Multnomah County than for similar properties in Washington or Clackamas counties.
• Tax bills are due November 15, but taxes are prorated in escrow to Oregon’s July 1 tax year.
• Property taxes are relatively predictable because of the tax limitation measures tied to the Oregon constitution.

One of Portland’s alternative newspapers recently ran a summary article on the state of our property tax system…and some of the inherent iniquities it has created. Newly reinvigorated neighborhoods are taxed at much lower rates due to those property values being set at 1995 levels, when they were low-income areas and not so desirable.

As the article points out, the taxes may not seem fair from property to property, but they are predictable from year to year. That predictability may forestall any major overhauls of tax policy if put before the voting public.

Here is the State’s official property tax overview.

Technorati Tags: Portland, Oregon, tax, property, assessed, market, value, rate, real estate

Photo by divemasterking2000, used under Creative Commons license.

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6 comments October 24th, 2007