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In Brief...

MEASURES 47 AND 50:


OREGON’S CUT AND CAP TAX REFORM
by: Todd S. Liebow, MAI

Way back in November 1996, Oregon voters passed For example, on December 31, 2007, a new fast serve
Measure 47. This was a constitutional amendment restaurant was completed. Its real market value is
popularly referred to as the "cut and cap" tax reform act. $800,000. The average maximum assessed value for like
The "cut" aspect of the legislation referred to a reduction properties in this class is $600,000 and the average real
in taxes for the 1997-98 tax year calculated as the lesser of market value for like properties is $800,000. Therefore,
the 1994-95 taxes or 90 percent of the 1995-96 taxes. the subject's 2008-09 assessment (maximum assessed
Bonded debt would be exempt from the calculations. The value) will be [($600,000/$800,000) x $800,000]
"cap" aspect of the measure restricted growth in taxes to $600,000.
no greater than 3 percent annually after the 1997-98 tax
year. The process is charted below:

Exempt from the calculation were circumstances of new Real Market Value (RMV) Subject Property $800,000
construction, significant renovations/rehabilitation, loss of
exemption status, change in zoning, subdivision of the Maximum Assessed Value of Similar Properties $600,000
(MAV)
property, and omitted property.
Real Market Value of Similar Properties $800,000
When the legislative assembly convened in January 1997, (MAV ) RMV of Similar Properties 75%
it became evident that, as written, Measure 47 was
impractical to implement on an equitable and feasible Subject Computation
RMV x 75% Ratio $600,000
basis. Measure 50 was the revision of Measure 47 and is $800,000 x 75%
the product of a cooperative effort between industry, the
petitioner for Measure 47, the Oregon Assessors, the
Department of Revenue and the House Revenue The 2009-10 assessed value will be ($600,000 x 1.03)
Committee. Measure 50 limited the 1997-98 assessed $618,000.
value of each property to the lesser of real market value or
the 1995-96 real market value, less 10 percent. Growth in Measure 50 also provided for establishment of new levies
assessed value was limited to 3 percent annually, outside the tax rate limits. One interesting aspect of the
thereafter. Thus, the 1998-99 maximum assessed value new levies clause was that the levy request required a
was the 1995-96 real market value, less 10 percent, plus 3 50 percent "turnout" of registered voters for approval.
percent. The 1999-2000 maximum assessed value was the Voters overturned this supermajority requirement in 2008.
1998-99 maximum assessed value plus 3%, and so on.
One significant implication of Measure 50 is the
In addition to the cap on assessed value growth, tax "disconnect" between assessed value and market value.
growth was also effectively limited to a 3 percent annual Reliance on assessed value for market-based decision
growth rate, although exceptions are permitted under making and matters related to income tax is clearly a
specially approved levies. Similar to Measure 47, phenomenon of the past. There is reason to believe that
assessed values can be increased due to new construction, there will be some level of predictability of future tax
subdivision, rezoning, omitted property and loss of obligations based on the growth rate limits. Properties
exemption. When these events occur, the assessor will subject to exceptions, particularly new or significantly
place the added value on the assessment roll at the changed properties, should be monitored closely for their
maximum assessed value. first year values on the tax roll, as these values will dictate
the taxable values into the future.
The maximum assessed value of added value will be
determined by estimating the real market value of the
Todd S. Liebow, MAI, is a Principal of PGP Valuation Inc, a National Real Estate
change and multiplying it by the ratio of the maximum Appraisal and Consulting Firm providing Property Tax Appeals/Consultations;
assessed values of like properties to the real market value Commercial, Industrial, and Special Use Property Appraisals; and Feasibility
studies.
of like properties.

TSLCut&Cap1/2009 PGP VALUATION INC.