The record · Transcript
Council Session — 2025-10-16
Transcript from the session's official auto-captions (23,361 words), shown in readable case and split into speaker turns. Speakers are not yet identified (colors just separate consecutive turns). Auto-captions can contain errors — check the recording for anything that matters.
Session summaryEditor-reviewed
Portland City Council held a work session on October 16, 2025, at 2:02 p.m. as stated in the transcript, with no roll call required for this format. The session was called to provide background on city revenue sources ahead of the fall Technical Adjustment Ordinance (TAO) and upcoming budget discussions, with the TAO scheduled for Finance Committee on October 20, a full Council work session on October 22, and a first reading on November 5. The Chief Financial Officer presented an overview of city revenue categories—service charges and fees, grants, and taxes—including property, business license, transient lodging, and other taxes, noting figures were drawn from unaudited actuals for the prior fiscal year. The Multnomah County Assessor then gave an extended presentation on Oregon's property tax system, covering Measure 5 and Measure 50, real market value, maximum assessed value, assessed value, compression, and tax increment financing (TIF) districts, using examples including a downtown office tower. Discussion topics included business license tax trends, valuation inequities across neighborhoods, compression's effect on general fund revenue, the Fire and Police Disability and Retirement fund, and requests for comparative data from other counties and jurisdictions. No votes were reported during this session; any vote outcomes would be recorded in the vote ledger. The session was adjourned after extended discussion and no further questions.
AI-drafted from the session's auto-captions, reviewed by an editor — describes the discussion only; recorded votes live in the vote ledger. Captions contain errors.
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1 Okay. Good afternoon. It is 2:02 p.m. On October 16th, 2005. I call this work session to order. So no roll call is necessary for a work session. Thanks to everyone for being here. This work session was called because we have a few councilors who requested an opportunity to learn more about the city's revenue sources. Before we talk about the fall tao, the technical adjustment ordinance, and the projections for upcoming revenues next week. As a reminder, the fall tao formally called the fall budget monitoring process, is used primarily to reconcile beginning fund balances to the ending fund balances from the prior fiscal year, as well as to make minor policy and technical adjustments to the budget. The fall tao will be coming to the finance committee on Monday, October 20th, then to a full council meeting full council work session on Wednesday, October 22nd, followed by a first reading at a full council meeting on Wednesday, November 5th. I'd now like to invite councilor Clark to share her thinking for requesting this issue. Coming to council for discussion. Councilor Clark.
2 Thank you. Council vice president. I did request this work session, I think, along with a couple of other people, because I think we need to take some time to really be educated about what's happening on the property tax in Portland. We talk a lot about what's happening in the downtown and the drop in values, and it has some very serious implications for our budget. So in fact, some people might even call it a crisis in what's going on with our with the downtown property values. And as I said, those decreases are going to lead to significant number of property value assessments, not just the downtown but in other parts of the city. And that means a loss of revenue for the city. We're very reliant on our property taxes. I think we're going to hear that from mr. Beary, but that's why I requested this. It's really a precursor to what's coming that we need to prepare ourselves for that and dispel any misconceptions we have about downtown property values. So I want to thank in advance our county assessor, I think, michael vaughn, for coming today and for our cfo, jonas berry, for providing us with a little briefing presentation before we really dive into the property tax. So thank you very much.
3 Thank you, councilor Clark. A little bit of run a show for today. Today we'll get an overview from the city's chief financial officer, jonas berry, on the city's major revenue streams. We'll then spend the bulk of the meeting with the county assessor, michael vaughn, talking about property taxes and how oregon's property tax laws affect our revenue and what we can see in the next few years. So happy to have you with us today, mr. Berry. And I will hand it over to you for your presentation.
4 Great. Thank you, madam vice president. Thank you, council. Thank you, councilor Clark, for the introduction as well. For the record, city chief financial officer jonas berry, we will here in a few minutes from our the headliner from Multnomah county to hear about property tax system. I do think this is a appreciate that this is a really great educational opportunity to share information with council, to share information with the public. I also just I hope it starts to illuminate some questions that will continue to address as we go through the budget cycle. There's a very limited universe of us who are passionate about the property tax system, so I'm glad that we have folks here to share share that space with us today. So maybe ten minutes, 5 to 10 minute presentation. I wanted to provide a little broader context on the the broad range of city revenue sources, which will lead into the property tax discussion. Note that this is a sort of compressed version of a larger presentation that was given on August 11th at the finance committee. So a first place to look if you're interested in more info would be to take a look at that 45 50 minute conversation we had then. And of course, we expect to have more as we as we go forward. I do expect the opportunity to continue to have revenue related conversations, including as soon as the work session next week as we talk about budget process and how that might be crafted. A few comments about revenues. Generally, the city relies on a complex mix of revenues that range from relatively simple and small one time charges, things like a single use parks related fee, or a single payment at a city parking meter to external resources like grants intergovernmental revenues to more robust revenue streams like utility rates, business license taxes, or property taxes. I don't anticipate we're going to go through all the details today. Happy to do so at another time, but want to acknowledge that collection of those revenues comes from various places and various mechanisms. It requires a lot of interactivity between multiple touch points in the organization. Obviously, we have legal considerations relevant both to the use of those revenues, legal requirements and standards related to collection security and transparency. There's a lot of interaction between accounting functions, budget functions, treasury functions, technology systems, and the bureaus and service areas that share responsibility for those collection systems. I also want to acknowledge up front the reality that when we're talking about revenues to the city, that means we're collecting money from somebody, whether that's an individual or a business that's inside our community or someone outside our community. In turn, of course, the city relies on all of that complicated revenue mix to provide the financial resources to do all the work that the community expects of us. We take that responsibility very seriously and work diligently to be as efficient, effective and transparent as we possibly can. So to turn to the conversation at hand, the sorry, if you can go back, one more slide, please. So for purposes of this kind of simplified discussion, what we've tried to do is bucket the broad category, broad bucket the city revenues into three broad categories. And we'll go through each one on their own. Slide here I'm going to go through each of these very briefly as fyi and as context, and certainly expect that we're going to come back to some of these at a later meeting, a later work session, as we as we continue the budget discussions, but wanted to give a quick frame up here today. Okay. Next slide please. So the first oh sorry, maybe a couple disclaimers before we as we show the numbers up here. First the numbers that are reflected here are 2425. So the fiscal year that just ended unaudited actuals were just completing the audit work right now. So if you see these numbers in a future presentation they might be a little different. Because we're in this kind of in-between moment when we have the actual audited numbers, then we'll pivot to using those. The other disclaimer is that as we talk through these numbers, we're only talking about kind of the major categories. So I'll save if anyone is compelled to try to sum all of these up and align to a total revenue number in a budget or an audit, don't don't bother because it won't match. We're not including all the revenues, we're just displaying some of the key key categories here. So the first bucket is service charges and fees. The largest grouping here, the chart on the left is the utility rates. And you can see how those are split between the sewer and stormwater system and the water water system. And then on the right hand side. And I'll just these are essentially user user fees. The traditional what we think of traditionally as utility utility rates, the things that show up on your bill as a utility player. The the other chart on the right hand side is a variety of examples of some of the other types of major fees and charges that we collect in various areas. Service charges and fees are generally almost exclusively restricted in use. Those restrictions can vary. For example, water charges and fees can only be legally used to pay for things in the water system. Sdcs or system development charges can only be used for their defined purposes, etc. Etc. The restrictions that are around those revenues, any bucket of revenues is typically codified either by city charter, by state law, or even sometimes by federal requirements. Next slide. The second bucket is is grants. And as you can see, there's a wide mix and variety of flavors of grants that come into the city. And those provide an important source of revenues to meet specific city objectives. Typically, grants are very restricted and that they're provided for very targeted and limited uses. I'd also just flag while receiving grants is is great and wonderful. There is no free money. Grants do come attached with a whole separate rubric of application requirements, receipt and administration, monitoring and compliance requirements. And so there is some internal cost and effort involved in receiving those grants and making sure that we're using them in compliance with the the rules around those dollars. And again, don't expect to dig into all of that today. There's a lot of information on this slide. But but happy to come back and provide additional information in a separate form. Next slide. And then the final of our three buckets is taxes. So in addition to some of the smaller a couple of smaller taxes. And so you've got obviously the gas tax. And then that little sliver that says other tax is actually the arts tax. The city really has two primary flavors of taxes. The kind of salmon orange color is business taxes and then taxes on property, the box on the right. And so you can see where this is going here in a minute. I would also note on this slide that a new feature has entered the presentation here, which is the little asterisk that's attached to some of these revenues, indicating that those buckets of revenues are unrestricted, meaning that they can be used for broader purposes with fewer limitations. When we talk about general fund revenues, those asterisk categories are generally the sources that are included in that mix. The business tax category includes things like the business license tax, which is the tax on business income above a certain threshold. It includes the transient lodging tax, which is a tax on room rentals, includes the clean energy surcharge and obviously a couple others that are that are listed there. But it's a bucket of taxes, not necessarily all directly general fund. And now to the next slide. Next and final slide. We've arrived at the star of the show which is property taxes. So this pie chart here kind of grabs that blue slice off the prior slide and splits out those property taxes in a little more granular detail to see the various types of property taxes that the city collects. We have a small amount for outstanding voted, voter approved general obligation bonds. We have the existing parks local option levy, we have the children's levy. We have a separate levy, property tax levy for the fire and police disability retirement fund. And then the box on the slice on the far right, about $350 million of general fund property taxes generated by the city's permanent rate. That was a lot in a very short amount of time, but wanted to make sure and give you that context. I will remain in the room. We also have cbo city budget office director and the city economist in the room to help answer questions, but I'd like to take this opportunity now to hand off to the county assessor to talk us through the exciting vagaries of our property tax system. Thank you, michael. Thank you, vice president.
5 And mr. Berry. I know looking at this agenda here, that we were going to hear both presentations and then have time for q&a. I have a few counselors that have put themselves in the queue. Does it make sense to wait until both presentations have happened?
6 I defer to you. I mean, I want to make sure we give plenty of space for the property tax conversation.
7 So I think if there's a clarification around your presentation, now would be a good time.
8 Yeah. Thank you. Thank you. Vice president. Hi, jonas. I think I thought I was coming to a meeting that was on both the business license tax and property tax. So I now realize that was a pretty quick presentation on business license tax. When will you return to do that? For the entire council?
9 I would, it's tbd.
10 Councilor that's such a what percentage of our general fund is the business license taxes.
11 I don't know, 40% ish. Well yeah. And we are coming back. I mean, as we have the conversation with you at the work session next week that will include some of this revenue. I was.
12 Just thought it was going to be both today. So that's why I wanted to get a little more out of this on the business license tax. Yeah.
13 To clarify, next week we'll be coming back on the 22nd and my presentation will be primarily on the business license tax.
14 Okay. And so I'd have to watch the finance committee to get the comprehensive report that you gave.
15 We're coming to the work session on the Wednesday work session.
16 Okay.
17 And just a broader answer to your question, councilor is this is not my intent is this is not the only conversation we have. We are happy to have this conversation with councilors as often as you'd like. It's helpful to do in this large forum so that we have the benefit of sharing everyone's information. So at any time, council would like to coordinate, you know, agendas to have us come back and share that information in more than.
18 A pin in it. Because there was a couple of years ago, we were surprised at the business license taxes being higher than projected, and now it seems like it's going the other direction. So that's a pretty big red alert that we have a revenue problem. So we do need to spend more time on that. Thank you.
19 Thank you counselor. I know I rushed through it in the beginning, but I'll say it again. Finance committee on Monday the 20th full council work session, Wednesday the 22nd of next week, and then also a first reading at full council Wednesday, November 5th. We'll make sure that that info is sent out. Councilor Smith.
20 Thank you, madam vice chair. I am looking for that 16 page memo that we were supposed to get. Is that out yet?
21 It's a great question. It should be out. It's been I know, submitted through the council system. I don't know what the status of publication is, but that's on the agenda.
22 I thought we were getting that emailed to us.
23 So I will follow.
24 Up on.
25 That, counselor. If there's it's it's available. I don't know the status. I haven't actually been at my computer for the last 4 or 5 hours, so I will check on it as soon as I have a chance.
26 I'm seeing a thumbs up from hailey behind you.
27 Okay. Thank you.
28 Is it an email or is it e council?
29 It's posted on council now.
30 I'm being told it's posted on e council.
31 I'll send it through email. I don't have access to e council.
32 Yeah. Some of us like emails.
33 Still you can send it through email. It's on the council agenda website. Not just.
34 The old I.
35 Don't care. It just came today and I know we were supposed to have it a couple days ago and so. Here with, with councilor Ryan is saying we haven't had time to look at that memo before we came in here. And so I'm a little at a disadvantage. I wasn't able to be prepared for this.
36 Yeah. No, thank you for flagging it, councilor. And just to be clear, for anybody who's watching, there's sort of there's a couple conversations that are getting kind of mixed together here. One is the conversation today around revenues and specifically property taxes separately related to the the tao, the technical adjustment ordinance. There is a memo and a whole suite of documents that are published on the agenda. I'm told as of right this as of now on the agenda web page for the finance committee, which we'll be hearing the tao ordinance there. Related. But the conversation today, I just wanted for for anyone who's listening on the public, the information in the memo that you referenced, councilor is a little bit different from the conversation that we're having today.
37 Oh, I was confused because I thought the mayor was saying that that when we were in our meeting that we were supposed to have a 16 page memo to prepare us for this meeting.
38 In preparation for next week. Councilor for the 22nd.
39 Okay, okay. Got it.
40 And the plan has been to make sure that everybody gets that by email as well. I believe council ops is planning on sending it out.
41 Okay.
42 I think that chiefs may have gotten it already, but it didn't go to all of us individually.
43 Excellent, excellent.
44 Thank you.
45 Councilor Kanal.
46 Yeah, just two questions to clarify. One is the memo you're talking about. It is exhibit seven right. The the 20 pager that's on the.
47 It's exhibit seven, I believe. That's correct. Yes.
48 And the second question I had is similar to councilor Ryan's question earlier. Are we going to be talking in this work session or in another future scheduled one about the fire and police disability and retirement tax?
49 Well, I believe I mean, this is a broad conversation about property taxes. So what I might suggest is we can let the county assessor give their presentation. And if it's a natural fit to have that conversation today, we're here and happy to do that. If that feels like it's a better fit to move to the 22nd or another forum would defer, defer to your preference.
50 Thanks.
51 And my hope is that we actually will have in the conversation. It sounds like an in depth study of the revenue streams called the business license taxes.
52 Thank you councilor. Yeah. So I'll just preview that. The work session on the 22nd, which I believe has been communicated. But I'll state again for transparency, we'll kind of have three sections. The first is a conversation about the tao and what's in the tao, and previewing that so that you have a couple of weeks before it comes to council for a vote or for a first reading, I should say, on November 5th, the second section of that work session will be to talk about kind of the revenue and financial picture. We probably need to make some decisions around how deep we want to dive, given the limited amount of space, but we'll at least start that conversation and can try to make sure we provide some of that information. The third piece, which I also think is critical, is to spend a significant amount of time getting council feedback on the budget process. We have to begin that process imminently, and we would really, really like to have space for council to provide thoughts and feedback on that budget process. So it's a lot to cover in that three hour session. We're happy to answer questions and navigate it however council chooses, but I just want to set expectations. That deep dive might be a little bit of a of a. I'm not sure if we'll have time to do a full deep dive, but certainly happy to come back and have additional discussion if that's necessary.
53 I think it will be helpful for this council to have a comprehensive dialog about where the revenue comes from, and I also think it's great that you're that you're partner at the county is here to talk about property taxes, which influence the county's budget even more. But we're all part of local government, so it's helpful to hear all of it. And if you could make those connections, that would be great.
54 Anything further councilor? Okay. Councilor Clark.
55 Just to be clear, I asked for this just for a deep dive into the property tax. That's all we're going to do today. Sorry if I misled anyone or I didn't. Wasn't clear from the beginning. It's a very complex system that we need to get our head around, and it's about half of our of our budget, so thanks.
56 Okay, so it sounds like we've been through the introduction from our cfo. We're turning to michael vaughan, our county assessor. Thank you for being here. I know that you had to move some things around to make it work. We really appreciate it. And I think with councilors with different backgrounds in how our property tax system works, there's a lot that we can learn as we move into our fall budgeting process. So I'll turn it over to you.
57 Thank you. Mike vaughan.
58 Multnomah county assessor. And right on cue, the technology isn't working.
59 Let's see.
60 There we okay, I really appreciate your my professional career working in property tax administration ten years. The last ten years with the county and the system after that many years hasn't gotten easier. It's just gotten more complicated. So what I intend to do today is take us through a high level overview of that system and not to make you an experts, but just to help establish the terminology that we'll be using throughout the remaining slides to talk about specific budgetary and revenue impacts to the city. And I'll be also introducing the county as a way to compare as we work through this. I want to connect Oregon law, property tax law with that revenue. So that'll be something I attempt to do. I have no problem taking questions during the presentation. If you want to ask, that's fine. I also have as many as much time as you want to stay after the presentation and work through it. And then what I want to do is I'm working through the city data, working with starting at the city, moving through the core. I will end with one of the larger tax accounts that have made the press lately, and I really want to highlight through that. It's just really talking about, you know, how all of the press and the economic trends relate to the reality that we're all facing with with our budget situations for the coming current and next fiscal year? All right. After 21 years definition of property tax, it's the administration of state law to fund our communities. So if it's not in statute, administrative rule, the Oregon constitution or a tax court interpreting one of those three, I can't do it. And so I often start that with a lot of folks who think that somehow, as the assessor, I have the ability to influence decisions. I as well as my staff, some who are here today, really spent a great deal of time trying to understand a collection of laws that have been written over 50 years and trying to relate those collection of laws to a simple math equation that we use today. And that math equation is simply a rate which is a district budget multiplied by a taxable value to give us a property tax. And that's as simple as I can make the equation. It's not a very complicated one. Again, what makes it complicated is that we take 50 years of. Legislative thought and try to apply that to today's circumstances. And if you think back 50 years, pre-internet, right. And so, you know, you think back to these things that, you know, the way things were and try to think that how were they envisioning this to be applied and used in 2025? So that's kind of what I want to talk through. And let's see. All right. So. Our major tax structure came about in the 90s. This is really the reform to our tax environment that came about that we're dealing with today. The first major constitutional amendment came about in 1990. And it's referred to as measure five. Voters approved this measure to limit basically district budgets. It limits district budgets by saying that districts can collect school districts can collect no more than $5 per 1000 of a property's market value, and for general government. So everything that's not a school district or education district, that is a $10 per 1000 of a property's market value. Now, what's important to realize about this is this is a limitation on a property's market value. So in 1990, measure 50 didn't exist. We didn't have maximum assessed value or an assessed value. Property taxes were based on a property's market value. And so we see already a law that was created pre measure 50, which I'll get into in a second. And it's based on a property's market value. So when we're dealing with this limitation we'll talk about it later in slides in terms of compression. And I'll define what that is and give you examples. So don't worry about taking the notes. I'll definitely try to clarify it as best I can. The second half of the equation was further limited by voters in 1997, and became eventually known as measure 50. Measure 50 limits the value that a property's tax can be based on, and it created what's known as a maximum assessed value, so it moved from taxes based on a property's market value to this new concept of a maximum assessed value. So essentially, as that name sort of dictates, it's the maximum value that you could use for the tax equation. So the rate times the value. And basically the fundamental or the foundation of our tax system ever since the 90s has been based on these two concepts that are in oregon's constitution, article 11, section 11. And it limits basically any other aspect to Oregon law. And I know since I've been around, there's been talks of reforming these for at least 20, 25 years. And that's something that, you know, I can definitely address throughout the presentation. But that's not really the major bent here. And I just wanted to talk through conceptually some of these, these concepts. So rates your taxing district. There's 59 taxing districts in the county. You probably are more familiar with this than I am. But basically your three common rates are your operating rate known as your permanent rate, your local options which are voter approved measures, and your bonds. Those are your three rates we use in the tax calculation. It's.
61 Bear with me one second.
62 It's flying a little too fast through.
63 My notes.
64 So for any single property account, there is between 8 and 12 different districts that assess the levy. And when we talk about rates in terms of aggregating those rates on a single property tax bill, that that comes up with an overall rate that we use in the tax calculation purposes. Just a little. Fact is, Multnomah county, the average aggregate tax rate for the county is $23.56 per 1000 of a property's maximum assessed value or assessed value. And then downtown area, we do have rates that are approaching just under $27 per thousand. So just wanted to highlight those two facts. The values that were established under measure 50. I'll spend a little bit of time on. The first is the real market value. And I think this is something that's I think most people understand it. You know, you've bought a house or you sold a house and, you know, market value is the essential thing that you come to an agreement over when you're buying or selling any property. It is a value that is driven by an opinion. So I tell this to everyone that market value is an opinion until a sale happens. And so as we're working in the assessor's office, we have 30 or so appraisers who are out there continually learning their craft, which takes 3 to 5 years to get designated. As an appraiser, you're really learning how to develop that opinion through economic resources, understanding how markets work, how buyers and sellers, essentially the market interact to come up with purchase price and sales prices and those sorts of things. So as we're working in the government and the public, the public sector, I don't have enough appraisers to go out and view each property. Every year we have over 300,000 tax accounts in the county. And so what we typically do is rely on a system of statistical analyzes to generate opinions of value. So we're constantly looking at historical data to generate trends, much like the city's economist will do. You know, we're looking at the information to help us generate which way is the market moving so that we can get out in front of values so that we can make sure that we're maintaining the most credible value we can on property. Now, again, 300,000 properties. And if you're talking statistics you're usually looking at averages. And so oftentimes, you know you could see values don't always align with sales. And that's why we have appraisers to make sure we're out there constantly getting it right. The second value that I introduced under measure 50 is maximum assessed value. Now this is a value that was created that's in the constitution. And once created on an account, it is sort of set in stone. It really can't be changed. The rule is every year it can go up by no more than 3%. It's a test. Unless, of course, there's an exception to that rule. Unless you've done something physical to change your property. So I often use the example of if you have a bare piece of land, you have a maximum assessed value market value. But if you build a house on it, obviously we can't just trend that value at 3% because it won't capture the improvements that you've built. So if you build a house, we're going to be adding, you know, that value. So generally maximum assessed value is locked in and it grows at 3% per year unless something changes. Now the final value is assessed value which I like to refer to as the taxable value. This is a value that is also formulaic like maximum assessed value. And it's simply the smaller of the two. So it's the lesser of real market value or maximum assessed value on every account. So we go through all 300,000 accounts and we say which one's lower. And then whichever is lower that becomes a taxable value. Now on average the typical residential properties maximum assessed value is about 50% of market value. So million dollar house has a maximum assessed value of 500,000. That's the 50% threshold. That's the average. Some higher. Some are lower. So typically if we're sticking with that scenario, assessed value for that account would be 500,000. So we would be basing taxes for that property on the smaller number. In that example of 500,000. So before I jump into the city data questions.
65 Councilor Green, did you have a question on the last slide?
66 Yeah. Just briefly. So you mentioned that, you know, there's the 3% per year cap, unless there's a triggering event where you sort of change the there's a meaningful or substantive change to the property, like a remodel or something that like something like that. Do you, do you do you think that explains a lot of why we see kind of wildly arbitrary differences in individual parcel by parcel, relative burden across the across the county?
67 Councilor. Great question. So our job is to equally apply the values amongst all the accounts. We know that through years of experience that it results in inequities in taxes. So often our office will get a call, you know, two neighbors write down similar houses. Both had $1 million. One is paying $8,000 in tax, and the next one is paying 12,000 in tax. And unfortunately, what we have to say is, well, when we were developing, the laws were passed and we were developing, you know, the market value, then we were developing the maximum assessed value. There were reasons why the values were lower at the time. This was back in 97. Right. So I can't tell you what was going on then. But what I can tell you is the maximum assessed value was created based on the values at that time. And then since then it's grown up at 3%. So you get neighbors that will have very wildly different taxable values, even though they have properties that are almost identical in market value. And that's and that's often the case. Now you had new construction remodels, you know, you had an addition. And that further complicates the inequity that we see with differing taxes. And then I also make this plug that, you know, every year I send out 30 appraisers into the market with, you know, identifying new construction. And it's we basically ask new property owners to let us do our work. Only about 20% of the houses we knock on actually let us in the door. Yeah. And so another challenge that we have, which is not surprising, I get it, but we still have our job. We still have to fund the districts that provide services to your property. So we're going to do the best we can through building plans and trying to figure it out. And it happens every year where we get an appeal. We go out and we said, well, it looked like we said we thought there was a finished attic and there's not. So we're going to go in and fix that for you. So there's 2 or 3 major reasons councilor Why we typically see those inequities.
68 Yeah. Thank you for clarifying that. And I understand it's not the counties fault. It's the sort of policy choice that we have made in this state. And I just I just note that for this body. Thank you.
69 Councilor Kanal did you have something as well?
70 Yeah. And while we're doing that, if our tech folks, if there's a way to turn up our presenters mic, I'd really appreciate it because I am hearing about half the volume here. So I had two questions. One is a follow up to councilor Greens. What tools do you have to incentivize increasing that 20% number? Of people who let you in the door?
71 It's a great question. It's been brought to the federal constitutional level as to what right the assessors have to enter a property, and the way that the the state department of justice has dealt with this question is to say that there isn't an actual right for us to to be on property. We can ask so we can walk up to a house and knock on a door. If a property owner refuses access, we have to to leave and try to do the best job we can. If, however, we generate a value that they feel is wrong and they appeal it, the tax courts have said that if you want this appeal to continue, you have to give access to your property. Got it? And so that in all the years I've been around, have been the has been the only way to incentivize, you know, to say, look, we're just trying to get it right. You know, we don't have a stake in anything other than accuracy. And so typically we have appraisers who are trying to, you know, articulate that. And, you know, it's but it's it's still kind of in that 20 to 30% range depending on property markets, areas, that kind of thing.
72 Okay. And then secondly, sort of logically, anecdotally, the major improvement sort of trigger for a second for, for a reappraisal seems like it would anecdotally, it has this sort of disincentivize certain types of improvements. Do you have data on that from a more aggregate level though?
73 I'm not sure I understand the question. Could you clarify what improvements.
74 In terms of you said that if someone's, for example, you mentioned building up a lot, but if you're adding a bathroom or something and that's going to get your your house reappraised and that's potentially going to have an impact on your, your the values that you have on the side here. Do you have data showing whether or not that that is a sufficient enough deterrent, that a disincentivizes the improvement in the first place?
75 Councilor I do not.
76 Okay, because we have that anecdotally, I think from at least some of the constituents.
77 But and just to be clear, when someone is remodeling a house or doing an addition, it's not a reassessment of the house. It really it's just picking up the additional improvements to modify the maximum assessed value to account for those. Right. So I can tell you that there are plenty of unlicensed improvements out there that we find through market research. You know, we we see, you know, a property sells and we look at the listing and next thing you know, it's been remodeled and gutted and new wiring. And we've never seen a permit come through. So typically we first gain notice of properties through permitting. And that's where we identify sort of a hot lead. The next step is sort of the sale of a property that shows us pictures of the inside to see if we've got accurate inventories. So I have seen people not permit for that reason. And folks have said I don't I didn't get the permits, I don't want the assessor out here. So I have had that conversation before, but I don't know if that is deter people from not. I wouldn't know whether they've been completely deterred from building at all.
78 Thanks, thanks.
79 We've got two more for you, councilor Dunphy.
80 Thank you. I have a couple of questions, and I'm trying to get this to work in my thick skull. Property taxes are for the assessed value. They are reevaluated when a house sells. Correct? Like if a house sells on the market, the new owner has a different assessed value than the the previous owner, potentially.
81 Councilor. That's not correct. Okay. We don't re reassess that sale. That's a prop 50 california thing that we hear all the time. Okay. No, there are very few provisions for changing maximum assessed value on property. One would be if a property comes out of exemption we would reassess that property complete, you know, demolition rebuild. We would we would reassess. There are there are reasons we would reassess in law but not a sale.
82 Okay. So and also not necessarily I mean, I'm thinking I'm trying to think of like I'm comparing a 100 year old house in on north williams. After all the gentrification that has happened and the increased property values compared to 50 years ago versus a ranch that was built in the 80s out in Lents, that they can have wildly disparate valuations in the real, like the actual market value versus the assessed value. And there I remember I've heard horror stories historically of like properties that are assessed at 20% of their their actual value. Are there still situations out there like that where $1 million home is being assessed as a $20,000 home or whatever, or $200,000 home?
83 So the ratio I've seen as low as 10%. And so those properties are, unless they've done extensive remodeling, they've added, you know, those types of reassessment things. It would stay in place. And that's and that's where we see the biggest inequity. We have those type of properties that have tax bills that are 1000 to 2000 and then say some property of that size, you know, built southwest, northwest Portland paying, you know, ten, 12 times that number. So it becomes one of our biggest challenges is explaining that scenario to a taxpayer, going, wait a minute, north and southeast Portland are paying on average 20, 30% of value where we're paying in northwest and southwest, 60, 70%. In fact, those are the most engaged neighborhoods with my office.
84 And we don't have any mechanism to rightsize that at any real period of the life of the existing house gets demolished or hit by a tornado, and they put something new that's a new entity that we can look at, but in effect, we are we are permanently benefiting homeowners in irvington at the cost and at the cost of new development in powell, hurst.
85 Councilor. That is correct. That's that's one of the challenges. And that's the problem with all of this being enshrined in the constitution. This is exactly what the constitution says, that you do not get the right to change, mav, unless one of these exception events, seven exception events occurred. Outside of that, there is no reassessment.
86 Horrifying. Thank you.
87 Sorry.
88 Thank you, councilor. Councilor Clark.
89 Thank you, madam president. I think we're getting into the gordian knot now of our property tax law. And I really was hoping that we would eventually get to what the impact is going to be on our budget and maybe this conversation about the inequities we can talk about later when it comes to trying to change the law and whether or not the league of Oregon cities or anybody else is willing to start nibbling around the edges of some of these things, because we don't have the power to really make that change ourselves. But I was hoping that we'll get to the overall impact here. Thank you. I think you did answer. I had a question about the linkage between permits and a trigger for your attention, and I think you answered that. That you do that.
90 Yes.
91 Councilor Zimmerman.
92 To councilor Dunphy, your analogy between irvington and Lents, I would say, would be more accurate if you picked a neighborhood who was not desirable in 1995, irvington was still desirable in 95, but parts of alberta, parts of williams are much better examples of that, where they are seven figure homes today. Yes. And then your statement is dramatically clear and inaccurate.
93 Thank you, councilor, for clarifying that. I think we are ready to move to the next slide.
94 All right. Impacts. So hopefully I've confused everyone. Let's go ahead and dig into some of the actual data. And maybe it'll get a little clearer. So I made some of the cardinal rules of, you know, packing these slides with data. I tried to graph and make it nicer, but this is it. So let me walk through this. The first category is assessed value. And you'll see there this is this is the city's city of Portland. This is the aggregate for all of the accounts. And so going back in memory this is the total aggregate of all taxable value for the city. Data begins in 23. So we'll look at a tax year in terms of the first year or the year that it was built. I know that's different than the revenue fiscal years. But in 23 you had just over $79 billion worth of taxable value for the city of Portland in 24. That increased just over 3.5% to 82 billion from an you know, an analytical standpoint, 3%, as we were noting before, is the typical trend for maximum assessed value. So as we're looking at assessed value, 3% growth would sort of mean that things are stable. You know, values are kind of going up, but you're not seeing a lot of new improvements, not a lot of cranes, not a lot of permits, you know, that sort of thing. But things are okay. They're stable and 25. So this is the bills that we just certified and are actually going out in the mail this week. The taxable value total for the city of Portland is $83.886 billion, which is a year over year increase of 2.24%. Now, when we see assessed value growth, that lags 3%, which is again, for thinking about those trends. That means that the the usually the market, the economy, real estate sector is not is not growing. It's not stable. In fact, not only is there not new construction, but it's likely that values are decreasing. And so as we were talking about when you start seeing the year over year decrease of or below 3% growth in taxable value, that's going to correspond directly to revenue. And that's something that I'll talk about on the next category extended taxes. So for the city of Portland going through 23, you by law and I'll say and I'll make a distinction here by statute, you were able to bill $572 million in 23. In 24, that's 617.8 million, which is an 8% increase. That is the total by law that you're able to collect going through your typical budgetary process. So after you certified your budget through your process and you've sent it to me saying, collect this amount of money, I go out and I generate the tax bills for 617.8 million last year and 634.5 million this year, again, year over year increase of 2%, 2.7% in the budget is for taxes. It's not as concerning to me. It's not the same thing as taxable value. I mean, you obviously want to see numbers in line with inflation, but there's a lot of reasons why taxes can go up greater than 3% or not grow, depending on local, you know, measures or budget increases or things that you're doing to, you know, to your budget at this level. So but it's something that I want to show that this is the amount of money that according to statute, you're obligated or that you're entitled to collect. That's what we refer to as extended taxes. So I've created 300 or however many tax accounts are in the city of Portland, I've created $634 million in receipts. The next category is imposed. So you'll notice that number is below the extended taxes. This is where the constitutional limitation of measure five comes into play and is compression. So for 23 you wanted to collect 572 million. But because of the limitation you were only able to collect 549 million, representing a $22.7 million reduction in taxes due to the measure five limitation in oregon's constitution. So in 24, that number is 29 million, which you see between 23 and 24. Compression increased by over 27%. That's usually a sign that values are dipping. And I know I've been talking to your economists and other economists in the metro region for the last few years, talking about ever since 2020, when are we really getting into the point where market declines are going to actually start showing up in tax receipts? I would say 24 was the first time we saw a significant increase in that, and that's due to that limitation. And so when you see a 27% increase in compression loss. And let me just put this in perspective, the entire county, all 59 taxing districts for this year, had a loss of $147 million. So this is not just the city of Portland. You know, issue. This is all of the districts are sort of sharing in this throughout the region. So that reduction increased to 33.8 million for the most recent tax year, which is a 16.6% increase. We're going to delve in the next two slides into the reasons why, but I wanted to pause if there was a question around this particular slide.
95 Councilor Koyama Lane.
96 Thank you. Council president. You kind of started touching on this, that this is what we're seeing in our region and other cities and counties. And I'm wondering specifically for assessed value, if you can talk about how our year over year percentage compares to other similarly sized cities and counties, even outside of Oregon.
97 Well, in in Oregon, I can tell you there's no other city or county that comes close to our values, our assessed values, our real market values. So the closest we could be looking is up in the seattle area with the various counties up there. I haven't followed them as closely as I'm trying to figure out how to get ours right. But I will say that I'm seeing some of the similar characteristics in downtown cores that have not fully recovered since 2020, and so I don't have specific numbers for you, councilor. But I can say that, you know, throughout the up and down the the west coast, we're seeing something similar with major larger cities. Now, I have heard that some of those cities are recovering at different rates. And so there are some increases, but I don't have anything more specific than that.
98 Councilor Dunphy.
99 Thank you again. My thick skull. I'm trying to figure this all out. I have also heard I represent east Portland and I've been I also used to serve on the park road school district budget committee, and we were essentially flat for revenues out there because of compression, even though we had a whole lot of new investment, we had some new housing come online. We've had some new property development and whatever. All the development happening at the airport also directly affected them. But that meant that our revenue remained flat, even though our expenses and our demands are going up. Is the compression geographically isolated? I mean, like similar across the city, or is that does that compression hit differently in east county than it does the rest of the city?
100 Councilor I do have a slide that shows a graphic. Okay. So if you hold your question and maybe I'll answer it, I'll be able to answer that better.
101 Councilor Ryan.
102 Yes, thank you. Council president, do you have comparables that you could send us maybe after this presentation on? Let's see, Washington and Clackamas county.
103 For compression?
104 Yeah, for these for the value and tax summary trends. I won't ask for Clark because it's a different state. And I'll it would be too complicated.
105 Absolutely. Councilor I'll get that to you. And it's a different tax structure across the river. So there would not be an.
106 That's why I said I'll give you a pass on that. But I think it'd be great to see the comparables of the markets close to us in Washington and Clackamas county.
107 Councilor Zimmerman.
108 Thanks, mike. On the assessed value. This in bold. We have city of Portland 82 million. And the year over year is 3.5%. I know you got john in the room, and this is probably about the time you joined the county. I am trying to understand about what number would we have seen there in. Let's say I'll call it the good years 2015 2016. In terms of that 3.5%, would I have seen a larger number in those years when it seemed like Portland was growing.
109 Councilor great question. Typically in those type, I'll call it boom years, where you see a lot of cranes, a lot of new building permits. We typically see a growth in the 4 to 6% range.
110 Okay.
111 Please. Yeah. Just to jump in on that 3.5%, that is mostly returning tif districts. It's not true. Assessed value growth about I with if you take out the tif districts it would be 1%.
112 So. Mike mostly made my point and you just made my point even larger. So thank you for that. I just want to the beginning of this presentation, colleagues said that assessed value grows at 3%. So if then the year over year is 3.5, I'm going to go ahead and throw the 0.5 as a part of the number. Doesn't really mean much there. There was no we didn't grow at all as a city. And like that's that that's really important for us to see here. And then if you add in the part that most of it is things coming off tif, it's stuff that was already here. And so in a world where our budget and what we have to spend on city services every year, I don't know of any service that we were all asked to budget this last year. That only grew by 3% in its costs. And yet our structure, no matter how, if we just paused everything, we would every year reduce, reduce, reduce until the last person standing was the mayor with a dump truck. Because that's how this would go, right? We have for a long time only made it because we grew further than the than the maximized 3%. And this I just hope that is coming off this graph about why growth is important given Portland. Excuse me, given oregon's. Structure of only allowing things to grow 3%, which is completely divorced from all reality of the costs of the world. So this this should be alarming to see anything close to 3%, especially then when you say some of it came off of tif. So it wasn't even new, just making the point there.
113 The mayor and a dump truck. Can we. Go to your bottom section here? The compression part, the constitutional property tax limits. We see compression above 20% for the 2324 to 2425 year. We see much lower compression for the 2526 year. Help me understand the wide variation in compression and what leads to those changes. I understand what compression is and how it happens in the chart you showed. But how do we get to such wide variation in how much compression there is?
114 So councilor Compression is an account by account test. So we have to look at each account. Over the last 2 or 3 years, we have seen most of downtown property commercial properties under appeal. And you know I think the thing to note is that one, once a property is appealed and successfully reduced. And I'll talk a little bit about this in a later slide as it relates to the us bank tower. Big pink. That value stays static for five years that that's in law. And so once we start seeing values are brought down either through appeal or through appraisal work, there's nowhere left for it to go. You know, we're talking about improvements that are getting reduced to not a bunch. And it becomes more of a land value scenario. So as we're looking at valuing commercial properties, office buildings on a more comparable to land value than it becomes, there's nowhere left for that. That compression calculation to grow. It's being based on the same value for the subsequent years.
115 So that decrease in the amount of compression is really about the reevaluation of value for those downtown properties.
116 Can I clarify real quick the the bottom right number, the 16.6% is the year over year increase of compression. So the compression actually went up from 33.8 million. So compression is growing.
117 It went from 29 to 33.
118 So what we're looking at here in the year over year is saying compression didn't grow as much between 2425 and 2526 as it did the year prior. But compression still grew. And that is okay.
119 That's to his point of there is a bottom. It's just wherever.
120 That so it grew but not as much. Yeah.
121 We're still going up. We're going up less. We're not coming down. We expect to come down in compression.
122 Maybe that's depends on values okay. But councilor Just to to clarify what peter was saying is. And so in 24, total compression loss for the city was 29,000,000 in 25. So the bill we just created, it went up to 33.8 million. So it's still increasing. And these values as are of one one. So a January 1st date. And because we're a couple months away from 26 valuation date, we're not seeing anything that's substantially changing the direction of the way things are going. So it's likely we will start. We will see an increase in compression loss for next years as well.
123 Okay.
124 How much I don't know okay.
125 We've got a bunch more people we're going to try to whip through them so you can keep going through your slides. Councilor Green.
126 Thank you. And just briefly that kind of tees up my question. So does the county or maybe maybe the city economist do do we have a reasonable basis for forming a projection of what we think our near-term year over year for assessed value is looking like in the next few terms, just given that five year piece and what we already know.
127 Should stay. Yeah.
128 Yes. So it's a combination of factors. And one we do a lot of me and the county economists do a decent amount of property analysis. And you can kind of see there is a bottom to the value that properties can drop. And so a reasonable projection is trying to figure out like what is the mix of downtown properties. How far can they drop before, you know compression is really maxed out. This is the most volatile property taxes will be because every percent drop is we feel it as opposed to when real markets are well above assessed values. We don't necessarily feel that at all. When there is a drop in of 10% real market value before this, this tax year and before the sale of big pink, the projection was this was going to be the last bad year, and then there was going to be slow, slow, very slow growth. Then big pink sold. And we've had discussions with the county assessor and we're I think I'm likely to be pushing out. Next year has been another equally bad year.
129 Okay. So you can almost imagine a sort of belly.
130 Yes. And and then again, property values can only drop to the level of the land value. And so there is a lower tier wherever that is. And it's trying to find out where that is.
131 Well that's some sort of that's a strange silver lining. I last last note, would you say, is it fair to say that this is actually a cumulative problem because of if the if the value comes down due to market dynamics, then the best you can do is 3% from there. Like you can return to the previous trend line of revenue.
132 So you you could in theory decompress. Yeah. And so you would you could the compression can fall a lot. Compression is a lot more volatile. So if the property value bounced back very quickly, you could see really strong tax growth. And so in prior years in prior cycles we've seen that where we've seen assessed values and compression bounce back quickly. I will say, particularly since most of these properties are now in tax increment finance districts that bounce back does not go to the general fund. It goes to the tax increment financing district. So I'm not assuming any of that.
133 Thank you.
134 Councilor Koyama Lane.
135 Do the 2526 projections include any boost we're hoping to see with the sdc waivers that we passed?
136 So the the forecast now. So. Not necessarily just largely because I need to see it before I start including in the forecast. I need to see kind of recovery in development and that sort of thing. And so the forecast will follow the the what's happening in the real market.
137 Councilor this, this 2526 is the actual this is the tax. This is all your taxes here. So for us, I don't know where your forecast landed is why I look to your economist. Because I this is basically what the numbers reveal right. So there's no forecast in this okay.
138 Thank you for explaining because that's only been about a month. So would we hope that for the following year we would see a boost because of that.
139 Following years. Because it's it's 3 to 5 years and it would be spread out if it's 5000 units and it wouldn't, it wouldn't necessarily show up. And then how many of them are in tif districts is the next question. And so it it's not something that I think was done necessarily to boost tax revenue in the short term. And so I don't think it will necessarily show up.
140 Okay.
141 Thank you. One other thing that we see, and I'll just add to this, is when commercial property goes under construction, it's usually exempt from taxes for two years. That's in law. So you typically don't see until the third year that actually come on the roll.
142 Yeah. Thank you.
143 Counselor Ryan.
144 Thank you. Council president I often tell a story that I, I don't think might be true at all right now. And so it's getting at a point where I just want some reality check. And are we going to change how we project going forward in our revenue model. So the stories this hour downtown used to bring in a lot of revenue based on everything we're talking about. And then that was the revenue that would pump out to the rest of the city for services. We're at a place where that's not the case as it was just say, 5 or 6 years ago. So what type of just explain if that statement makes sense because of what I'm hearing right now, doesn't sound like it's providing that revenue stream like it used to, like it's the colorado river and it's being drained quite a bit. So where are we going to? What's our plan? How can we reimagine if downtown doesn't become that provider of the big revenue stream they all used to tap into? Let's have an honest conversation about where that's coming from.
145 The the comment you made, it just all depends on by revenue stream. But for property taxes, I would describe the downtown as a drag. We are still growing in property tax revenue, but because of declining values in the downtown, we're not growing nearly as much as we otherwise would be.
146 Right. So you're affirming what I said. It's not the same revenue stream that it used to. It's it's become a tiny stream where it used to be a river. And so that's a big reality that we have to look at right now.
147 Yeah. And so in my forecast, just to clarify, not just downtown, but in terms of property, property tax growth over the next five years, if we had grown compared to how we had done historically in versus how it's projected based on everything we've heard today, that's $35 million plus a year that we are anticipating not to have.
148 Are you looking at comparables around the country where they've experienced this, where their downtown was robust with revenue streams and then it shrinks? And how did those cities survive?
149 It's really difficult just because in some cases measure five and measure 50 protect us in our insulate our taxes in ways that other cities don't. So even if they've recovered faster, in many cases they were hit harder, where as we didn't see a decline in property taxes, we even despite all of that, that's happened. A lot of them did. And so comparing to other cities is difficult, even if what is happening in terms of the property values is the same. Just again, because for many of the downtown properties, they're assessed to, real market value ratio was 50%. So it's it can drop by half its value before we really start feeling it in terms of property tax revenue.
150 And my friends in the marketplace, I'll end with this, say that they can't see any city that has been successful with its revenue streams without a successful downtown. Would you agree with that assessment or that comment?
151 I, I wouldn't disagree with the comment. I would say that a lot has changed since history, and so I don't know how things could play out going forward or not. I there may be success stories going forward in other cities or ours without a strong downtown or not. It's really too early to say so.
152 Anyway, a lot of people say that to me, and they give the detroit example, and I just hope we're having scenario conversations so that I could say something. I could do more dialog with them on this topic. And I think that it it comes up a lot. Thank you.
153 Councilor. I don't know that we'll get into those scenario conversations today. This is a bit more of a one on one, but we'll see how far we can get before.
154 We decide how to do budgeting next year.
155 I want to I want to put out a question that I have that I don't expect to have answered right now. I want us to move on in the presentation, but if we don't get to it today, I'd like to follow up. And that is that. You've mentioned tiff a few times, and I'd like to understand the relationship around what happens when properties come back online from tiff, and whether compression. What happens to that 3% growth cap during the time that it's in tiff, how that relates to compression, whether there's any downside when something's in tiff or if it does just grow and we just don't realize it until it comes out. So I can hold that question for later. But just a note for follow up. I think that clears our queue so that you all can keep moving.
156 Okay, so let's jump into the course summary. And this is just the downtown core area of the city. So we've collected a chart here of avi and rmv growth since 2018. The the thing that I want to point out is pre 2020, we had consistent growth of both avi. And this is to your question, councilor Zimmerman is, you know, what can we expect in avi growth when times are good? You know, when we're seeing development and you can see here that the year over year change in avi in 19 and 20 were that seven 5% range. Rmv grows at 42 billion, 43 billion and then 46.2 in 20 as the peak. And as we know, that was the time of change. The thing that I'd like to point out here is this is when we were sitting in the assessor's office trying to identify what values we're going to look like, you know, what were what was going to happen with properties, where where businesses are going to be coming back, you know, how would that affect real estate? And because appraisers are always tasked with the the challenge of looking retrospectively and projecting a current or future value, we didn't really have clarity with that. And so when economists were asking the same question because they were trying to develop credible forecasts for budgets, we were we were trying to allude that we see indicators at the time we saw in at the end of 20 and the beginning of 20, we saw vacancy rates for for commercial properties increasing. We were talking to, you know, major investors at that time talking about tenants were not returning, canceling leases and that sort of thing. And so that's where we started to identify that we needed to be a little more proactive in identifying the trends. Of course, avi, it's it's formulaic. There's nothing we can do there. But in terms of real market value, we wanted to make sure we were up in front of that trend as best we could with data, and you'll see that we have rmv starting to contract after 20, where we see it drop 4% in 21, 3% in 2223, 10%, 24, 12%. The reason we we we have to do that in the assessor's office is because of the impacts to districts. So we know that if we were not staying out in front of values and trying to best reflect the market condition where we were focusing our attention, we would see a large number of appeals coming in. And those appeals then are something that takes one, two, three years to resolve. And not only when we resolve those through the courts, any any refund that's owed to a taxpayer due to incorrect market values. It's compounded by 12% annual interest in in refunds. So we have to take this job pretty seriously in the office to make sure that we're staying in, you know, staying up on the values and making sure that we're dedicating the appropriate resource to getting it right. Is there any question about this?
157 Councilor Dunphy.
158 I didn't do well with math in college, so I appreciate you guys taking the patience with me on this, but am I reading this to say that? I mean, we all acknowledge that through the portlandia years, the cost of living and the cost of real estate in this city went from being the most affordable city on the major city on the west coast to being, I guess still, but like compared to what it was 20 years ago, you know, the rents are out of control, property values are out of control. I bought a house in 2016. It's now doubled in price. That's crazy to me. I'm seeing this as like property value or the real market values are I mean, kind of tanking, but are our assessed values are steady. So does this mean that when big pink, for example, goes from $300 million in valuation down to $30 million or whatever it was, the property, we aren't actually seeing an effect in our property tax collection that the the real market value may be going crazy, but our our assessed value is staying steady.
159 Councilor peter kind of talked about this a little bit. And if you notice the avi to rmv totals. So we'll just we'll just pick on 18, $11.5 billion as an rmv of 42 billion. So what is that? You know, 20%, 25%. That's what's being taxed. Right? So as you see, even though values are dropping, the assessed value or the value for tax purposes is still incrementally increasing due to the constitutional allowance of 3% increase in addition to the new construction. So that insulated the county from any major. This the city and the counties from any major reduction in revenues until we start getting into 2324, where values are now prolonged in a decrease. Now this is this course summary is of all property and the one property type we haven't talked about and we won't talk about here in the presentation is residential, which makes up about 60% of the overall tax collection. It has been very resilient homes. We haven't seen the values slip. We've seen them stable. We've seen them grow, trend up. You know, those types of things. And so the residential property accounts have been somewhat bullying of overall revenues. So there are a couple factors going on here. But as we talked about with the compression slide previously and the amount of tax increase you're seeing, you're seeing the revenue decrease due to the real market value of these commercial properties decreasing. So there is an axis there. There's a point where it's an inflection. And now it's really impacting the revenue. Yeah.
160 The I stole the words out of my mouth. But the only thing I would add when looking at this, this is a summary at the very top level. The distribution matters a lot. And so if you look at a specific downtown building, that value may drop a lot. Whereas residential again, to his point has largely just been increasing. And so yes, we are we're getting less property taxes from those downtown buildings or other commercial buildings, but we're still collecting 3% more in residential of the 60% and others. And so it really becomes a weighted average. And that's the way that measure five and measure 50 insulate us from like actually losing property tax revenue. Okay. It's we are. And that's why I will always phrase it as versus what we would otherwise be getting. Because again property tax revenue has been going up and we'll probably continue to go up. It's just not as much as it otherwise would be.
161 This doesn't. Just. So I'm explicitly clear, this does not imply that we could actually I mean, my first place in my brain was said, okay, maybe we're in a market correction territory and it wouldn't be as terrible. But what I'm hearing is, no, that's that's not what this is saying. This is the aggregate average, you know, between commercial and residential. And that because of the compression factors, we are holding steady. But if we had major market correction in the residential side, these numbers are all going to tank. Okay.
162 And councilor Slide I believe it's 12 is you I've talked to you before your previous question. I think that's going to tie a lot of this together on an individual account basis.
163 Okay. Thank you for helping me through this guys.
164 Councilor Kanal thanks. At some point, do you have this disaggregated by geography or by sector.
165 Councilor we do we we've mapped it. We've got a bunch of cadastral maps online that kind of show the differences. And I'll show a couple of what we have. Representationally.
166 Okay, great. How's industrial doing? You mentioned commercial. You mentioned residential.
167 Industrial has been resilient, much like residential and a lot of the areas throughout the county. So I can't most of it's in the city. But just look, you know, thinking of most of the areas we've seen, not a lot of vacancies. I'm kind of wanting to invite my chief appraiser up, because I think he's got a better handle on this question than I.
168 Do. Commercial. Introduce yourself. Thanks.
169 Good afternoon. My name is john vote yea. I Multnomah county chief appraiser. I can speak to the property type that you have a question about the industrial property type. It was the darling of the industry and it was growing. It was expanding. We had all sorts of new cross docks, warehouses, distribution centers. They were building them as fast as they could find land for them. We were running out of industrial available land in most of the area. It has leveled off. It has changed a bit from what it was before. So that's it's not a massive declining property type, but certainly it's one that is stabilizing to a much more normal level.
170 And that's because previously there was a effectively a supply constraint that was driving up the value.
171 There was an increased demand. And that demand comes in various different forms. And obviously if there's a constraint, then that obviously pushes up pricing even more.
172 Okay. So getting back to this core summary slide, I mean, I think part of the the key thing to take away here is if, if everything stayed the same and just kept growing at normal, or if rmv stayed above assessed value, even if the market value wasn't growing, we would just see 3% across the board here, and that that probably wouldn't be enough, given what we've been hearing from our colleagues about the fact that our costs are going up by more than 3% a year. So in addition to a the fact that this average is brought down by what's going on in the commercial sector, we're also facing the fact that we're going to be needing to add through improvement or new construction to the tax base in order to stay above 3%, and in order to keep up with our actual cost growth. Is that accurate?
173 I would say yes. For me to forecast above 3%, I would need to be forecasting new assessed value in the form likely of new development.
174 Okay, so given that, then what we're saying is that there is a direct direct correlation for those. And I think many of my colleagues up here have said this in other words. So I don't want to act like this is new information, but there's a direct correlation between the number of cranes in the sky and the ability in the medium to long term of the city to keep up with its with its cost growth. Unless we start getting out of certain lines of business and trimming back what the city does.
175 I would say, yeah, for the general fund, that is largely true unless the other revenue sources really pick up.
176 Right. And then and then that's an important thing too, because I think one of the previous slides, you have information about grants. And I you know, when you see those over year to year, especially in light of the American rescue plan and the ending there. And as a side note to this, one of the reasons for the the what was described as a deficit, but what was really a desired increase in the budget that we needed to make up $40 million of that was things that were funded by federal funds, that were one time funds that expired. And the goal of the the budget proposal was to keep those going. But we don't have those federal funds anymore. So we had to come up with the the difference was the and that's how it was described as a deficit. So it's not as though the other revenues are bailing us out here. And I know councilor Ryan has talked about the business license tax, having historically been able to bail us out, but not anymore as well. So I ask all these questions just to kind of to to get to the point here that this is really important. And I'm glad that you're, you're mentioning all of this and that the, the market correction aspect of it is very. It is it is helpful as a way of assessing an individual building, but not necessarily the aggregate. It's a micro factor, if that makes sense. So thanks.
177 Councilor Smith.
178 Thank you, madam president. So I want to kind of level set this. And and we hear it in a lot of briefings. And much is said about, oh, we're receiving less property tax than we've received. And that's why we have budget holes. But the reality is we receive more property taxes this year than we did in the previous year. And so I think I need our people to stop giving us that, that fear mongering attitude, because that's not the case. And we need to say what it is. Maybe we took in less revenue than we thought than we originally forecasted, and that's all subjective, but we need to call it what it is. So I want us to start stop using those phrases that we were taking in less property taxes, but we took in more than we did the year before. So really, that is not the truth. And the idea that the 3% is added on every year. And so we're we're keeping up, I think where the real issue is, is going to be around the business licensing tax, because as the state. Economists projects what the state is going to do, and then when it actually comes in, if the state is actually having an increase, we're going to have an increase in Portland because the majority of the businesses are in the Portland metro area. So a lot of mixed messages, a lot we just need as councilors. I me personally, as a policy person, I just need plain language. I don't need scare tactics. I don't need any of that. Just tell me what it is and don't say, you know, it's the taxes, the taxes, because it's clearly the data is here showing that we're taking in more taxes than we did the previous year.
179 Councilor Koyama Lane.
180 This might help councilor Smith, because I want to make sure that I'm following. Let me know if if this is great. Actually, I'm very interested in this. Okay. So when we're looking at. This property tax about 60% is residential. Is that correct. Correct ish. And then we have commercial and industrial. We're not seeing the huge dips in residential and industrial as we are with commercial. Am I still on the right page. Correct. So that's where the big concerns are. This whole system relies on growth. That's why we need we're hoping to see the cranes in the sky. But the big piece is commercial. And unlike someone with a house that maybe might not want to get it assessed because it has value, a lot of these commercial buildings have been vacant. So they're getting their assessed value and it's coming in a lot lower. Am I still on the right page? And so that's part of why we're seeing some of the dip there.
181 Councilor correct market value is dipping and that's affecting assessed.
182 Value.
183 Okay okay. Market value. So a piece of it is for long term we need to see the the cranes in the sky and see that growth. But really the big concern is that the commercial market value is low which is likely connected to vacancies. Or can we not make that connection.
184 So councilor as I'll answer this as an appraiser. So when we're looking at a value of income producing properties, so everything nonresidential, usually we're looking at it as a market participant or an investor would. Right. And so they're looking at when they're valuing a piece of commercial real estate, they're seeing what's the income that particular property can generate. Right. So you look at rents you know how how much rent can we get. Vacancies are factored into it. So if you know historically before 2020 historical vacancy was always like 5%, you know, now headlines are we're seeing stuff in the 20 to 30% range for downtown. That all puts investors who are market participants in these types of properties to realize that they can't get the rents because the tenants aren't there, vacancy because vacancies are high, which then creates a risk for if I buy this property, the holding expenses with maintaining a building, taxes, all these sorts of things become problematic to the overall income that a property can generate. Right? So that then would be the overall reason that investor would not pay as much for a property that has those types of conditions in place vacancies, lower rents, not sure where tenants are going to come from. You know, those types of things. That's just one of the approaches to how we look at developing a value on a commercial property. The others are, you know, what are they selling for comparable properties like you would with a house? What would it cost to build a new property, you know, that sort of thing. So there are a lot of factors that weigh on answering that. But I think the vacancy is a significant component.
185 Councilor. That's helpful.
186 Thank you.
187 I'm going to ask that we do the next two slides together before we take more questions, councilors, so that we can see two related sets of data. And then I'll ask the same thing for the two slides after that.
188 Okay.
189 Go right ahead.
190 Made a mistake. And the slide I cannot actually see the numbers. I apologize. So in 2324 this is when we were working with the economist to identify in the core what property types really were we looking at in terms of declining market values. And so we generated this spreadsheet that compared 23 and 24 assessed value and market values between the two years for those category or those business group of properties. So you'll see on the left, commercial condos, hotels, mixed use office, restaurants, store, vacant land warehouse. And so we looked at those property types and we compared the aggregates of their assessed values for 23 to 24. You'll see that in that case, we did see noticeable changes in decline for hotels. So if you follow the hotels across it declined from this. Is the assessed value now declined in 23 to 24 at 5.2%. We saw a decline in the office at 3.6%. But we did see some properties that actually were, you know, increasing in value and not and not totally decreasing like we would expect with the office and hotels. So overall, there was an impact change of a -1%. If you look at the aggregate ave for all of those classes of property. So not all property types in the in the city or the core, just those categories, if that makes sense. We were then further looking at the market value, and we see that in terms of market value change between 23 and 24, we see the biggest changes in hotel at 27% decrease, which then is consistent with the assessed value decrease of 5%. We also see a significant decrease in office at 20%, which then also translated into a decrease in assessed value for those property types. So for this chart and working with the economists throughout the region, we were looking at data that would help clarify or shine the light, so to speak, on what property types are actually being impacted by decline and how is that impacting the overall taxable value for the core for the city, ultimately. And so these two categories are this these two years that we compared are very consistent. They were what we expected to see with respect to offices vacancy rates facing higher occupancy challenges, and also with hotels that we were hearing from that they weren't seeing the type of customer they were used to seeing in the downtown area. So the picture is getting painted or filled in a little bit better with respect to the core. And that's where we see the ave and the rv for certain property types and how they're impacting the overall taxable value. Now, I was asked to kind of combine the two slides, but councilor, do you want me to move on or wait?
191 I want to hold questions until after the next one.
192 Okay. So the next one compares 24 to 25. And this was the same analysis that we did for 23 and 24. So you'll see at the bottom part of this spreadsheet the same categories that we had before. But this time we added multifamily. So up to this point multifamily had been resilient. It had been we saw values were increasing. We saw new properties being developed, being sold, being filled, occupancies were up and we had no reason to pay attention to that property type until 24. So what we've noticed in 24 and continued into 25 is that multifamily, if you look at the far right, there is now starting to show decreases in market value. So between 24 and 25 you can see the various types of types of apartments decreases of 15% for 9 to 20 units, 16% for 5 to 8 units, and further declines in that. However, because this is sort of the beginning of what we're seeing in terms of value declines, it really hasn't impacted assessed value yet. But what we are trying to do is be proactive with the forecasters and the economists to let them know that we see some strains occurring in this property type. Further down, of course, we see continuations of decline with hotel and offices from year 24 through 25, which is also correlated to decreases in avi for office. And I will note that hotel shows an increase in avi that is entirely due to the ritz coming online, so it had been exempt up until this point. But I will note that it's also under appeal. So we did our best job at developing a value for the 24 tax roll, but it was promptly appealed. So any questions?
193 Councilor Smith.
194 Thank you, thank you, thank you for that. That last slide, what policy changes do you suggest that we keep or changes that we make to interrupt compression in in the commercial property area?
195 Councilor I'm an administrator. I know we've had this discussion where I'd really like to focus in on administering the laws. The only thing that we so since the limitation is based on market value, the only thing we can do is to make sure that when properties are appealed, that we have the resources necessary to defend those appeals, which we are continually asking for resource to do, we've hired outside consultants to help. We've dedicated a large percentage of johns appraisers to defending appeals, also making sure that we're out there reappraising property to make sure the values are right. But in terms of a policy, I don't have a recommendation on how to affect tax increase due to compression, other than making sure that we're appropriately funded in the assessor's office to manage the values.
196 So my second. Okay, okay. So in my second question is and how can we our budget forecast methodology methodology change based on the property tax revenue that we saw in the 2020 and then then in the 2324, are there some things that we can do? Because if we need to be liquid in cash, should we be a little, little bit more conservative on our forecasting so that we do have that liquid cash? If we have to make up the difference when they're going through the assessor's office and changing the changing their, you know, their, their assessed rate from their market rate.
197 I my, my goal is to be accurate and conservative. If council wants to have cash on hand or liquid cash on hand, that is council's choice. I'm not going to under forecast in the hopes of having cash on hand, if that makes sense.
198 Yeah, I didn't suggest that you under forecast. I asked should we be more conservative? He said that we should have liquid. We should have be able to have cash on hand to be able to pay the differences. That's that's what I was responding to. So I was trying to figure out how do we how do we keep that cash on. How do we how do we keep enough cash to deal with the appeals process that you're talking about?
199 I see okay. Councilor sorry. We thought we.
200 Were sorry. That's that's me. I didn't communicate properly.
201 So we work through the county for our budget. Even though the assessor's office represents all 59 districts and how we manage it. So right now we are funded for appeals. We have enough funding to work with our outside consultants and defending some of the more complex ones. I can't I can't ask the city for money in terms of that aspect, but I, I do appreciate the support. One thing that we've been working proactively with the city on is part of our funding at the in the assessor's office comes through a state grant, and we've asked that that grant, which has been inadequate for 20 years, to be inflated to market. So that would be a support mechanism where we could generate more revenue or money into the assessor's office to fund it more appropriately. But other than that, councilor I don't have a recommendation.
202 Okay. No, we're just trying to learn because all of us are at different experience levels. And I do like what councilor Ryan said earlier, if we had an opportunity to look at other peer cities who are experiencing the same thing, then we could look at those models and see what they did to change things around. That's I'm just looking for some for some opportunity to to either keep what we're doing or to change in a way that's going to be impactful to us and that we'll be able to meet our operating costs where we're currently at. Thank you.
203 Thank you, councilor Councilor Koyama Lane.
204 Can someone explain the definition of core that we're using here? And then below, what's an core h n core?
205 Yes. So core we've generated neighborhoods for the entire county in core represents predominantly the downtown area. And is there some areas on the.
206 Yes. So what you're talking about are economic submarkets. So you have economic conditions that exist in certain areas. And they drive the investment grade quality of that area. So we're talking about commercial, industrial, multifamily property types. As mike mentioned, you're you're looking at what conditions exist there for the investor, for the property owner. And then you create submarkets so that you can study those areas because they perform similarly in those areas, try to group properties in those areas, especially when you're doing statistical analysis. So the core itself is the downtown area predominantly. You see basically from the river, it goes down to south waterfront. It goes up towards PSU. It comes all the way around northwest 23rd area. It goes into some of the northwest area and then actually hops the river and goes over into lloyd district as well. Because lloyd district is performing similarly to downtown at one point. And obviously there there are gradients even within we have we call it a patchwork or quilt work downtown. So you have hot nodes, you have lesser hot nodes. And so you look at all these things. So but the core itself is that geo boundary that I just described for you. And mike has a little bit of a representation there on this map.
207 I'm going to jump forward to a map.
208 It's the same of what we call our central city. In our planning documents they use core. Yeah.
209 And councilor You had a second part to that question, or is it just the court? Okay.
210 Yeah, I got it.
211 Thank you, councilor Green.
212 Thank you. Vacant land. That that vacant land. Is it so in the core, if I'm reading this correctly in the core, as part of that map, there's 449 parcels that are coded as vacant land. Is that right?
213 That councilor. That is correct.
214 Okay. That's interesting to me. And then would surface street parking lot fall in the auto related category.
215 Typically that is referred to as an ill property type for us, which is basically a property type that is improved but essentially as land. Okay available for development potentially.
216 So is it on this table anywhere?
217 It's probably listed as one of the vacant land lots.
218 So it's part of the vacant okay. Correct. Give me a lot of great information. Thank you.
219 Thank you.
220 Okay. Let's move through the next two slides with the maps and then we'll do more questions.
221 Councilors okay. So this is a city wide and mostly in contains some of the county. But this is a compression map. So you'll see that the map shows a gradient of the various blues of between 10 and 30% of imposed taxes that are actually or extended taxes that are compressed. So you'll see the various shades of blue that fall within that range and that and that kind of you see, follows a lot of the industrial type properties along the river. You see some some properties out east, but a lot of it follows right in the central areas within the city. And this is where compression impacts the most, because this is where we see for certain property types. And this is the core where we see areas that are these are on an account account mapping basis that have been affected by the compression calculation. Countywide, we have over 30,000 accounts that are compressed that have some level of tax reduction because of the constitutional limit. And as I said before, that number is over 147 million for the current tax year. Of course, the city's portion is 33 million of that. So just just to draw it. But this, I thought, was a good visual that shows the relationship of the taxes you would otherwise have collected for revenue had it not been for measure five. Limitations. Questions.
222 Koyama Lane is this a screenshot of a tool that is available to the public?
223 Councilor correct. It's on our website.
224 Councilor. Smith. Okay, that leaves me as I look at this compression map and see that a lot of the compression is in what might be industrial or large commercial spots. There's a fair amount on the east side. As councilor Dunphy talked about, but there's a whole lot of compression downtown. And so I I'm thinking about the statement that my colleague made earlier about downtown being the engine of essentially property tax revenue. And I'm wondering if it is more true that downtown is the engine because we see growth there, or if it is more true that downtown is the engine, because there's a whole lot of highly valued properties there, but that in terms of growth in our budget as a local government that relies in part on property taxes, that growth is mostly happening out of downtown and take not where we are now, but in a normal growth period.
225 Councilor I'll attempt to answer that. I've got some thoughts, but maybe peter can kind of jump in. So if you think back to let me see the slide here, you'll see that ave in 2020 accounted for. Rmv was mostly centered or the large percentage. It was centered in the core area or the city area. And this this kind of talks about not just the value but the density of development that you see in the city, in the downtown areas. You know, compare this to how many houses you have to get to the value of a $400 million high rise office building. You know, it's so it's it's one of those of magnitude type answers that we have to go through. But I will say that as we start seeing more of the development pushing out out east and out, you know, kind of out west, you're seeing more growth in those areas because there is more to develop and more to build in certain aspects of what we're seeing for the market. And I think that the consequence of, you know, the significant decreases in values of some of these downtown properties are significant. As we'll get into the next slide.
226 Yeah. I think what I'm wondering is if downtown with 40% of the blocks maybe in compression is still able or has still been, obviously we're in a different point in time now, but if it has still been a driver of revenue growth, not just revenue but revenue growth, or if there's so much in compression that it it is not really outside of a year with a pop because of the ritz or something like that able to drive growth. And it may be that that's a question that needs a longer answer than we have time for today.
227 Yeah. I think a simple way of thinking about it. And it's I know it's not simple, but is to think of it as a weighted average. And if you're projecting property tax growth, if we got 3%, that means that. And as we heard, residential largely grew 3% or more. That's 60% industrials largely fine. We're talking how did we get to 2.2% assessed value growth this year. And how did we get to 1% assessed value growth the prior year? It has to be that the downtown commercial space fell in value enough that we were actually losing money off of them just to get that weighted average to 1% and 2.2%. So I wouldn't say it's growing.
228 Yeah. I think like I said, I'm not looking at right now. I'm trying to understand in in past years how much of a driver really was this in the growth. But let's move on. We can come back to it.
229 All right. Let me tie this all together neatly into looking at one account. So us bank tower, big pink 111 the address. So I'll just kind of take you through the history of what we're looking at. Big pink has two tax accounts associated with it. In 24. We had on one of those accounts a real market value of 32.8 million mav of 69.5 million and an average of 32. So this is the the selection. So the av is the lesser of the two. Rmv was lesser in 24 than the mav. So rmv becomes the taxable value. That account generated a tax bill of 623,000. Second account. It had an rmv of 110 million mav of 121 million, and an av again of the lesser of the two of 110, generating a tax bill of just over $2 million. So 25 we see on the right hand side of this this slide, you see the sales history. So I just kind of want to walk you through that. In 2000, us bank sells it for 173.5 million. Subsequent owner sells it for 283 million. Eight years later in 2015, 372 million. This is sort of back to the earlier question around what's value and how investors look at income producing properties. So these were, you know, these were investors who bought property, increased its value for income purposes, sold it for more. And that's sort of how this continues. Fast forward to just recently, the sale of $45 million. So that sale then becomes the basis for our value in 25. What we know about value in tax court is when a subject property actually sells, that becomes the predominant indicator of the property's value. Right. And so that then b is the basis for our new valuation for the current tax year. So breaking that apart between the two accounts, we have a market value in 25 of 10.3 million mav stays consistent at 69.5. And that's because it did not trend at 3%. The test actually is interesting in that 3% is the max, which is it's in the constitution stated as the greater of 103% of the prior year's eve or the prior year's mav. In this case, because the the mav is so much higher, it stayed the greater of at 69.5 million. It did not grow at 3%. The acv is the lesser. Obviously it becomes the 10.3 million tax bill, then decreases to 197,000, a dip from 623,000 from the prior year. Second account again, the addition or the subtraction of the 10 million from the 45 million gets us just right around just under 35 million for the market value of the second account, mav stays consistent in 121 million. Avi is the rmv 34.65 million, and the taxes are now 662,000. So a couple of things I want to point out is that we identified in 20 sort of this trend with value. So in 24. So the property sold in 2015 at 372,000,024. If you notice we have a market value there of just over 142 million. So we were we were out in front of it. We felt like we had a good handle on the historical data and how that applied to current valuations. The 25 sale blew all those expectations away, and we saw $45 million sale, which is pretty close to the land value. So if you can imagine, you know, big pink and the improvements not holding a lot of value in relation to historical value of the land and the improvement, that's where we start seeing a scenario in the assessor's office that we just don't have. You know, there's no way for us to know this. You know, I think the market was surprised. And so if you add up the two tax bills for 25 of 197,000, just under 200,000, plus a 662 of 862, you see almost a $2 million drop in taxes from one year to the next. That amount includes 350,000 in compression loss. So but for compression, the tax bill this year would have been 1.1 1.2 million. So the compression becomes a sort of an exponent to the reduction in just the tax calculation of taxes of rate times value. So that was decreased because the value decreased, the rate stayed the same. But compression then compounds the impact. And that's where you get the addition of growing from 27 million last year to 33 million this year in compression loss. Did I answer everyone's question?
230 Councilor Kanal.
231 Yeah. So let's say that this, the big pink is fully leased in a year and that the value is that, that the market value is significantly higher, the real market value. How does the bounceback work? And can you walk us through the sort of constraint factor on that?
232 Councilor I'd love to. So this this allows me and I was hoping for that question. I will say, because there is a common misconception in Oregon, and I hear this constantly that my realtor or somebody told me that taxes can only go up 3%. That is an absolute false. There is no 3% limited as this group now knows, the 3% limited limit accounts or is for maximum assessed value. So just it's a it's the value constraint. It has nothing to do with taxes. So let's take your scenario and let's say that it's back to 300 million in value. Like someone would buy it for 300 million. You'll notice there that the maximum assessed value that's still on the books. So that's the frozen value is 121 plus 70. So $190 million. We would be basing the tax bill based on 190 million the next year. And that would then take the tax bill from this year of 800,000 to 3, $4 million. So there would be no limit on that increase that would that would bounce back. Now we would still do the compression test. And you know, if that there depending on how much of a value increase, there may still be some compression in that calculation, but certainly not of the magnitude that we're seeing today throughout the downtown. So that would then increase it.
233 And that that is a place for growth in our revenue that is greater than a lot of other in terms of the speed at which it could grow, the significantly greater than a lot of other options that we could take. So assuming we obviously we don't this this room does not have control over the degree to which big pink is leased out in a year. But that's something that would be immediately beneficial.
234 Correct. Can I clarify one thing? Councilor yes, it would be beneficial to the tax bill. I believe big pink is in a tax increment financing district now. And so that new assessed value, a new property taxes would be going to the tax increment financing district and not the general fund. And so if you see in the general fund a forecast of very flat, it's because of the tif. Yeah. So just a clarification there.
235 We'll leave that one to council Green.
236 Councilor Green. You happen to be next in the queue.
237 Thank you I've I, I don't know if I'm. Yeah masochist but I've really enjoyed this presentation. I on the tif thing I really appreciate what you have guys established for us because it's really important because some of my colleagues have been hinting towards policy changes that we might need to make the long term consequences of those policy choices need to be understood in the context of the long term revenue consequences of the recent market adjustments and compression. Everything you've laid out I am looking at prospers. West side, tif, district map overlay, and they have a number of blocks that are like gerrymandered out of it that are just like exempted from it. And notably, the block on which big pink sits is not included in that overlay. I hope that that's the correct thing and not just a mapping error. I don't know why we've exempted certain blocks from parts of it, but that might be a really good outcome for us.
238 Urban renewal as well, in that we're just. Yeah. Yeah. Okay.
239 So and I think they do this because you can only have so much acreage under a tif district at a time. And so if you're picking and choosing, for instance, it juts way out to pick up Portland state university and also the area around the keller. So it's like, okay if you have to make some choices. But so so it looks like when we get the decompression effects from big pink that will flow to under unrestricted coffers to the extent that it can, which is which is a good thing. I am curious if you guys know off the top of your head though, when we do pass, when the city adopts ordinances for our tif districts, there is this sort of like this. The base year of level of revenue. Is that sort of like is that defined in that ordinance by reference? Is it sort of like, okay, it will be fy 2023 or fy? Is there a specific fiscal year that is that is affecting these the basis of these these upcoming tif districts?
240 Yeah. So once we get notification from the district that there's these these properties are in, we freeze the value. And that value then used for tax purposes goes to that district. Everything above that frozen value then goes to the new tif urban renewal area. Right. We rely on you to tell us how much value is needed from one year to the next. So, as was indicated the past few years, there's been a few that have gone away which have the value back to the other districts. That frozen.
241 Oh, peter, were you going to follow up on that?
242 No.
243 Okay. Well, then I have a follow up question for you, peter. So when we adopted the the new tif districts in 2023, do we know what tax year that those are based upon? I see jonas nodding.
244 We do I do.
245 Yeah I don't know off the.
246 Top of my head but yes okay.
247 Well we'll figure that out.
248 It should be on the website. It should have the exact values of the assessed values of the frozen bases. Yeah.
249 Yeah. Thank you. It's it's troubling to me. It's to know that our decompression and our future tax growth relative to the picture that we're in, is going to largely be encumbered by tif districts, is extremely troubling to me. Not because I don't think that we need funds for development, and not because I don't think we need funds for affordable housing set asides, but that the core of our city doesn't basically get access to that at all. And so the over to overcome that, we've got to have an enormous rate of growth in new production of taxable parcels, basically. Or we need to have other revenue sources. So that's that's the way it looks to me. And I just think that we all need to come to terms with that if we're not already there. And so when we when we approve the action plans that we'll be faced with, we we really must understand how those are going to affect and offset the conditions that we're burdening our city for the next several generations in terms of our loss of general fund revenue. And that's not just for the city, that's for the school district. That's for all the other property tax jurisdictions as well. If I'm if I'm not mistaken, is that true?
250 It would affect all of the districts that normally would collect revenue from that account. Correct.
251 So, you know, that's just for us to think about colleagues, you know, not really. You know, trying to get to an answer here. But but I do wonder if you guys can talk a little bit about the order of compression in terms of our liabilities on, on top of the property tax bill. I'm particularly interested in the. Piece because as I understand that that is capped at, I think, $2.80 per thousand. And because it's a fixed liability, if the real market value decreases year over year, then we probably have an inverse relationship in the rate on each property to to fund the spdr. And so and then but that doesn't that that also feeds into the, the the caps for for compression. So so if that grows does that then continue to place downward pressure on on those other subsidiary or subordinate local options if that makes sense.
252 A couple not clarifying points, but just a level set I guess for is levied with the city of Portland permanent levy. And so all the things that the county assessor showed you earlier, those like the total imposed tax and all that, that is both the permanent levy. And so we're not imposing $600 million of general fund. It's 600 million of general fund. And and then there is we basically it's it's as such as a permanent levy and levied as a permanent levy. It gets compressed after local options. So in the same way that if the general fund rises or any other permanent levy rises, it will further compress those first down to nothing. And so. That kind of answer your question. And then I think there was another one.
253 No, no it does. And as I understand the program design from the documents on the website, you know, we we must fund that by charter. That's pay as you go system. And so if our cost to the program grow and they are projected to grow for another 2030 years before peaking and then leveling off, then we will have to increase the npdr rate, which then grows the dollar impact on the bill. But then there's a total cap on the bill, right?
254 Yeah. In the again, not just a slight clarifying point. Sorry about that. Yeah. If the liability grows faster than the assessed value then it will further compress. If it grows slower then it will actually be a form of decompression I guess.
255 Okay, I probably could keep talking guys, but I'll spare you and let my colleagues join the discussion. Thank you.
256 I'm going to jump in because we were on tiff and I had a tiff question, but we've moved away. I'll try though. Anyway, councilor Green asked about the year that the value is based on for properties that are within a tiff zone, and you said that that's posted on the website, but what I'm wondering is when things come out of tiff and go back on the tax rolls, presumably within that period of time, they have still been capped at a value increase of 3% asterisk. Except that because we have redevelopment, maybe there's a significant change. Do we capture that significant change in order to set the baseline right, the 100% that we can then grow from every year? Do we capture that baseline, the year of redevelopment or the year that it comes out of tiff and back onto the regular tax rolls? And what I mean by that, maybe this helps is if you have a property and they redevelop eight years into being in a tiff district, and then we are adding to the. We're adding to the assessable value 3% every year. That value, when it comes out of the tiff district back onto the regular tax rolls, will be very different than if we assess the value based on those redevelopments. The year it comes out of the tiff district.
257 Do you want to take us?
258 Yeah.
259 And councilor I let me see if I can capture this in an example. So let's say we have a property that's valued at a dollar that goes into this district. The dollar is frozen. You collect on the dollar as the city, the 3% growth. So the $0.03 and the subsequent years gets allocated to the tiff. It does not you do not collect on that 3%. You're still frozen at a dollar until you tell me as a district, that we're doing away with the tiff. And then let me just finish the there. There are some exceptions to this rule, but this is kind of how it works mechanically. So if we have you say we do away with that. All of the frozen value that was increasing incrementally over those years, going to the district now gets released back to the districts, all of the districts. So it's the additional incremental value that gets released. Not it was always there, but you just weren't getting the increases.
260 Here's what I'm wondering. The property goes in at a dollar. And for the first five years that $0.03 and then three point something cents that's collecting is going into the tif district. Eight years in that property is redeveloped. It's now not worth a dollar plus increments of $0.03 and $0.03 plus a little bit more. It's now that would put us at what, like $1.26 or whatever that would have been. It's now worth because of the redevelopment, $3 instead of the dollar 26 that it would otherwise have been. So instead of we have the dollar we're collecting, we have the $0.26 that's going into tif. We now have a property worth $3. Does that reset the baseline? Because when you redevelop something, you can set what the assessed value is differently. You're not limited to that cap of the 3%. Does that reset the baseline in that year that the redevelopment happens? Or do we continue to calculate based on the $1 plus some, and we reset the baseline of that property when it comes out of the tif district? When does that happen.
261 So the $2 of added value is exactly what goes into the tif. So we would not release that $2 of extra value until you release the property.
262 What I'm trying to understand is when I understand that what I'm trying to understand is when it comes out of the tif district, is the rate that you are assessing for the city as a whole reset. So is the. Hold on. I'm getting my terms right. Is the maximum assessed value based on a reset the year it comes out of the tif district? Again, if it hasn't been redeveloped, I understand it's just been growing. Or is the maximum assessed value based on the reset in year eight in the tif district plus the 3% every year?
263 So when that we reappraise that property, when the final construction has happened. Right. So when we call that the exception year, that has no bearing on the tif in terms of when that goes back to you.
264 Okay.
265 We we then capture the increased of maximum assessed value, how the constitution allows us under that exception provision, we continue to generate the tax bill with you getting the dollar. And then the additional new construction value going to the tif. Now when you release it, all of the additional value goes out. If it happens to correspond with the construction ending on the day that you release it from the tif, then you would see your scenario play out, but it doesn't correlate.
266 The tif being in or out of a tif district does not affect the maximum assessed value at all, even when something is redeveloped.
267 Councilor. Correct.
268 Okay.
269 Thank you.
270 Councilor Dunphy.
271 Thank you. I also have a tiff question, something. Caught my attention of what was the exchange with councilor Green as it relates to school districts. Again, when a tif district goes in place, those funds are frozen in place for all the tax collectors in that region, not just the city. Right. So the county's portion, the school district's portion, those are all frozen at that moment.
272 I generally would say, yes, councilor, but I know there were some laws passed, and I'd have to work with my team on this to know that there are some aspects of school districts that were being excluded. I don't know if that applies to all tifs. The problem is we have 30 years of differing options within this world, and so it's not a uniform answer. The new options, I would say yes, but I'm not sure how school districts are affected in this in this equation.
273 Okay.
274 Yeah. I'm I'm just thinking specifically because a lot of times when we talk about schools, we talk about Portland public schools, but we know that there's seven school districts that are within the city of portland's boundaries, five of which are in my district, six of which I don't remember. It doesn't matter. And so, like, for example, the new, they call it space. I call it spac, sumner park, roseburg, whatever the entirety of the parkrose district is encompassed in that the entirety of the david douglas maybe not the entirety, but a big chunk of the david douglas district is in the new east 205 district. Does that mean that there I mean, is there is there a likelihood that they are going to be sort of their income is leveled out then in some, some levels, like their our actions are affecting them and I guess not so much to you, but maybe don't. Do the school districts know that? Are they engaged when we set up tif districts?
275 I do know they're engaged.
276 Okay, okay.
277 I will also add school funding is complicated with the state sharing. And so the impact of districts is a little bit less direct and more diluted than other jurisdictions. But I do know that prosper and others engages with the school districts.
278 I know it's super not clear. I know that parkrose, for example, a I don't want to say a majority, but a significant amount of their funding comes from the airport and it's not property taxes. And so it's like a very dumb system. But okay, I just want to at the very least, as long as they are engaged and they had a say okay. Thank you. Sorry.
279 Thank you, councilor, councilor Zimmerman.
280 I just want to say thanks to council president and councilor Clark for bringing this forward. It's really necessary. And I think that this body of 12 amplifies just how confusing the Oregon property tax system is. And I would and I it's a it's a self critique on ourselves. I say to mike and john I think that you you have done some really important work over the many years to the point where I think the county commission historically has grasped, grasped this system better than a lot of other governing bodies, given their role in overseeing it and your role as an assessor. But I've seen and I've been through many of these presentations, and I would welcome this as a more regular and continuing dialog, because I think for the next largest taxing authority in the state after the state, I think it would be good for us to continue our our understanding of this. And I and I say that with a couple of things I don't think we're ever and this is where I have to cut them out because they're not politicians. Some assessors are elected, by the way. Ours is not. And I think it actually is good because ours is professionalized deeply. But there's some editorializing that our body should be able to do, but we can't do if we can't explain the system. There's you've all heard me rail on on measure 50 and our property tax system. I'm going to give it one good thing. And this is why I think we have not unstuck it. If you were able to buy a house on a waitress's salary in 1990, and that neighborhood was moderately desirable, but nothing special. But today that neighborhood is hot and that house that you live in is worth seven figures. Today. Measure 50 has essentially ensured that you won't get kicked out of that home because of rising taxes relative to your real market value, even though you're still live there. So there's the one good thing is predictability, right? Predictability is the one good thing we've gotten out of this system, and I hope that we will see that. But there are other fixes. And now deep inequities to councilor Dunphy's point that when that lady passes away or sells that home and the estate sells that home, who is able to spend $1 million on that home and still pays the taxes, as if that home was bought for $37,000 in 1990. That's the inequity that occurs. So it's not inequitable to that person who lives there. I think that's deeply fair. But it's the after part, and that's where some of our districts have experienced that so heavily. And so I think we owe it to our voters to get better on this topic, because we have the most functional government relations team in the state of Oregon. And if we're ever going to change this constitutional amendment and include predictability, but actually get something that funds our governments, it's going to have to involve us. But I will also say that there's some confusion in this and that. Three I'm looking right now at the 1989 city of Portland budget. I'm also looking at the 2005 city of Portland budget. In 1989. I cannot find for the life of me a business license tax. Okay. And we saw earlier with jonah's presentation, the blt represents a significant portion of our general fund. 1989 no business license tax. By 2005. We've brought that in and we now have to have a business license tax. Right. So these two measures that these gentlemen told us, about five and 50 have occurred since then. And in 1989, property taxes for the city of Portland brought in $142 million. 15 years later, and through a significant changing part of our city's history, property taxes brought in only $158 million. So what is that $16 million growth in property taxes over 15 years? I think we're we have we have put things in place to overcome a system because our property tax system, which it should be the thing that funds governments, cannot fund governments. And the and we because we're the largest jurisdiction, we have been able to forego what almost every tiny jurisdiction has, has done over the last 10 to 15 years, which is they have created special levies for police, for parks, for fire, for libraries. They have reduced their services. Troutdale stopped having police and they had to buy it from the county would village. Same thing. Et cetera. Et cetera, et cetera. Because Portland was hot and because we grew and because we had cranes in the air and because value for the property, we were able to overcome the structural system that will put us in a deficit where if we don't fix it, it's the mayor and a dump truck. At the end of the day, well, maybe 100 years from now, but that's what it would be. And it is if the biggest city in the state is not paying attention to that. While every tiny city has been screaming it for a long time, but also doesn't have the oomph to change anything in Salem or with our voters, kind of shame on us. So I just, I just say, because we're in this very special moment where Portland is hurting, our property taxes are not coming in, our cranes are not up, and the values are no longer supporting government. And we see a business license tax that went from 0% of our budget to 50% of our budget, and will become more of our budget as these property taxes don't rebound, we have to take a moment here to recognize where we're at in the inequity of the system. And it is deeply broken because we can be so informed and knowledgeable of government to be elected to these seats and still not understand that when you sell your house, it's not reappraised. Your realtors are wrong, your neighbors are wrong. Your neighbor has a different tax bill than you, even though your house is worth the same $500,000. And I think 12 people who were elected across this area have some pretty big microphones, should be really tied into these facts. So I just say that I would not encourage you to go read the 1989 budget or the 2005 budget, or any of the others, but it does show us that we're not in a system that has to be. It's been created over some time, and I care a lot about it. Obviously, I am way too nerdy on this since I was a baby appraiser when john was a slightly toddler appraiser, and now he's the chief appraiser for our county. And so I just really appreciate you guys coming and spending time on this with us, because it's it is foundational to our work. Very confusing for the layperson and affects every part of our lives, whether we're owners or renters. So I just thanks for coming over here and putting your time into it. And I really hope that we get more of these so we can watch what happens when a property rebounds, what doesn't happen when a property rebounds. That's the big side of this. That's the bigger picture of this is how do we how do we keep Portland on an all of Oregon, frankly on a growth growth pattern despite the system that's against us. And I think that's really important.
281 This is our pleasure. Councilor. Thank you for the words.
282 Councilor Kanal.
283 I agree with every word of that.
284 Thank you.
285 I don't get to say that. Yeah, I don't get to say that a lot. So I want to I want to take the opportunity when it arises. I also wanted to point out that the equity element of it, it's hard to look at the the geographic part. And this goes back to councilor Dunphy's point earlier too, where you know, some of the people that are benefiting from the particular context of north alberta, north williams and alberta are the people that manage to hang on while the rest of the neighborhood was getting gentrified around them. So it benefits also, the folks who've been around in that exact way of being able to hang on. In addition to those who kind of came in early in that period of gentrification, the question I wanted to ask was about fpr, fpr as well. So it's a third of the property taxes we collect right now. It's 224 million based on your slide out of 678, that's almost exactly a third. And what I have seen in the projections for fpr is that it's going to be growing by nearly 6% year over year. 5.8 is the the amount that I've been looking at through 2033. It starts to level off a little bit after that. And so as we can expect, my question is, can we expect that the fact that that is growing faster than the aggregate growth in our property tax revenue right now means that we will that the unrestricted portion of what we're getting in property taxes is actually going to decrease even more, because we're expecting more of our property tax dollars to go towards this program.
286 So. All things held equal. Yes. If you increase the size of and property taxes and just, you know, hold everything kind of the same, it will compress the unrestricted general fund more. So just a couple real quick clarifying points. So we collect 600 million between general fund and fbr that did not include the local option levies, which is another 80 ish million or 70 million, something like that.
287 Yeah. I'm looking at the last slide of your presentation. So it shows the 678.
288 Yeah, that that's just the permanent levies. So 600 million of permanent levies.
289 Right.
290 Of there, of theirs. Yes.
291 And all 678 million. Just so you know.
292 It does.
293 I'm sorry. Was it my slide or.
294 Is the first presentation.
295 Oh sorry. Apologies. Yes. That's correct.
296 Thank you.
297 Jonas is presentation.
298 Yeah.
299 So the city's I'm distinguishing city and county here. So, you know, even including that additional the the children's levy, all the different things. It's a third because 224 out of the. So what I guess I'm bringing up here is and I know this has been raised by people across the, across the city including it was most recently in the the pmc report that we can the fact that we can expect that to grow unless we can get out of that by growing property tax revenue in the aggregate, by greater than the growth rate of fpr, we're going to end up with more restriction and a smaller general fund revenue from property taxes. And that's particularly concerning to me. I think that we need to obviously find a way to maintain and and fulfill our obligations to our our public servants and our retired public servants, of course. But I also want to make sure that we're doing that in a way that's that's more prudent. And I'm concerned that if we are not serious about reconfiguring how we fund this and getting away from a pay as you go structure, we're going to be in a deeper bind than all the binds we've learned about today. And there are many. So I just wanted to make sure I highlighted that before we're done here today. Thanks.
300 Thank you. Councilor, councilor Green.
301 Yeah, I just wanted to. Councilor Zimmerman had raised a really important point about the change in property tax revenue to the city's budget from, what, 1989 to 2005 or somewhere around there.
302 That's what I.
303 Could find. Yeah. We also had tif districts during that period as well. One of those south which has been renewed. So when we think about, okay, this is a temporary thing we're using for development, and then we expect returning tif resources to come back to the revenue when we choose to renew it or extend it. We don't get that back. And so we're going to continue to hammer that point over and over and over. Colleagues, when we think about how we make our budgetary choices.
304 Thank you. Councilor. Councilor Clark.
305 Thank you, madam president. Thank you so much for being here today. The team. I really appreciate it. And I think councilor Zimmerman's right that we need to probably spend more time with you. It's really hard for me to hold on to a lot of the details behind this, you know, let alone master it. It's just it's really difficult and it's going to be very difficult to try to change the law, to go to the voters, to change measure five and and 50. It's a very heavy lift. And I don't see any significant change coming in the near future. I don't see the legislature initiating any change, although there's been some, you know, minor conversations around it. I have discussed this with the league of Oregon cities as our representative to that board, and discussed the fact that if we're going to change this, it needs to be a grassroots effort statewide, a coalition effort to go after this. But that's a ways out. They do have some ideas around tinkering, tinkering around the edges of this. I'm sure the assessors association has worked on this as well. I don't hold out a lot of hope for a lot of change here, but just I just want to let you know that that I have had that conversation with the league, with the board and we'll see where see where that goes.
306 Thank you. Counselor.
307 Colleagues, are there any other questions for our guests here today? Okay. We started, I think, at a lot of different places today in terms of our background here, and I really appreciate you all making the time to help give everybody a common baseline of understanding of what it is that we're looking at. We know as we enter our budget work, looking at the fall readjustments and then starting to build toward next year's budget, that a lot of what you've described to us is going to have a significant effect, and it will in out years as well. So having this baseline is really important. I said previously, I know that you all rearranged some things to be able to be here, and we really appreciate you taking the time. So thank you very much.
308 My pleasure.
309 Thank you.
310 Colleagues, as a reminder, this is just a piece of where our city budget comes from. But it's a big piece, an important piece and a piece that has a lot of the drivers, certainly not all. As councilor Ryan reminded us earlier, but a lot of the drivers for what we'll be looking at over the next few years, starting with the fall technical adjustment that we will see over the next couple of weeks. So just as a reminder, that will be before the finance committee on October 20th and before the full council on October, I believe, 22nd, you do have those documents not related to today's presentation, but today's presentation is a good baseline to help us understand some of the conversations that we'll need to have through our next multiple budget seasons. Thank you guys all for making the time. And with that, I will adjourn today's work session.