In our new real estate market of foreclosures and bargain basement pricing, one of the questions I get asked the most by buyers is, “Will these taxes go down after I buy this place?”  My answer is, “Probably not.”  The inevitable, “Why not?” is frustrating because I don’t know the reason 100%.  This is because Oregon’s property taxes are generally not connected to market value.  How’s that for an answer?

Last week I went to a class put on by Scott Phinney of Prime Property Tax Negotiation.  He gave me some of the answers that my clients and I have been looking for.  Mr. Phinney is a pro who has been dealing with the property tax question for over 20 years and probably knows Oregon’s property tax structure better than most people in the assessor’s office. 

Assessed Value vs Market Value

Your tax statement should have two values for you to look at:  the assessed value and the market value.  The market value is the County Assessor’s estimate of the actual market value of your property and this amount is determined by the assessor’s office every year on January 1^st.  How do they determine market value?  It depends on which county you live in.  Every county does this in their own special way.    

The assessed value is set by Measure 50, which passed in 1997.  Measure 50 took your property’s value in 1995 and subtracted 10%.  For each year after 1997, the assessed value should have increased by 3% regardless of what happened to real estate values that year. 

How Taxes are Calculated

To make things more complicated, there are two ways to calculate your taxes.  The first way is to take the current tax rate and multiply it by your current assessed value (Measure 50). 

The second way to calculate your taxes is determined by Measure 5, which was passed in 1990.  Measure 5 limits property taxes to 0.5% for education and 1.0% for government.  That is, you take your market value and multiply it by 1.5% to get your property tax due. 

In both methods of calculating taxes, any additional levies and assessments are added after the tax is calculated. 

Your property tax for that year should be the lesser of these two methods of calculation.  My property taxes are currently calculated using the Measure 50 method, and I’m guessing that this is the case with most people in the metro area.  When I did a quick check to see if my property taxes would be lower using the Measure 5 method, and they weren’t.  I picked a value for what I thought my property was worth on January 1^st of 2009 and I came up with a property tax burden of at least $800 more that what I’m currently paying, and I still needed to tack on all of the levies and special assessments.

Red Flags on Your Tax Statement

There are lots of reasons to challenge your property taxes and errors are made all the time.  Mr. Phinney gave us some red flags to watch for:

      1.  Did your assessed value go up by more than 3% in a year where you made no improvements to your property?  Changes in zoning or being incorporated into a municipality can affect this as well.

     2.  Did your market value (on the tax statement) jump up by a big percentage?

     3.  Is the market value on your tax statement more than what your property was worth as of January 1^st of that year? 

     4.  Compare your special assessments and levies to the previous year.  Is there something new or way out of line with the previous year? 

If the answer to any of these questions is yes, then you might want to contact Mr. Phinney to see if anything that can be done and determine whether it’s worth your time and energy.  Consultations (as of November, 2010) are free of charge. 

Challenging Your Taxes

If you think there might be an error in you property taxes, the first step in the appeal process is pretty easy and it’s free.  Go to your county’s Board of Property Tax Appeals and file an appeal by December 31^st.  You can probably get an appeal from the county web site and filing an appeal is free.  Some time after January 1^st, you’ll go before the board, plead your case and hope for a favorable decision.  The nice thing about dealing with the Board of Property Tax Appeals is that they cannot raise your taxes.  They can only reduce them.

If this doesn’t work for you, then there is a further appeal process, but at this point I would recommend getting help from a professional.   

Last up, if you’re in a condo complex that is dealing with structural defects, call me!  I’ll give you a good earful and send you off to Scott for some good advice.  His contact information is below. 

      -Ron-

Scott Phinney

Property Tax Negotiation

(503) 427-1645