EQUITY

To: The East Portland Action Plan
From: EPAP Housing Subcommittee
Date: 3/27/13

RE: Research on the Question: Does East Portland have more Tax Exempt Property due to Affordable Housing than other areas in Portland?

The EPAP Housing Subcommittee finding is: No, it does not. The number of affordable housing tax exemptions is slightly higher than the city average, but not unreasonably so.

Background:

From its inception, EPAP members have raised concerns about a concentration of tax-exempt properties in East Portland, particularly about the tax exemption for affordable housing. Tax exemptions are perceived to reduce funding for local governments and school districts. New affordable housing is perceived to increase enrollment at already crowded public schools and increase the concentration of poverty in East Portland. The EPAP Housing Subcommittee decided to research this question to determine its validity and resolve an Action Item:

HD.4.3 Review and assess housing development tax abatement benefits and impacts in East Portland; consider adjustments as warranted.

Procedure:

In the early fall of 2012, Frieda Christopher obtained and analyzed data on Property Tax Exemption from Multnomah County. David Hampsten assisted with the analysis. Chris Scarzello provided additional data from the Bureau of Planning and Sustainability. The Multnomah County Tax Collector provided the data in both situations for the 2012/13-tax year. After discussion with the Housing Subcommittee, Chris Scarzello sent this analysis to Uma Krishnan at the Portland Bureau Planning and Sustainability for additional input. In December 2012, Nick Sauvie drafted the initial report and provided recommendations. The EPAP Housing Subcommittee adopted its final report and recommendations at its meeting on 3/11/13. The results of this process are shown below:

1.East Portland contains about 25% of the city’s population and it has about 25% of the city’s affordable housing tax-exempt properties. A review of the Percentage of Properties with Tax Exemption shows that the East Portland percentage (7.3%) is higher than the City of Portland percentage of 6.1%. However, other areas of Portland have even higher percentages of exemption. The percentage for North Portland is 9.7%.

Percent of Properties with Affordable Housing Tax Exemptions
7.3% East Portland
6.1% City Average
1.7% Low (Central City)
9.7% High (North)

2.Similarly, when the total of all tax exemptions (exemptions for housing, hospitals, schools, religious groups, etc.) is added together, there is a slightly higher percentage in East Portland (12.9%) than for the city as a whole (12.4%). When all exemptions are combined, the area of Portland with the highest percentage of exemptions is the Central City area with 26.4%.

Percent of Properties with Tax Exemptions of Any Kind
12.9% East Portland
12.4% City Average
9.9% Low (Southeast)
26.4% High (Central City)

3.The data reviewed showed that the total affordable housing tax exemptions for the city of Portland is $36.7 million per year, which is about 3.7% of total tax collections for the Portland area (City + School Districts + County). The total Property Tax collected for the area of the Portland city is $999 million. The EPAP Housing Subcommittee believes that exempting 3.7%, when compared to the total property tax collected, is a reasonable amount since it is exempted to provide housing for thousands of Portland’s most vulnerable residents, many of whom are elderly, disabled or children.

Tax Inequality:

An additional finding of this property tax analysis was that East Portland property tax payers often pay a higher amount of taxes for similar properties than are paid in other areas of Portland. This is clearly a property tax inequity for East Portland, which relates to two other Action Items:

EQ.1.1 Initiate a citywide audit of resource allotment - research tax equity and contributions of East Portland to the tax base.

EQ.1.2 Initiate county audit of resource allotment in East Portland - tax contribution/use and service needs alignment.

Data from the Multnomah County Tax Assessor on properties in the City of Portland demonstrate the unintended consequences of property tax limitation measures as approved by the voters in the 1990s. There is a wide disparity between property taxes paid on different properties of similar value in East Portland when compared to other areas of the City. As a result, the taxes paid on a typical property worth $200,000 in East Portland might be $1,000 more per year than those on a similarly valued property in the Central City or another area of the City.

City Commissioner Steve Novick and the League of Oregon Cities have each proposed solutions to make the state’s property tax system more equitable. Commissioner Novick’s commentary can be read at http://www.portlandoregon.gov/novick/article/428020.

One of the reasons for East Portland paying more than its fair share of property taxes may be the large number of tax-exempt properties in the Central City area of Portland. More than one out of every four Central City properties – 26.4% – is tax exempt. Despite this large number of exempt properties, the Central City has by far the lowest percentage of affordable housing tax-exempt properties – only 1.7%.

Final Conclusions:

The EPAP Housing Subcommittee does not find there to be significant differences in the amount of tax exempt property for affordable housing in East Portland when compared to other areas of the City of Portland. The belief that East Portland has more property tax exemptions because of its affordable housing is an urban myth.

The misperception of East Portland having more property tax exemptions for affordable housing may result from the fact that East Portland has a higher percentage of affordable housing, although much of it is not property tax exempt. Housing which is built intentionally to be affordable by Community Development Corporations is very likely to be property tax exempt. However, housing built by the Private Sector often becomes affordable because the properties are not well maintained and deteriorate over time making it more difficult to command higher rents. Consequently, the housing becomes affordable to lower income residents and less desirable to those with higher incomes. It is not affordable by design---it is affordable by accident. This type of accidentally affordable housing is generally not property tax exempt.

The EPAP Housing Subcommittee supports good, affordable housing by design. Building well-designed new housing and rehabilitating existing housing supports strong East Portland neighborhoods. The affordable housing tax exemption is an important tool that benefits families, seniors and people with disabilities.

Aging & Disabilities Services (ADS) is revising community contractor allocations to reflect movement of target populations to East Portland - District Senior Center funding. We are also working with nutrition services contractor to plan new meal sites in East Portland. ADS is coordinating with nutrition services provider and East Portland Community Center on development of new community garden to support the local senior meal site and low income seniors in the neighborhood.

Leach Botanical Garden board and community supporters advocate to continue public investment in the Garden as the only city-owned facility of its kind east of I205. The Garden is a multi-faceted resources akin to the Rose Test Garden, the Japanese Garden, Hoyt Arboretum, Pittock Mansion and other west side facilities. Our leadership are making the case that the City and larger community already have a substantial 30 year investment in Leach, have undertaken and adopted a Master Plan to help the Garden better serve the community, and have taken first steps toward the needed improvements. East Portland deserves a facility of Leach's caliber, and support of efforts to bring Leach's facilities to the level envisioned are a matter of fairness and equity.