As the Bend Bulletin recently pointed out, many Central Oregonians can expect an unwelcome surprise when they receive their property tax bill text month. According to Deschutes County Assessor Scot Langton: “About half the accounts county-wide could see an increase in their property taxes this year of more than the usual 3 percent. And a number of those could see a pretty sizable increase because some property values have come back by 20 or 30 percent.”

Uh-oh.

The reason? Much of the credit (or blame, depending on how you look at it) for that goes to Measure 50, the state’s inordinately complicated system for determining taxes, which voters passed back in 1997 to limit tax increases. Measure 50 allows a property’s “Maximum Assessed Value” to rise by no more than 3 percent per year. However — and right now, this is a big however — Maximum Assessed Value is not the same as assessed value. Maximum Assessed Value is a number that was established by Measure 50, based on property values in 1995. Assessed value is determined by the lesser of a property’s real market value and its Maximum Assessed Value. (To complicate things even further, the property taxes for homes built after Measure 50 passed is calculated as follows: When construction of a new home is complete, it is assessed its initial real market value and its Maximum Assessed Value; the assessed value is the lesser of the two.)

Confused yet? Unfortunately, there’s more.

The amount of taxes due is calculated based on the lower of either Maximum Assessed Value or real market value. And this is where the rest of the credit (or blame) for this year’s significant change comes in. As you might have heard, many real estate markets within Central Oregon have been appreciating notably. Consequently, that has made the current tax-rate calculations even more labyrinthine.

Here’s why:

During the real estate market boom, most homeowners in Central Oregon saw the real market value of their homes rise dramatically. But because of Measure 50 and the way Maximum Assessed Value is determined, they only saw a 3 percent increase to their property taxes per year.

Then, when the market crashed, the real market value of some Central Oregon properties fell below the Maximum Assessed Value, which resulted in a decrease in property taxes. Meanwhile, Maximum Assessed Values continued to rise at 3 percent per year. That meant that, if the real market value of a property never fell below the Maximum Assessed Value, a homeowner continued to see a 3 percent annual increase in taxes, even though the real market value of their property decreased.

Fast-forward to 2013. Here we are in the midst of another appreciating market, and all bets are off. When the real estate market increases by more than 3 percent per year, if the assessed value and the real market value of a property are the same, the assessed value can increase by any amount until it catches up with the Maximum Assessed Value.

Deschutes County Property Tax Graph

For many of us, the best way to comprehend this aggravating equation is by studying a graph comparing the history of the various values. And that’s exactly what the county has provided access to this year via a computer program called “Graph-It.” Available on the county assessor’s website, it allows Deschutes County residents a way to chart their specific property’s tax history.

To better explain the convoluted tax structure, the county has also created an eight-minute video hosted by Langton (and the “Property Tax Fairy”), which, although a bit cheesy, is extremely informative. The video is especially helpful in explaining why three properties on the same street that were built at about the same time might have three dramatically different tax bills.

Here it is:
https://youtu.be/Fo_hSySAC2A

Property Tax Values – youtube Video