LOC FINANCE & TAXATION POLICY COMMITTEE

Tuesday, March 27, 2018

11:00 a.m. – 2:00 p.m.

LOC Board Room, 2nd Floor, Local Government Center, 1201 Court Street, Salem, OR 97301

Conference Call Number: 1-800-504-8071

Participant Pin: 2196588

Agenda

1. Welcome / Introductions / Announcements – Don Hudson

2. 2018 Legislative Recap

3. Lodging Taxes: 2003 Restrictions a. Reimbursement Fee b. Revenue Usage Restrictions i. Frozen Percentage ii. 70/30 Split iii. Definitions

4. Intro to Property Taxes

5. Second Meeting Preview – April 16th, 2018

LOC Policy Committee Guidelines

The role of the policy committees is to give advice and make recommendations to the League’s Board of Directors as part of the Board’s policy development process. This may include:  Participation in the proposal of Oregon Municipal Policy revisions;  The review of areas to recommend that the League take proactive and defensive positions in the legislative process; and  Service as a focus group when necessary to assist staff assessing policy issues.

The following policy committee guidelines are intended to provide broad, procedural guidance for the League’s policy committees:

Committee members are appointed for two-year terms. It is anticipated that in even-years, committees will meet three or four times between January and June; in odd-years, once or twice in the fall on an as-needed basis. Committee members may participate in committee work by phone. Summary minutes will be taken of each meeting by League staff.

Committees may include the following:

Committee members:  Members will consist of elected city officials or full-time city employees.  Not more than two members from a single city shall be appointed to the same LOC policy committee.  Each city represented on a single committee may have one vote. For committees that have multiple members on a single committee, it is up to those particular members to determine how their single vote shall be cast on matters when a vote is taken.

Interested parties:  Interested parties will consist of in-house government relations or lobby staff.  Interested parties are non-voting committee representatives.

Liaisons:  Liaisons may be specially appointed to a committee, on a case-by-case basis by the Committee Chair and the League’s Executive Director.  Liaisons are non-voting committee representatives.

Formal votes must be taken on specific policy recommendations to the Board. It is a matter of the individual Committee Chair’s discretion, whether other committee decisions or other types of recommendations are made by formal votes or by consensus. When a formal vote takes place, a quorum must be present. A quorum of the committee consists of one-third of the members. Committee members may participate in meetings by phone.

Updated 2018 INSTRUCTIONS

1. Each city should submit one form that reflects the consensus opinion of its city council on the top four legislative priorities for 2017.

2. Simply place an X in the space to the left of the city’s top four legislative proposals (last pages of the packet).

3. The top four do not need to be prioritized.

4. Return by July 22nd via mail, fax or e-mail to:

Paul Aljets League of Oregon Cities 1201 Court St. NE, Suite 200 Salem, OR 97301 Fax – (503) 399-4863 [email protected]

Thank you for your participation.

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City of: ______Please mark 4 boxes with an X that reflect the top 4 issues that your city recommends be the priorities for the League’s 2017 legislative agenda.

Legislation Community Development A. Needed Housing Assistance Program B. Natural Hazard Land Use Reform C. DOGAMI Disaster Mapping D. Floodplain Technical Assistance Energy E. Green Energy Technology Requirement F. Funding Public Energy Projects G. Updates to Oregon Energy Code Finance and Taxation H. Property Tax Reform - Market Value / Local Control I. Property Tax Reform - Fairness and Equity J. Local Lodging Tax K. Nonprofit Property Tax Exemption L. Marijuana and Vaping Taxes General Government M. Restore Recreational Immunity N. Increase Local Liquor Fees O. Marijuana Legalization Implementation P. Mental Health Investments Q. Qualification Based Selection Human Resources R. Subsidy for Retiree Health Insurance Repeal S. PERS Reform T. Arbitration Reform U. Veterans Preference Clarifications Telecommunications V. Rights of Way W. Franchise Fees X. 9-1-1 Emergency Communications Y. Technology Funding Transportation Z. Transportation Funding and Policy Package Water/Wastewater AA. Funding Water System Resilience BB. Enhanced Prescription Drug Take-Back CC. Water Supply Development Fund

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Finance and Tax Legislation Background H. Property Tax Reform – Market Value / Local Property taxes are regulated largely by Measure 5 (1990) and Control Measure 50 (1997), as provided in the Oregon Constitution. Measure 50 established a new method for assessing A legislative constitutional referral to reform the property, discounting the assessment at 10 percent of the property tax system: real market value and calling this assessed value. Assessed value is capped at an annual growth limit of 3 percent. As a a) to achieve equity, transitions to a market state total, due to the limits and market changes, the gap based property tax valuation system; and between real market value and assessed value has now b) to restore choice, allows local voters to adopt grown to nearly 25 percent over the past 20 years. This gap tax levies and establish tax rates outside of varies widely on a property by property basis, creating current constitutional limits in their taxing considerable property tax inequities for properties that sell jurisdictions. for similar prices in a city. In short, Oregon property taxes have become disassociated from real market value and the result is considerable inequity.

For FY 2014-15, 60 percent of cities, 97 percent of counties, and 89 percent of school districts had some compression. This means that the Measure 5 caps of $5 per $1000 for education and $10 per $1000 for general government on real market value have been exceeded in most taxing jurisdictions. The caps are over 25 years old and were set low as voters were anticipating a sales tax to be coupled with it. Voters can no longer vote for the services they desire due to these caps. With looming PERS costs increases, paying for services with the present restrictions will become very difficult in some cities.

I. Property Tax Reform – Fairness and Equity There are some adjustments to the property tax process and calculations that can be done statutorily. These include A bill that pursues statutory modifications to the altering the changed property ratio statute and the statutory existing property tax system that enhances the discount given to property owners who pay their taxes by fairness and adequacy of the current system. November 15th. New property is added to the tax rolls using a county-wide ratio (assessed value to real market value) for determining the discount to apply to the real market value and that could be changed statutorily to a city-wide ratio in taxing districts who elect the change.

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Finance and Tax (Continued) Legislation Background J. Local Lodging Tax State law restricts how local lodging tax revenues may be expended. Post 2003, any new taxes or any tax increase A lodging tax bill, the outcome of which, would: requires a 70 percent revenue dedication to tourism promotion or tourism-related facilities. In addition, state a) Provide jurisdictions greater flexibility to statute provides that cities may not lower the actual spend local lodging tax revenue to plan for percentage of lodging tax revenues that were dedicated to and provide services and infrastructure tourism prior to 2003. This means that cities have varied related to tourism; percentages of restricted local lodging taxes revenues. These b) Reduce or eliminate the required numbers are arbitrary as they were set based on reimbursement charge that a lodging tax circumstances in 2003 that have often greatly changed. In collector is allowed to retain for filing a local addition, the legislative history shows that the legislature lodging tax return; and intended to provide some revenue flexibility and provide that c) Improve efficiency and collection of local certain infrastructure (roads, sewer lines, etc.) would qualify lodging taxes in cooperation with the state. as tourism-related but the statutes need revision and clarification.

State law requires local governments to provide a 5 percent collector reimbursement charge if they impose a new lodging tax or tax increase after January 1, 2001. This is a deduction from the taxes that would otherwise be due. The state also provides a 5 percent collector reimbursement charge for state lodging taxes. In addition, local governments that had a reimbursement charge, must continue it. Thus, cities have very different reimbursement requirements—some are at zero, others are at 5 percent, and some are in between. When coupled with the state deduction, the deduction seems too generous.

The Oregon Department of Revenue now collects state lodging taxes throughout the state and could collect and enforce local lodging taxes at the same time if given statutory authority. Local governments could then enter into voluntary agreements with the state to delegate the collection. This option could make collection much more efficient and cost- effective for some local governments. In addition, cities continue to struggle with collections and auditing, particularly from online companies and private home rentals (through Airbnb, etc.) and this area of the law could be improved.

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Finance and Tax (Continued) Legislation Background K. Nonprofit Property Tax Exemption Nonprofit organizations that are charitable, literary, benevolent or scientific are provided a property tax Clarify and reform the statutory property tax exemption that will cost more than $194 million in the 2015- exemption provided to nonprofit entities to address 17 biennium. In addition, exemptions for the property of cost-benefit concerns for the continued full exemption nonprofit religious organizations costs more than $113 in light of cost of city services provided to nonprofits million for the biennium. For many cities, much of the city is and the changing services and business models of exempt from property taxes due to the public property some nonprofit entity types. exemption and these nonprofit exemptions. This includes hospitals, nursing homes, etc.

The Legislature has formed a work group to look at the nonprofit property tax exemption issue as the nature and number of nonprofits is changing and the administration of the exemption has become complex for county tax assessors. Nonprofit entities require significant services, including transportation, water, sewer, police, fire, etc. Thus, the legislature is looking at property taxes more as a service tax and considering how the full exemption could be adjusted to have nonprofits pay for their fair share of costs of services or otherwise meet a benefit test for continuing an exemption.

L. Marijuana and Vaping Taxes There are no revenue use restrictions on local marijuana taxes, but the local marijuana tax rate is capped at 3 percent. Defend against restrictions and preemptions regarding There are no restrictions on local governments imposing a local marijuana and vaping taxes and advocate for vaping tax. The state has not imposed a tax on vaping appropriate state shared revenue levels and products to date but is considering a tax. Often when the distribution formulas for state marijuana taxes and state imposes a tax (for example, cigarette or liquor), the potential vaping taxes. state preempts local governments from also imposing a tax.

10 percent of state marijuana taxes will be distributed to cities after state administrative costs. Distributions will be made per capita for revenues received prior to July 1, 2017. After July 1, they will be distributed based on the number of the various marijuana licenses issued in a city. Cities that prohibit establishments for recreational marijuana producers, processors, wholesalers or retailers will receive no state shared revenue. Likewise, cities that prohibit a medical marijuana grow site or facility will receive no state shared revenue.

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TRANSIENT LODGING TAXES – ORS 320.300 – 320.350

(Definitions)

320.300 Definitions for ORS 320.300 to 320.350. As used in ORS 320.300 to 320.350: (1) “Collection reimbursement charge” means the amount a transient lodging tax collector may retain as reimbursement for the costs incurred by the transient lodging tax collector in collecting and reporting a transient lodging tax and in maintaining transient lodging tax records. (2) “Conference center” means a facility that: (a) Is owned or partially owned by a unit of local government, a governmental agency or a nonprofit organization; and (b) Meets the current membership criteria of the International Association of Conference Centers. (3) “Convention center” means a new or improved facility that: (a) Is capable of attracting and accommodating conventions and trade shows from international, national and regional markets requiring exhibition space, ballroom space, meeting rooms and any other associated space, including without limitation banquet facilities, loading areas and lobby and registration areas; (b) Has a total meeting room and ballroom space between one-third and one-half of the total size of the center’s exhibition space; (c) Generates a majority of its business income from tourists; (d) Has a room-block relationship with the local lodging industry; and (e) Is owned by a unit of local government, a governmental agency or a nonprofit organization. (4) “Local transient lodging tax” means a tax imposed by a unit of local government on the sale, service or furnishing of transient lodging. (5) “State transient lodging tax” means the tax imposed under ORS 320.305. (6) “Tourism” means economic activity resulting from tourists. (7) “Tourism promotion” means any of the following activities: (a) Advertising, publicizing or distributing information for the purpose of attracting and welcoming tourists; (b) Conducting strategic planning and research necessary to stimulate future tourism development; (c) Operating tourism promotion agencies; and (d) Marketing special events and festivals designed to attract tourists. (8) “Tourism promotion agency” includes: (a) An incorporated nonprofit organization or governmental unit that is responsible for the tourism promotion of a destination on a year-round basis. (b) A nonprofit entity that manages tourism-related economic development plans, programs and projects. (c) A regional or statewide association that represents entities that rely on tourism-related business for more than 50 percent of their total income. (9) “Tourism-related facility” means: (a) A conference center, convention center or visitor information center; and (b) Other improved real property that has a useful life of 10 or more years and has a substantial purpose of supporting tourism or accommodating tourist activities. (10) “Tourist” means a person who, for business, pleasure, recreation or participation in events related to the arts, heritage or culture, travels from the community in which that person is a resident to a different community that is separate, distinct from and unrelated to the person’s community of residence, and that trip: (a) Requires the person to travel more than 50 miles from the community of residence; or (b) Includes an overnight stay. (11) “Transient lodging” means: (a) Hotel, motel and inn dwelling units that are used for temporary overnight human occupancy; (b) Spaces used for parking recreational vehicles or erecting tents during periods of human occupancy; or (c) Houses, cabins, condominiums, apartment units or other dwelling units, or portions of any of these dwelling units, that are used for temporary human occupancy. (12) “Transient lodging intermediary” means a person other than a transient lodging provider that facilitates the retail sale of transient lodging and charges for occupancy of the transient lodging. (13) “Transient lodging provider” means a person that furnishes transient lodging. (14) “Transient lodging tax collector” means a transient lodging provider or a transient lodging intermediary. (15) “Unit of local government” has the meaning given that term in ORS 190.003. (16) “Visitor information center” means a building, or a portion of a building, the main purpose of which is to distribute or disseminate information to tourists. [Formerly 305.824; 2005 c.187 §1; 2013 c.610 §3]

Note: Sections 2 and 14, chapter 610, Oregon Laws 2013, provide: Sec. 2. The Legislative Assembly declares that it is the purpose of the amendments to ORS 320.300, 320.305, 320.310, 320.315, 320.320, 320.325, 320.330, 320.345, 320.347 and 320.350 by sections 3 to 12 of this 2013 Act to enhance the administration and enforcement of existing law governing transient lodging taxes in this state. [2013 c.610 §2] Sec. 14. Section 2 of this 2013 Act is repealed on January 2, 2023. [2013 c.610 §14]

320.302 Certain terms definable by rule. The Department of Revenue may by rule define “dwelling unit,” “nonprofit facility,” “temporary human occupancy” and other terms for purposes of ORS 320.300 to 320.350. [2005 c.187 §5]

(State Transient Lodging Tax)

320.305 Rate and computation of tax; total retail price; collector reimbursement. (1)(a) A tax of 1.8 percent is imposed on any consideration rendered for the sale, service or furnishing of transient lodging. (b)(A) The tax must be computed on the total retail price, including all charges other than taxes, paid by a person for occupancy of the transient lodging. (B) The total retail price paid by a person for occupancy of transient lodging that is part of a travel package may be determined by reasonable and verifiable standards from books and records kept in the ordinary course of the transient lodging tax collector’s business. (c) The tax shall be collected by the transient lodging tax collector that receives the consideration rendered for occupancy of the transient lodging. (d) The tax imposed by this subsection is in addition to and not in lieu of any local transient lodging tax. (2) The transient lodging tax collector may withhold a collection reimbursement charge of five percent of the amount collected under subsection (1) of this section. [2003 c.818 §2; 2013 c.610 §4; 2016 c.102 §1]

Note: The amendments to 320.305 by section 3, chapter 102, Oregon Laws 2016, apply to consideration rendered on or after July 1, 2020, for the sale, service or furnishing of transient lodging. See section 4, chapter 102, Oregon Laws 2016. The text that applies to consideration rendered on or after July 1, 2020, for the sale, service or furnishing of transient lodging, is set forth for the user’s convenience. 320.305. (1)(a) A tax of 1.5 percent is imposed on any consideration rendered for the sale, service or furnishing of transient lodging. (b)(A) The tax must be computed on the total retail price, including all charges other than taxes, paid by a person for occupancy of the transient lodging. (B) The total retail price paid by a person for occupancy of transient lodging that is part of a travel package may be determined by reasonable and verifiable standards from books and records kept in the ordinary course of the transient lodging tax collector’s business. (c) The tax shall be collected by the transient lodging tax collector that receives the consideration rendered for occupancy of the transient lodging. (d) The tax imposed by this subsection is in addition to and not in lieu of any local transient lodging tax. (2) The transient lodging tax collector may withhold a collection reimbursement charge of five percent of the amount collected under subsection (1) of this section.

320.308 Exemptions. The following are exempt from the state transient lodging tax: (1) A dwelling unit in a hospital, health care facility, long term care facility or any other residential facility that is licensed, registered or certified by the Department of Human Services or the Oregon Health Authority; (2) A dwelling unit in a facility providing treatment for drug or alcohol abuse or providing mental health treatment; (3) A dwelling unit that is used by members of the general public for temporary human occupancy for fewer than 30 days per year; (4) A dwelling unit, the consideration for which is funded through a contract with a government agency and the purpose of which is to provide emergency or temporary shelter; (5) A dwelling unit at a nonprofit youth or church camp, nonprofit conference center or other nonprofit facility; or (6) A dwelling unit that is leased or otherwise occupied by the same person for a consecutive period of 30 days or more during the year. The requirements of this subsection are satisfied even if the physical dwelling unit changes during the consecutive period, if: (a) All dwelling units occupied are within the same facility; and (b) The person paying consideration for the transient lodging is the same person throughout the consecutive period. [2005 c.187 §3; 2009 c.595 §206]

Note: 320.308 was added to and made a part of 320.300 to 320.350 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation.

320.310 Records and statements. Every transient lodging tax collector shall keep records, render statements and comply with rules adopted by the Department of Revenue with respect to the tax imposed under ORS 320.305. The records and statements required by this section must be sufficient to show whether there is a tax liability under ORS 320.305. [2003 c.818 §3; 2013 c.610 §5]

320.315 Due date and form of returns; payment of tax. (1) Every transient lodging tax collector is responsible for collecting the tax imposed under ORS 320.305 and shall file a return with the Department of Revenue, on or before the last day of the month following the end of each calendar quarter, reporting the amount of tax due during the quarter. The department shall prescribe the form of the return required by this section. The rules of the department shall require that returns be made under penalties for false swearing. (2) When a return is required under subsection (1) of this section, the transient lodging tax collector required to make the return shall remit the tax due to the department at the time fixed for filing the return. [2003 c.818 §4; 2013 c.610 §6]

320.320 Refunds. If the amount paid by the transient lodging tax collector to the Department of Revenue under ORS 320.315 exceeds the amount of tax payable, the department shall refund the amount of the excess with interest thereon at the rate established under ORS 305.220 during a period beginning 45 days after the later of the due date of the return to which the excess relates or the date the excess was paid, and ending on the date the refund is paid. A refund may not be made to a transient lodging tax collector that fails to claim the refund within two years after the due date for filing the return to which the claim for refund relates. [2003 c.818 §5; 2013 c.610 §7; 2017 c.278 §12]

320.325 Amounts held in trust; enforcement. (1) Every transient lodging tax collector is deemed to hold the amount of state transient lodging taxes collected in trust for the State of Oregon and for payment to the Department of Revenue in the manner and at the time provided under ORS 320.315. (2) At any time the transient lodging tax collector fails to remit any amount of state transient lodging taxes deemed to be held in trust for the State of Oregon, the department may enforce collection by the issuance of a distraint warrant for the collection of the delinquent amount and all penalties, interest and collection charges accrued on the delinquent amount. The warrant shall be issued, docketed and proceeded upon in the same manner and shall have the same force and effect as warrants for the collection of delinquent income taxes. [2003 c.818 §6; 2013 c.610 §8]

320.330 Applicability of other provisions of tax law. Unless the context requires otherwise, the provisions of ORS chapters 305, 314 and 316 governing the audit and examination of reports and returns, confidentiality of reports and returns, determination of deficiencies, assessments, claims for refunds, penalties, interest, jeopardy assessments, warrants, conferences and appeals to the Oregon Tax Court, and related procedures, apply to ORS 320.305 to 320.340 as if the state transient lodging tax were a tax imposed upon or measured by net income. The provisions apply to the taxpayer liable for the tax and to the transient lodging tax collector required to collect the tax. Any amount collected and required to be remitted to the Department of Revenue is considered a tax upon the transient lodging tax collector required to collect the tax and the transient lodging tax collector is considered a taxpayer. [2003 c.818 §7; 2013 c.610 §9]

320.332 Disclosure of confidential information by Department of Revenue and local governments; rules. (1) As used in this section, “confidential information” means information contained in state transient lodging tax returns required under ORS 320.315, any information in state transient lodging tax reports from which information about a particular taxpayer may be determined and any other information or reports exchanged by the Department of Revenue and a unit of local government related to transient lodging taxpayers that is confidential pursuant to the confidentiality provisions of ORS 320.330. (2)(a) Notwithstanding ORS 314.835 and the confidentiality provisions of ORS 320.330 and except as provided in paragraph (d) of this subsection, upon written request, the Department of Revenue shall disclose information received under ORS 320.305 to 320.340, or any reports or other form of analysis based on the information, to a unit of local government for purposes of local transient lodging taxes imposed or administered by the unit of local government. (b) Before making a request under paragraph (a) of this subsection, the unit of local government must provide written notice, to the officers, employees and agents of the unit of local government who will receive the confidential information, of the provisions of ORS 314.835 and 314.991 (2) relating to the penalties for unlawful disclosure of confidential information. (c) Before disclosing confidential information requested under this subsection to officers, employees and agents, the unit of local government must receive from the officers, employees and agents certification of receipt of the notice required under paragraph (b) of this subsection. (d) The department may refuse to comply with a request if compliance would be unduly burdensome or expensive. (3)(a) Notwithstanding any other provision of law and except as provided in paragraph (b) of this subsection, upon written request, a unit of local government shall disclose information received under ORS 320.345 to 320.350, or any reports or other form of analysis based on the information, to the Department of Revenue for purposes of the administration of the state transient lodging tax by the department. (b) The unit of local government may refuse to comply with a request if compliance would be unduly burdensome or expensive. (4)(a) A unit of local government may disclose confidential information only to qualified personnel for management audits, financial audits or research conducted by any accredited university, the League of Oregon Cities or the Association of Oregon Counties. (b) Personnel who receive information from confidential communications or records may not disclose the information except to the extent that disclosure is consistent with the authorized purposes for which the personnel obtained the information. (c) For audits or research, personnel who receive confidential information may not directly or indirectly disclose in a report or any other manner the identity of a taxpayer, including a taxpayer identification number or Social Security number. (5) Information requested under this section is not required to be provided more frequently than once per calendar quarter. (6) A request made under subsection (2) or (3) of this section remains in effect until the unit of local government that made the request or the department, respectively, requests in writing to discontinue receiving the information. (7) The Department of Revenue, after consultation with local governments, shall adopt rules establishing the process for making requests under this section, including, but not limited to, forms and timing, information that may be disclosed and the notice and certification requirements under subsection (2)(b) and (c) of this section. [2017 c.89 §2]

Note: 320.332 was added to and made a part of 320.300 to 320.350 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation.

320.335 Distribution of moneys received. All moneys received by the Department of Revenue pursuant to ORS 320.305 to 320.340, and interest thereon, shall be paid to the State Treasurer to be held in a suspense account established under ORS 293.445. After the payment of refunds: (1) Moneys necessary to reimburse the Department of Revenue for the actual costs incurred by the department in administering the state transient lodging tax, not to exceed two percent of state transient lodging tax collections, are continuously appropriated to the department; and (2) The balance of the moneys received shall be transferred to the account of the Oregon Tourism Commission established under ORS 284.131. The moneys transferred under this subsection are continuously appropriated to the Oregon Tourism Commission for the purposes set forth in ORS 284.131. [2003 c.818 §8]

320.340 Exemption from public records law. (1) Public records of moneys received by the Department of Revenue pursuant to ORS 320.305 to 320.340 are exempt from disclosure under ORS 192.311 to 192.478. Nothing in this section shall limit the use that can be made of such information for regulatory purposes or its use and admissibility in any enforcement proceedings. (2) If a conflict is found to exist between subsection (1) of this section and ORS 314.835, ORS 314.835 controls. [2003 c.818 §8a]

(Local Transient Lodging Taxes)

320.345 Collector reimbursement charges. (1) On or after January 1, 2001, a unit of local government that imposed a local transient lodging tax on December 31, 2000, and allowed a transient lodging tax collector to retain a collection reimbursement charge on that tax, may not decrease the rate of the collection reimbursement charge. (2) A unit of local government that imposes a new local transient lodging tax on or after January 1, 2001, shall allow a transient lodging tax collector to retain a collection reimbursement charge of at least five percent of all collected local transient lodging tax revenues. The unit of local government may increase the rate of the collection reimbursement charge. (3) A unit of local government that increases a local transient lodging tax on or after January 1, 2001, shall allow a transient lodging tax collector to retain a collection reimbursement charge of at least five percent of all collected local transient lodging tax revenues, including revenues that would have been collected without the increase. The unit of local government may increase the rate of the collection reimbursement charge. (4) A unit of local government may not offset the loss of local transient lodging tax revenues caused by collection reimbursement charges allowed under this section by: (a) Increasing the rate of the local transient lodging tax; (b) Decreasing the percentage of total local transient lodging tax revenues used to fund tourism promotion or tourism-related facilities; or (c) Increasing or imposing a new fee solely on transient lodging tax collectors or tourism promotion agencies that are funded by the local transient lodging tax. [2003 c.818 §10; 2013 c.610 §11]

320.347 Alternative remittance of receipts from tax on camping and recreational vehicle spaces. (1) Except as provided in this section, a unit of local government that imposes a tax on the rental of privately owned camping or recreational vehicle spaces shall, regardless of a schedule imposed by the unit of local government for remitting tax receipts, allow a transient lodging tax collector to hold the tax collected until the amount of money held equals or exceeds $100. (2) Once the amount held by a transient lodging tax collector equals or exceeds $100, or by December 31 of each year if the $100 threshold is not met, the transient lodging tax collector shall remit the tax collected at the next following reporting period established by the unit of local government for payment of the tax. (3) A unit of local government may not assess any penalty or interest against a transient lodging tax collector that withholds payments pursuant to this section. [2005 c.610 §4; 2013 c.610 §12]

320.350 Tax moratorium; exceptions; uses of revenues. (1) A unit of local government that did not impose a local transient lodging tax on July 1, 2003, may not impose a local transient lodging tax on or after July 2, 2003, unless the imposition of the local transient lodging tax was approved on or before July 1, 2003. (2) A unit of local government that imposed a local transient lodging tax on July 1, 2003, may not increase the rate of the local transient lodging tax on or after July 2, 2003, to a rate that is greater than the rate in effect on July 1, 2003, unless the increase was approved on or before July 1, 2003. (3) A unit of local government that imposed a local transient lodging tax on July 1, 2003, may not decrease the percentage of total local transient lodging tax revenues that are actually expended to fund tourism promotion or tourism-related facilities on or after July 2, 2003. A unit of local government that agreed, on or before July 1, 2003, to increase the percentage of total local transient lodging tax revenues that are to be expended to fund tourism promotion or tourism-related facilities, must increase the percentage as agreed. (4) Notwithstanding subsections (1) and (2) of this section, a unit of local government that is financing debt with local transient lodging tax revenues on November 26, 2003, must continue to finance the debt until the retirement of the debt, including any refinancing of that debt. If the tax is not otherwise permitted under subsection (1) or (2) of this section, at the time of the debt retirement: (a) The local transient lodging tax revenue that financed the debt shall be used as provided in subsection (5) of this section; or (b) The unit of local government shall thereafter eliminate the new tax or increase in tax otherwise described in subsection (1) or (2) of this section. (5) Subsections (1) and (2) of this section do not apply to a new or increased local transient lodging tax if all of the net revenue from the new or increased tax, following reductions attributed to collection reimbursement charges, is used consistently with subsection (6) of this section to: (a) Fund tourism promotion or tourism-related facilities; (b) Fund city or county services; or (c) Finance or refinance the debt of tourism-related facilities and pay reasonable administrative costs incurred in financing or refinancing that debt, provided that: (A) The net revenue may be used for administrative costs only if the unit of local government provides a collection reimbursement charge; and (B) Upon retirement of the debt, the unit of local government reduces the tax by the amount by which the tax was increased to finance or refinance the debt. (6) At least 70 percent of net revenue from a new or increased local transient lodging tax shall be used for the purposes described in subsection (5)(a) or (c) of this section. No more than 30 percent of net revenue from a new or increased local transient lodging tax may be used for the purpose described in subsection (5)(b) of this section. (7)(a)(A) A local transient lodging tax must be computed on the total retail price, including all charges other than taxes, paid by a person for occupancy of the transient lodging. (B) The total retail price paid by a person for occupancy of transient lodging that is part of a travel package may be determined by reasonable and verifiable standards from books and records kept in the ordinary course of the transient lodging tax collector’s business. (b) The tax shall be collected by the transient lodging tax collector that receives the consideration rendered for occupancy of the transient lodging. [2003 c.818 §11; 2013 c.610 §10]

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OVERVIEW

Passing any tax or finance legislation in a short session is challenging, and thus the list of passed bills is short. The League spent the entire session advocating for passage of a gigabit repeal and a lodging tax improvement. The gigabit bill, HB 4027, ran out of time in the Senate and will likely be back in the 2019 session. The lodging tax improvement bill, HB 4120, passed, and the League thanks all of the cities that stepped up with lobbying, testimony, emails, and phone calls. This is an important win for Oregon’s 241 cities. The revenue committees spent the bulk of the session trying to understand and respond to federal tax changes (see SB 1528 and SB 1529). A state revenue package with tax reform is expected in 2019, and the League looks forward to working on property tax and excise tax reform to assist cities.

Property Taxes

PROPERTY TAXES – PASSED BILLS

HB 4028: Omnibus Property Tax and Income Tax Credit Bill Effective Date: June 2, 2018

HB 4028 became the omnibus tax bill, with several property tax exemptions and income tax credit amendments added at the end of the session. The bill: extends the sunset of a low-income housing property tax exemption by six months to conform with the tax year; changes the definition of “rural” to increase the areas in the state where a permissive new industrial property tax exemption is available; and allows cemetery property, when converted to low income housing, to avoid 10 years of back taxes that would normally become due (still a work in progress with an interim work group expected). HB 4028 also makes the following income tax credit changes: clarifies that the term "bovine" refers to "cattle” and adjusts the $5 million annual cap on the manure credit to a calendar instead of a tax year; adjusts the definition in the affordable housing lenders tax credit program to allow a nonprofit corporation or housing authority that has a controlling interest in a limited partnership to be a qualified borrower for purposes of the credit; adjusts appropriations regarding the film and video tax credit when available credits are not all sold through an auction; and makes adjustments to the working family household and dependent care tax credit, focused on limits and calculations related to employment-related expenses and schooling.

HB 4139: Heavy Equipment Taxation Effective Date: June 2, 2018

HB 4139 replaces the existing personal property tax system for heavy equipment held for rental with a 2 percent point-of-sale tax. Heavy equipment rental providers will file quarterly tax returns and remit the sales tax to the Oregon Department of Revenue (DOR). The DOR will return the revenue to the county in

2018 Legislative Session Summary of Bills |1 which it was rented, where it will be distributed to taxing districts using the tradition property tax methodology. The League was neutral on the bill, as it ensures that local governments will be made whole yearly by the rental companies if there is a revenue loss. This type of personal property is very mobile and often missed in property tax assessments. HB 4139 requires the DOR to submit a report on the new program on or before July 1, 2022.

PROPERTY TAXES – FAILED BILLS

SB 1515: Children’s Districts SB 1515 would have authorized the formation of a new special district to provide services for children. The bill would have given these districts traditional special district powers, including the ability to levy and collect property taxes to pay for services. The League, along with a coalition of local governments, again opposed the bill because property tax levies for a new special district would cause or exacerbate compression for taxing districts due to Measure 50. In addition, there would be geographic tax inequities, depending on the borders of the proposed district. The League also opposed SB 1515 because children’s districts could be duplicative. That is, they could compete with other successful programs, as many services authorized under the bill already exist or can be provided by school districts, cities, counties and recreation districts.

HB 4027: Gigabit Property Tax Repeal HB 4027 would have repealed the generous 2015 gigabit property tax exemption provided to qualified centrally-assessed taxpayers. The exemption has failed to provide the intended broadband expansion benefits and has instead been interpreted in ways that do not ensure a return on investment to taxing districts. The League, along with a coalition of city, county, school, and special district advocates, lobbied heartily through the session for the bill’s passage. HB 4027 would have kept the exemption for one year for two companies that have a pending exemption application: Comcast and Frontier. The League supported compensation to these companies, as the short-term loss is necessary to avoid larger long-term revenue losses to all local governments and schools. In addition, HB 4027 would have extended the sunset of a low-income housing property tax exemption by six months to conform to the tax year. The sunset extension was later included in HB 4028, which did pass. HB 4027 came about after a work group (which included the League), led by Representative Rob Nosse (D-Portland), worked on the gigabit issue throughout the interim. The bill passed the House and died in the Senate during the last week of session amidst end-of-session negotiations. Legislation is expected to return in 2019.

HB 4078: Industrial Property Tax Exemption HB 4078 would have made changes to statutes governing a new local government permissive property tax exemption made available to qualified industrial property (see HB 1565 from 2016). Specifically, HB 4078 clarified and expanded the definition of rural, and therefore eligible, areas for the exemption. The legislation also would have expanded eligibility to include a location that has not formerly been used for industrial purposes. There were some brownfield cleanup references added to the program as well, but those seem to have been made in error. HB 4078 did not advance in the House, but the bulk of the bill was added as an amendment to HB 4028 in the Senate.

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Excise Taxes

EXCISE TAXES – FAILED BILLS

SB 1564: Liquor Tax: Distillery Exception SB 1564 would have created a new distillery tasting room permit, and allowed distilleries to earn up to $500,000 in direct sales per year without becoming a retail agent of the Oregon Liquor Control Commission (OLCC). Distillers can currently make direct sales, but they are treated as agents of the OLCC (like a liquor store) and are provided a commission for their sales by the agency. A portion of each sale goes to the state for distribution, with cities receiving a 34 percent share of those liquor revenues. SB 1564 would have exempted direct sales by distillers from this tax and the revenue sharing process. The League opposed this legislation, as it would have had a substantial adverse impact on the city share of state shared liquor tax revenues. An interim work group is expected to address this issue of how to more fairly compensate distilleries that make direct sales.

HB 4146: Cigarette Tax Increase HB 4146 would have provided a modified funding package for paying for Medicaid costs. The bill would have used revenues from the Tobacco Master Settlement Agreement and various provider assessments, including ambulatory surgical centers, emergency ambulance services, and modified hospital assessments. HB 4146 also called for an unspecified increase in cigarette taxes as part of the package, and cities would have also received a portion of an increase. Because the temporary hospital tax (Measure 101) that was referred to the voters passed in January, this alternative funding stream did not advance.

Lodging Taxes

LODGING TAXES—PASSED BILL

HB 4120: Lodging Taxes: Intermediaries Effective Date: July 1, 2018

HB 4120 revises the definition of “transient lodging intermediary” to clarify that all online platforms are subject to lodging tax collection, as well as filing and payment requirements, unless otherwise provided for by a city or county. Passage of the bill was a priority for the League, which maintained that legislation passed in 2013 was intended to treat intermediaries the same as traditional hotels and motels. Unfortunately, some companies found potential loopholes in the 2013 statutory wording and also changed their online business platforms over time. As a result, cities have faced enforcement challenges and have had to treat some intermediaries differently. To adapt, many cities have signed unfavorable voluntary collection agreements in order to receive lodging tax revenues. With the bill, the responsibility for collecting and paying the tax will rest clearly with intermediaries and agreements will not be necessary. HB 4120 will also make it more feasible for the state to collect local taxes on behalf of the cities with which it has intergovernmental agreements, because the bill aligns both state and local tax treatment of intermediaries. The League is hopeful that a state collection option will be made available by January 1.

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Originally, HB 4120 had also provided subpoena authority to local governments seeking disclosure of lodging tax records. However, that language was removed by amendment. The League had requested specific statutory recognition of this authority, as some online intermediaries refuse to disclose business records (including rental location information), citing protections under the federal Stored Communications Act. Cities are advised to rely on their home rule authority for requesting such records.

Miscellaneous State Taxes

MISCELLANEOUS STATE TAXES—PASSED BILLS

SB 1528: Income Tax: Pass Through Deduction and State and Local Tax Work Around Effective Date: June 2, 2018

SB 1528 rolls back a new state business tax break automatically created by 2017 federal tax reform. Oregon tax law is generally connected to the federal tax code, unless the state specifically disconnects from it. The federal tax break would have allowed “pass-through” businesses to deduct 20 percent of their gross income from their state taxes, starting this year. “Pass-through” refers to businesses like S- corps and limited liability companies that pay taxes using the individual income tax code rather than the corporate code. The bill’s disconnection from this break restores roughly $200 million per year to the state budget. SB 1528 also creates an attempted work-around for the new $10,000 federal cap on deductions for state and local taxes (SALT), which primarily impact high-income Oregonians. The bill allows state taxpayers to buy a combined $14 million in tax credits to fund Oregon opportunity grants – specifically, need-based college scholarships. Those taxpayers could then claim their tax credit purchases as a charitable deduction on their federal income taxes. This bill passed on close partisan votes, and the legality of the measure may be challenged. Tax increase bills require a three-fifths vote, but the Legislature’s lawyers ruled this measure reduced an existing tax break and was not a new tax increase.

SB 1529: Income Tax—Business Repatriation of Assets & Revenue for PERS: (See Human Resources Section for Bill Summary)

HB 4026: Charitable Donations Effective Date: June 2, 2018

HB 4026 prevents the Oregon Department of Revenue from considering charitable contributions or activities as a factor when determining the residency of a personal income tax filer. Historically, charitable contributions and activities is one of many factors used to determine if a personal income tax filer is a resident of Oregon or a different state. Removal of consideration of this factor will assure that tax filers are not discouraged from making donations in Oregon.

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SSTTAATTEE BBUUDDGGEETT

STATE BUDGET – PASSED BILLS

SB 5702: Bond Bill Effective Date: On Passage

In SB 5702, the Legislature authorized an additional $84.3 million in general obligation bonds, $121.6 million in revenue bonds, $275 million in pass-through revenue bonds, more than $19.15 million in lottery bonds, and $17 million in certificates of participation and other financing agreements. The Oregon Water Resources Department is directed in a budget note to report to the Emergency Board, no later than December 2018, on publicly owned high-hazard dams in Oregon that have unsatisfactory or poor condition ratings. Another bill highlight is the approval of $74.6 million in bonds to fund important capital projects for five public universities (Eastern Oregon University, Oregon State University (Cascades Expansion), University of Oregon, Western Oregon University, and Southern Oregon University).

SB 5703: Program Change Bill Effective Date: On Passage

SB 5703 implements several statutory changes necessary to support a balanced 2017-19 biennial state budget and respond to budget changes made as a result of 2018 legislation. The adjustments in the bill increase total lottery allocations by $71.76 million, as lottery revenues are exceeding forecasts. More than $70 million from lottery revenues were allocated to the State School Fund, and more than $1.7 million went to Business Oregon. Adjustments to the Criminal Fine Accounts revenues were also made, resulting in an increased allocation of $3.7 million to the Oregon Department of Public Safety Standards and Training, which will permit an increase in the number of the department’s training classes. Lastly, an adjustment to the choice of state deposit accounts will ensure that a portion of the distribution of the state’s marijuana tax revenues will assist with mental health treatment, as well as alcohol and drug abuse prevention, early intervention and treatment.

HB 5201: Budget Reconciliation Bill (Christmas Tree Bill) Effective Date: On Passage

The reconciliation bill, otherwise known as the Christmas tree bill, implements additional pieces of the state budget for the 2017-19 biennium. The bill provides numerous appropriations for several specific city and community projects, the “ornaments” of the Christmas tree bill.

Highlights of the bill that will benefit cities are:  Housing and Community Services Department

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o $23.2 million for shelter capacity and homelessness prevention services provided through the Emergency Housing Assistance program o 1.15 million for veterans’ homelessness and housing stability activities  Carbon Policy Office o $1.4 million in general funds to create and staff a new Carbon Policy Office. The funds will also support several studies including an economic impact analysis of a cap and trade program on jobs and on the state’s economy. The analysis will also assess potential opportunities for carbon sequestration.  Department of Public Safety Standards and Training o $3.65 million for the addition of six classes to the 2017-19 Public Safety Academy training calendar  Oregon Department of Transportation (ODOT) o $14,690,000 for administration of ODOT’s local government program  Oregon Business Development Department o $500,000 for the Local Economic Opportunity Fund to assist with community economic resilience planning. o $1,250,000 of Lottery Funds to the Oregon Growth Fund (transfer from Strategic Reserve Fund)

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2018 Finance & Taxation Committee

Title Name City Email Phone Chair

Finance Director Don Hudson Tualatin [email protected] 503-691-3050

Vice Chair

Council President Jake Boone Cottage Grove [email protected] 541-653-7413

Members

Financial Reporting Anthony (Tony) Salem [email protected] 503-588-6187 Manager Turley

Councilor Barbara Bull Corvallis [email protected] 541-602-4123

Councilor Bessie Johnson Albany [email protected] 541-791-2494

Mayor Dave Drotzmann Hermiston [email protected] 541-567-5521

Councilor Jeff Gudman Lake Oswego [email protected] 503-780-1524

City Manager Joseph Gall Sherwood [email protected] 503-625-4200

City Economist Josh Harwood Portland [email protected] 503-823-6954

City Manager Kenna L. West Willamina [email protected] 503-876-2242

City Manager Lance Colley Roseburg [email protected] 541-492-6866

Finance Director Lisa Young Sandy [email protected] 503-489-0940

Finance Director Nancy Brewer Corvallis [email protected] 541-766-6990

City Administrator Nolan Young Fairview [email protected] 503-674-6221

Finance Director Patrick O'Claire Beaverton [email protected] 503-526-2241

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Councilor/Umatilla Paul Chalmers Pendleton [email protected] 541-969-6757 County Director of Assessment

Finance Director Sandra Montoya Woodburn [email protected] 503-982-5211

Councilor Scott Fairley Pendleton [email protected] 541-240-1825

Councilor Steve Wright Seaside [email protected] 503-984-5324

Finance Director Suzanne Linneen Hillsboro [email protected] 503-681-6404

Mayor Ted Tosterud Fairview [email protected] 503-665-7929

Councilor Theresa Kohlhoff Lake Oswego [email protected] 503-975-8881

Councilor Thomas Brownson Astoria [email protected] 503-440-5474

City Manager William A. Peterson Wood Village [email protected] 503-489-6856 Jr.

Interested Parties

Interim State Daniel Eisenbeis Portland [email protected] 503-823-6556 Government Relations Manager Government Relations Eric Chambers Gresham [email protected] 503-807-3152 Director

Liaison

Managing Director Carol Samuels Piper Jaffray [email protected] 503-275-8301

Staff

Intergovernmental Wendy Johnson LOC [email protected] 503-540-6585 Relations Associate

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