Contesting Your Property Taxes

You know that fall is in the air when the leaves are turning color and your tax bill is about to arrive in the mail. So it seems appropriate that I share some information that may be of help with your tax bill.

Some History
The tax year in Oregon runs from July 1 to June 30. Taxes are due on November 15. So when you pay your property taxes you are paying back to July 1 and ahead to June 30. That in and of itself is confusing because it doesn’t correspond to the calendar year.

Coming out of the recession weary 1980’s, Oregon’s real estate boomed. We had year-over-year property value growth. With no caps on tax assessment, people would receive their property tax bill in October and find the tax amount due had increased 10-20%. This was a huge burden and an unexpected expense that had to be paid. It lead to a series of ballot measures put before the people of Oregon to address this problem. In 1996, ballot measure 47 was passed.

Ballot measure 47 restricted the annual rate of tax increase to not more than 3%, plus any bond measures that were voted on and approved by the community. The exception to this is significant remodeling that changes the property.

The sale of a house does not trigger a new assessment. The tax rate remains on the property when it is transferred to a new owner, and is subject to the same 3% annual limit.

Move forward from 1996 and property values changed significantly. We had years of appreciation in property values that were in the double digits year after year. Real market values increased at a rate significantly greater than 3%.

When you get your property tax bill, you will see two valuations. One is what the county tax assessor thinks your real market value currently is (what your house would sell for today). And one is the current value that your tax bill is assessed at. As long as the market value is greater than the assessed value, your taxes will go up. The increase limit is 3%. This is why your tax assessment goes up even though you know your property value has gone down. This will continue to happen as long as your market value is higher than your assessed value.

If you think your assessed value is higher than your market value, there is a process you can go through to appeal your taxation and potentially reduce your property taxes.

Contesting your property taxes
To appeal your property tax bill, you need to submit a petition to the Clackamas County Board of Property Tax Appeals between October 25th and December 31st. This window of time is the only time an appeal can be made. If you don’t do it on time, you have to wait until next year.

Once you have submitted your petition, you will be given the opportunity to appear before the appeals board sometime starting in February, but not later than April 15th. At your hearing you will have 15 minutes to present your evidence. Evidence can consist of the following:

A professional appraisal
Your testimony and testimony of witnesses you bring with you
Physical evidence such as photos, maps, graphs, and documents
The paperwork from your recent purchase of the property
Recent sales of comparable properties

At the hearing you need to be prepared and concise. The Board will attempt to make a decision at the hearing, and a written decision will be mailed to you in about 3 weeks.

My story
I attended a class on the tax appeal process last winter. The class was taught by a man who had served on the Appeals Board. He brought up a case as illustration of the process. It happened to be a condominium where my 82 year old mother currently lives. The condominium complex, in Lake Oswego, had been an apartment conversion in 2007. The entire complex was remodeled. With beautiful units, right on the Willamette River, the condos sold on the high-end of the condo market. Well, we know what has happened since then. Those condos have lost more in value than the average home. One of the unit owners successfully contested their taxes and reduced them. A discussion took place, which was now shared with the people in the class I was attending, that perhaps the tax assessor should reduce the taxation throughout the complex (benefiting perhaps 100 home owners or more). The decision? No. Each unit owner would have to bear the burden of individually contesting their taxes.

Needless to say, I am going to be working with my Mom to appeal her taxes this year.

Would you like to appeal your taxes? Click here to get started.

If you would like me to run some comparable sales for you, I am happy to help. Disclaimer: I am not an expert on the appeals process and I will not do the appeal for you. But I can at least point you in the right direction. Drop me an e-mail at and tell me about your house. I will run a quick property search for comparable sales in your neighborhood and send them back to you. This will help you to know if you should do an appeal or not. And you can use the comparables at your hearing if you decide to pursue the process.

Wish me luck with helping my Mom. I’ll let you know next spring if we are successful.

Talking Taxes

Along with the gorgeous fall color, October brings property tax statements.  If you live in Oregon, you will be receiving your statement in the mail in the next week or so.  Property taxes are pretty misunderstood, and not because people are dumb. The simple fact is that they are confusing. I am going to take a shot at explaining them and clearing up some basic issues.

fallcolorThe tax year runs from July 1st to June 30th, but you receive your tax statement in October for payment on November 15th.  No wonder people are confused!  Not only does the tax year not correspond with the calendar year, but you get your statement at a completely odd time as well.  (Is this some sort of a conspiracy?)  So when you pay your taxes in November you are paying in arrears back to July 1 and ahead to June 30.  You can pay your taxes in one lump sum and receive a discount, or you can pay it in thirds with the final third due in May.

Don’t fall behind in your property taxes.  The tax assessor is the only entity that can step ahead of your mortgage lender in lien position.  This means that if you fall behind, the county can actually foreclosure on your home even if you are current on your mortgage.  This is why mortgage companies pay attention to whether or not your property taxes are paid and will be all over you if you let them slide.  I recommend to all first-time buyers, and to buyers who are not yet financially seasoned homeowners, that they arrange for their taxes to be paid as a part of their house payment.  This builds a reserve account that is built up all year so that when November rolls around the full year’s tax bill is on hand, and the taxes are paid on your behalf by your mortgage company.  It makes paying your taxes quite automatic.

fallcolor2Yes, your property taxes will probably go up this year even though your house value has likely gone down.  Right now, this is the most confusing issue about property taxes and is getting a lot of play in the media.  This is happening because of the restriction that was placed onto annual tax increases in the mid-1990’s.  At that time house values were going up quickly and property taxes were going up at the same pace.  This was creating financial hardship because people’s incomes were not keeping pace.  A ballot measure was passed that restricted annual tax increases to not more than 3% per year plus any bond measures passed through public vote.  Bond measures are those ballot measures that supply funding to build libraries, schools, zoos, etc.  Lots of bond measures have been passed in the last 15 years, including an $80,000,000 bond measure that re-built the two High Schools here in Lake Oswego.

When you receive your tax bill you will see two values:  tax assessed and market.  The tax assessed value has increased under restrictions for the last 15 years.  These restrictions have kept the increase to about 3-6% per year.  At the same time the real market value has increased at the rate of the actual market and there were many years with 10-15% appreciation.  You will not see any decrease in property taxes until or unless the market value falls below the tax assessed value.  And because the market value so far out-paced the tax assessed value, they are still pretty wide apart.  And that is why your property taxes will likely be going up this year.

It’s good to know that buying or selling a home does not trigger a tax increase.  The tax assessed value goes with the house to the new home owner.  So the new sale at a value that is much higher than the tax assessed value will not have an impact on the annual property taxes.  (Other than becoming a part of general statistics used in the tax assessor’s office to track valuations).  There are, however, two things that can trigger higher taxes.  I have already mentioned publicly voted bond measures that pass.  These have no dollar limitations.  It is completely at the discretion of the voters.  The second is major remodeling.  This is not the sort of remodeling where you re-do the kitchen or put up a fence in the yard.  (I am providing general information here.  What the tax assessor uses to trigger a tax increase because of remodeling is at his/her discretion, and not mine )  This is the sort of remodeling where you add square footage to the house, or gut a house and re-build it from the studs out.  This will bring in lots of building permits and the tax assessor will be right in there to see how it affects the value.  A total remodel can trigger tax assessments that make the home virtually a new house.

The taxation process is political. And that means it was built from problems that needed to be solved and a solution that was from compromises.  So it’s not perfect.  The biggest area that I see as imbalanced is that the basis for the 3% annual increase happened in the mid-1990’s.  Older homes that had lower market values 15 years ago continue to benefit from those values.  And homes that were newer or in expensive neighborhoods continue to have taxes that are higher in comparison.  Having said that, it is my experience that on average taxes in Lake Oswego/Clackamas County still remain lower than taxes in Multnomah County (Portland), and there is no transfer tax like you find in Washington County (Beaverton/Tigard).

Without going on and on on this topic (because that would be pretty easy to do), I hope this explanation is helpful to you as you receive your tax statement in the coming weeks.  And if you are re-locating to the area, I hope it helps you to understand what to expect.