A one-stop source about accessory dwelling units, multigenerational homes, laneway houses, ADUs, granny flats, in-law units…
This post is complicated, thick, and heavy – it’s about property taxes. Ick! For the purposes of retaining readers’ interest, I may as well write a 10-page piece about getting dental procedure work done on the mesial side of molar #31.
Yes, it may seem too boring for most of our readers to bother continue reading. But, it’s actually one of the most significant issues I’ve covered on this website, because it could spell the death of detached ADUs in Portland.
As a pre-amble to this post, read the Portland Tribune’s coverage of this same topic, posted on October 22nd, 2015. It’s a much lighter and quicker read than this post is, and explains the basic dynamics at play very well. But, if you want or need to fully understand the full details of this taxing issue, or want to see further evidence that the County is misleading its citizens, read this post.
Background on How Property Taxes Increased with Detached ADUs
Without any public notice, discourse, or explanation, Multnomah county has changed the formula of how properties with detached ADUs will be assessed and taxed this year. This change dramatically impacts the resulting property tax increase for many owners, wiping out any financial motivation for developing an ADU in the first place.
Up till this year, the average tax increase for properties that have added ADUs has been $1,134/year. This tax increase was high, yes, but it seemed reasonable and was in alignment with how all structural improvements were taxed.
County assessors would visit properties after the development of an ADU, increase the Real Market Value (RMV) of the property by adding their perceived value of the ADU structure to the previously established RMV. But, they would only raise the property tax proportionally to the added structural “improvement” value of the ADU to the property.
From a property tax perspective, ADUs were classified as an “improvement”. Like hundreds of other types of “improvements” a homeowner might make to their property, taxes would go up proportional to the improvements that were made. My experience over the last four years of talking with hundreds of ADU homeowners, has been that the property tax increase for the assessed $40K-$150K ADU improvement, typically ranged from $500-$2,000/year, with some rare instances where taxes increased by $2,500. Under the old method of property tax increases for detached ADUs in my classes and consultations, I used to advise as a rule of thumb, “After building an ADU, your annual tax burden will increase by roughly the equivalent of one month’s rent for the new ADU”.
This year, for reasons only known to the directors of the Multnomah County Division of Assessment, Recording & Taxation, they suddenly flipped the calculation on its head in a radical, extreme, and unilateral manner, uncharacteristic of the relatively good government I’m used to witnessing around Portland. Under the new method that this post will spell out in excruciating detail (because Multnomah County hasn’t done the honors), the increase can be so severe that it will force some homeowners who have just developed ADUs, to sell their properties and move to another location in order to stay above water financially.
In a unilateral policy move this tax season, without public notice and explanation and without consultation and permission from elected officials or the State Department of Revenue, the County’s tax directors decided that after the development of a detached ADU, they would re-assess the entire property, including the land and primary structure, tying the new tax Maximum Assessed Value tax rate to the current Real Market Value.
This may seem fair if you don’t understand how Measure 50 tax law works. Measure 50 tax law isn’t “fair” to begin with, but the surgical and selective manner in which the County officials are opting to apply obscure Measure 50 code to detached ADUs, is not only unfair, it’s abominable.
This single change in property tax calculation kills the economic rationale behind the development of detached ADUs. Under this new method, property taxes after ADU development may increase by 600% or more.
Seems unbelievable, doesn’t it? 600%? But, it’s true.
Here’s just three examples of property tax increases for adversely impacted homeowners whose ADUs happened to be featured in recent City-wide ADU tours. In other words, this is a relatively random sample set of detached ADUs that illustrate the perverse and extreme changes that are happening, and that are representative of what is likely to happen with any detached ADUs in the future if political intervention does not happen immediately. I have not included the names/addresses used in this post in order to protect the owners’ privacy, but I encourage anyone adversely impacted by this new formula, to speak up in the comment thread if they are inclined to do so. There’s power in numbers and in knowing that you’re not alone.
In all three of these examples, homeowners built these ADUs for themselves and are either renting out their primary structure or their ADU as a traditional rental. In other words, they were adding another unit of housing to Portland’s housing stock. Their motivation for building an ADU was the same primary motivation that most people have for building an ADU–the possibility of generating passive rental income.
Let’s now consider the post-development personal finances math for the three examples sited above in light of Multnomah’s new taxing method.
The owners of Example 1 would have to pay $6,061 more each year- a 594% property tax increase. Let me repeat that. Their taxes increased by 594% for adding an ADU.
After first learning about this tax increase, the owner’s first reaction was understandable:
“Wow that is so fucked . I’ll be putting that property up for sale soon if that sticks. I have very little patience for extortion.”
If the County gets its way in Example #1, the owners will pay an extra $505 each month. For comparison, I recently got a quote for full health care coverage-and it came out to $250/month. The property tax increase for Example 1 is equivalent to the cost to cover two people each month for health care. The tax impact is also roughly equivalent to the cost of two plane tickets around the world annually.
Looked at over a longer time span, it’s even scarier. In 8.2 years, the owners will pay $50,000 more in property taxes than if they hadn’t built an ADU at all.
As a professional ADU design/builder, the owner was both personally aghast and professionally concerned about his business prospects:
“Wow, we were expecting an increases but that is indeed absolutely without precedence. Sounds like something we need to fight. If this is the case it will immediately put a stop to detached ADU’s being built at all. (At least with permits). We will not be able to work with clients and not inform them of how much their taxes will increase. We have two detached in the pipeline right now”
In the 3rd example, the taxes increased by $3,488.77/year, a 358% tax increase. His reaction was this:
“I really appreciate paying taxes especially towards schools and infrastructure but I also feel they should be fair and don’t like surprises. When you live in a house for 10 years and get used to paying a certain amount for taxes. I was really shaken by the tax. Like wrecking a brand new car. At $4,800 its almost 4 times higher than my previous cost. More money than anyone I know pays for property taxes.”
When you consider that most people are building ADUs largely as a means to develop a good source of passive rental income, you’ll quickly come to understand why this radical new tax calculation will deflate a rational homeowner’s motivation for building an ADU.
Were You Adversely Impacted by This?
If you thought this issue was complicated before, you will be amazed by how complex its going to get before this post is over. Sorry, but I warned you.
The county is only applying to this new interpretation to detached ADUs. Because of Measure 50 tax law, put into law in 1997, the County has decided to only “re-MAV” properties with detached ADUs (garage conversion ADUs and detached new construction ADUs).
If you add a 2,000 ft addition, that’s no problem. If you a detached bedroom, you’re fine. And, if you attached a structural wall between your ADU to your house or converted a basement to an ADU, no worries. But, if you added a detached ADU anytime in the last two years…surprise! Watch out for the tax wrecking ball that may have just ruined your life. Surprise!!
Here’s how they’re justifying the unilateral move to penalize detached ADU owners. The City of Portland only started allowing detached ADUs in 1998, which is one year after Measure 50 passed in 1997. Before 1997, basement and attached ADUs were allowed. But, the city’s design code regulations changed over time to allow for people to have detached ADUs starting in 1998. So, suddenly, and without any public warning, 18 years after detached ADUs were first allowed in Portland, the County tax directors have unilaterally decided to “re-MAV” the property, claiming that Portland instituted a “zoning change” and that Measure 50 requires them to re-MAV the property. More on “re-zoning” later.
To find out whether and by how much you were impacted, you can find your new property tax bill by visiting http://www.multcoproptax.org and clicking on “guest”. Type in your address eg. “100 N. Example”. Leave off “st” or “ave” from the address. Once in, click the “Tax Summary” tab, then click the hyperlink “click to view tax bill”. That’s where the new tax records can be viewed.
If you’re trying to figure out what the tax impacts would be on your property if you were to add an ADU under this new formula, take your RMV. Then, add $100,000 to that or whatever you think your ADU value would add to your property to get the new RMV. Then, multiply that new RMV by the CPR (0.59411) and then multiply that again by the tax rate (0.02365). Or, just multiply the new RMV by 0.014051.
So, if your RMV was $300K, just take $400,000 x 0.014051= $5,620.
$5,620 would be your new property tax.
What Does “re-MAV” Mean, Anyway?
In the past, the County treated all ADUs just like they treated all other property “improvements”. They would simply take the previous “Maximum Assessed Value”, then add on the value of the additional improvements (eg $100K), established by taking the RMV of the addition, applying the CPR (~0.59411) coefficient to it. They’d establish a new “Maximum Assessed Value” by adding the previously established MAV and the MAV of the additional improvements ($59,411), and they’d apply the 0.02365 property tax rate to it ($59,411 x 0.02365=$1,405.07). This is the formula that is used for all “improvements”. Property taxes would go up roughly by that amount ($1,405.07).
“Re-MAV” means that the county will take the current Real Market Value (RMV) of your property, which consists of the land, the ADU structure, and the primary structure, and base the new year’s taxes on this RMV. They will multiply the RMV by the Changed Property Ratio (CPR) of ~0.59411 to establish the Maximum Assessed Value (MAV). The property tax rate is directly tied to the MAV via a property tax rate-which this year, is 0.02365. So, if anyone looks at their tax bill, and multiplies the 0.02365 property rate by their MAV, that’s what their property tax is this year.
Re-MAVing means that the County will increase the MAV basis on which the taxes are levied from the values originally established in 1997, to a basis established by the current RMV of the property. To put it another way, if your property value has increased by more than 3%/year since 1997, you don’t want your property to be re-MAVed.
This year, they’ve cherry-picked detached ADUs to teach them a lesson. This sneaky re-MAV that the tax directors have applied, is the metaphoric equivalent to beating detached ADUs down with metal-spiked cane.
The Commonly Used Method for Increasing the Property Taxes after Adding an ADU
Here is an example of the tax impacts on a detached ADU
from the ADU Tour in 2014.
Note that in 2013, the “improvements” value increase from went up by $113,130-a normal, justifiable increase. Their “RMV” went up accordingly from $223,350 to $352,480.
Under the common “improvement” taxing method, their “MAV” increased by $69,340 to $120,530. If the property had been re-MAVed under the new crazy method, the MAV would have gone up to $209,411.89 [$352,480 (RMV) x by of 0.59411 (CPR)]
Look at the relationship between the RMV and the MAV in all previous years versus this year. For numbers geeks, the numeric relationship between the MAV and the RMV from this 2014 tax bill is 0.342.
This indicates that the CPR was not applied to the whole RMV in this older ADU. Instead, the CPR was was only historically applied to the ADU “improvement” portion. Till this year, detached ADUs were simply been considered “improvements”.
If their property were re-MAVed such as they are being re-MAVed this year, their new tax would have been approximately $4,952.59, instead of their actual new tax 2014 amount of $2,908.77.
Now, let’s look compare that to Example 1, from above–the one whose taxes increased to $7,286.15
In contrast, the numeric relationship between the MAVs and the RMVs from all the 2015 tax bills with detached ADUs is 0.594. In the case of Example 1, $308,120/$518,640= 0.594.
0.594 is the Changed Property Ratio number. But, instead of just applying that CPR coefficient to what you’ve CHANGED ON YOUR PROPERTY, they’re suddenly applying it things YOU MAY NOT HAVE EVER CHANGED ON YOUR PROPERTY, such as your PRIMARY HOUSE and your LAND.
If the common method that Multnomah County used before this year had been applied, Example 1’s taxes would have increased from $1,225.14 to $4,085 instead of increasing to $7,286.15.
So, if you built a detached ADU and your taxes increased by more than $2K/year, you should still be pissed off, but whatever, right? Your taxes may have gone up by that much anyway.
If your taxes increased by more than $3K/year, you should be outraged. No ADU property taxes have ever gone up by $3K before this year as far as I can tell.
If your taxes increased by more than $4K or more like in Examples 1 and 2 above, you should raise hell. Your financial planning has officially been screwed up for life by your County, without any notice, explanation, or apology.
Fortunately, the Multnomah County Division of Assessment, Recording & Taxation is not very well positioned to defend their rogue position in an appeal process. To make sure that I wasn’t going crazy when I first heard whispers about this change, six weeks ago, well before the taxes were posted, I reached out to Multnomah’s parent agency, the Property Tax Division in the Oregon Department of Revenue, for a legal determination on whether the County was allowed to do this.
And, predictably, the state’s interpretation was totally different from the County’s. They spent a month reviewing the issue at hand, and here’s their finding on the matter, which they shared with the County tax directors by no later than October 12th, 2015.
Hello Mr. Peterson,
The issue regarding accessory dwelling units (ADUs) in Multnomah County involves interpreting the phrase “rezoned and used consistently with the rezoning” in Article XI, section 11(1)(c)(C) of the Oregon Constitution.1 The department interprets the term “rezoning” as a formal change in the legally allowable uses of property under the zoning laws, as determined by a governing body with zoning authority. The change can refer either to a change in the zoning designation applicable to a particular property, or a change in the uses permitted under that designation.
In order to create an exception event and the recalculation of maximum assessed value (MAV), the property must be both “rezoned” and also “used consistently with the rezoning.” Because “rezoning” refers to a change in the zoning laws governing the property, we have interpreted “used consistently with the rezoning” to refer to a use that is newly permitted under the rezoning, as opposed to a use that was permitted under the prior zoning.
Prior to the adoption of Measure 50 in 1997, which established Article XI, section 11 of the Oregon Constitution, most of the city of Portland did not allow detached ADUs. The city allowed houses to have an accessory rental unit (ARU), which was “an additional and auxiliary living unit in an existing house.” PCC 33.205.020 (1997). For the most part, ARUs could be created only through internal conversion of an existing house, and could not be created in detached structures.
In February of 1998 the city adopted Ordinance No. 171879, which permitted detached ADUs in all residential zones, except in certain attached houses. Before 1998, most owners of residential property in Portland could not construct detached ADUs on their land, or convert existing detached structures into ADUs. After the passage of Ordinance No. 171879, they could do so. The city amended its zoning laws to permit a use of property that was not previously permitted in residential zones; therefore, property in those zones was “rezoned.” Once a homeowner uses that property to construct a new ADU, or convert an existing detached structure to an ADU, the property is “used consistently with the rezoning,” and the county assessor is required to capture exception value for whatever portion of the property is “used” consistently with the rezoning.
What portion of the property is used consistently with the rezoning is a fact-dependent question. Regardless of the “rezoned and used consistently with the rezoning” exception, an adjustment to MAV is made for the new construction as “new property” under Article XI, section 11(1)(c)(A). The existing dwelling typically would not be used to site or construct the new dwelling. Therefore, under this interpretation, only the land, which is now used to support two structures with living units instead of one, is affected by the zone change and use consistent with the rezoning.
Our interpretation isn’t codified in statute or rule. Other interpretations may exist and may be legally sound. We would likely engage our formal rulemaking process if we discovered inconsistency among counties in the assessment of properties in the same fact situation. We haven’t seen such a problem relative to the situation you’ve asked us about, but will continue to monitor the issue for potential inconsistency among the counties.
I hope this information is helpful. Please let me know if you have more questions or concerns.
1 Refer to Article XI, section 11(1), Oregon Constitution (https://www.oregonlegislature.gov/bills_laws/Pages/OrConst.aspx), ORS 308.146(3), 308.156 (https://www.oregonlegislature.gov/bills_laws/lawsstatutes/2013ors308.html), and OAR 150-308.156(5), 150-308.156(5)-(B) (http://arcweb.sos.state.or.us/pages/rules/oars_100/oar_150/150_308.html),
Their official finding is a bit a dense to understand if you’re not already steeped in this issue, but in summary, they’re stating that when an ADU is added, the land value can be re-MAVed, but that the main house should not be re-MAVed. And, this minor change in interpretation would make a lot of difference for you, if you’ve been screwed over by the County.
This finding is certainly far more reasonable than that of Multnomah County. This interpretive change results in a tax increase that lies somewhere between what has been done in previous years (adding the value of ADUs as “improvements”), and what the county is doing this year (re-MAVing the whole property). Given that Multnomah County’s job is to implement state statute, the fact they have deliberately strayed from the state’s interpretation in a way that causes permanent financial damage to its citizens, should be a cause of great concern to anyone who lives in Multnomah County.
The good news is that in the end, an appeal should ultimately make its way to the State Department of Revenue, and the Department of Revenue’s interpretation should overrule the County’s interpretation. This will presumably force the County to correct property taxes where they were calculated in error.
But, interestingly, even the State’s carefully constructed findings aren’t in alignment with all of the other counties in Oregon in terms of how they treat tax increases on properties with detached ADUs. To do some due diligence for the benefit of detached ADU owners in Multnomah County, I reached out to three other counties in Oregon to see how they taxed properties with detached ADUs.
And, unsurprisingly, they use the exact same method to assess and increase the taxes on properties with ADUs that Multnomah County had used up till this year. That is to say, they all interpret detached ADUs as “improvements”, and raise the taxes proportionally, based on the additional value that has been added to the property. This is the way it should be done, and has always been done in Multnomah County up till this year.
I’m including here the written explanations below of how taxes are increased in three other counties throughout Oregon. Incidentally, it was so refreshing to receive clear explanations in plain English of what methods they use. Multnomah’s County Tax and Assessment Division directors have been opaque and misleading throughout this process, claiming that they’ve always calculated taxes this way. Despite numerous requests to explain their methodology in writing, they haven’t done so, instead only responding with cryptic references to statutes and avoiding answers to the simple and direct questions I posed.
Response from County #1
We can only assess the new property value being added. Anything that was previously assessed is protected by the appraisal/assessment that occurred when the primary structure(s), land, etc. were first placed on the tax roll.
Also, once the new property is added and it is the first tax year that new value is recognized, if you believe our new value is too high that year is the only year in which you can appeal the value to reduce the additional MAV, otherwise it gets locked in and grows by 3% annually.
Response from County #2
Thank you for your email. As you may know, by statute there are limitations to when changes can be made to the maximum assessed value. Generally speaking, the value added for the ADU would be considered ‘exception’ value and there would be an addition to the maximum assessed value. ( not 100% of its value gets added to the MAV- there is a calculation that determines that each year )
In the scenario you describe below, I can see a couple ways a change to your maximum assessed value could occur. 1) the addition of a new bldg. & 2) if there were changes made to the existing improvements that are not currently reflected on the tax roll – potentially value could be added to the maximum assessed value. However, we do not establish new maximum assessed value for the entire property based on a new real market value.
Response from County #3
Typically, we will add the contributory real market value associated with the ADU and per statute, we will add a portion of that to the existing Maximum assessed value (the portion added as a percentage changes yearly). Generally, if there are other items noted during the inspection, such as garden sheds, pavers, asphalt, decks, additions, etc. that we do not have on our records, we will add those at that time as well. I have included a couple of the statutes that may help you too.
I hope this helps.
So, while the State’s interpretation is more reasonable that Multnomah County’s rogue interpretation, it nonetheless, seems to run totally afoul of how counties in Oregon are commonly interpreting Measure 50.
And, just to be sure that I was comparing apples to apples, I confirmed that these were examples from locations where detached ADUs have only been allowed since after Measure 50 passed. Just as in Multnomah County, detached ADUs have only been allowed by right in these locations since after Measure 50 passed. But, unlike Multnomah County, for taxing purposes, their tax directors treat detached ADUs just like any other improvement to a property.
What has changed on properties in Portland that have built detached ADUs since Measure 50 is not the zoning, nor the allowable uses of the property. In other words, these properties weren’t “rezoned” from Residential zoning to Commercial zoning, which SHOULD trigger a re-MAV. Rather, what has changed is the rules surround the design of the types of the structures on a property.
Here’s an analogy. Imagine you could only store a bike in your basement under old zoning rules back in 1991. Then, in 1998, the City said, actually, now you can now store your bike in sheds outside. Then you built that bike shed, and moved your bike to it instead of storing your bike in the basement. You could always have stored a bike on your property, but now you can store it the shed that you built. I bet people who then built those bike sheds would be a pissed off if their taxes then went up by $6,061/year because the County said that the owners had taken advantage of a “rezoning”.
This is analogous to the type of code change that has occurred to the rules regarding the allowance of detached structures to be used as structural forms in which an “ADU” can be hosted. There hasn’t been any change in density or intensity of use of the residential property. Multnomah County had the audacity to classify this as a “zoning” change. It is laughable, but certainly not defensible.
And, while the State’s more tempered interpretation above could be rationalized, all other counties appear to be doing exactly what any rational actor would assume that a taxing authority should do after an ADU is added: they’re increasing taxes based on the improvements made. It’s pretty simple, really.
Methods Used to Calculate Tax Increases and Impacts
Before I continue to the final section of this post, I want to clearly explain who is impacted, and who isn’t. This change in taxing methodology is only being applied to those who developed detached ADUs (new construction or garage conversions). It is not being applied to those who developed basement ADUs or attached ADUs.
The reason for this difference in tax treatment pertains to whether this type of structure was allowed to be used as an ADU on a property prior to the passing of Measure 50. That’s right. They’re reaching back to a statute from 1997 and just this year, 2015, eighteen years since detached ADUs have been allowed in Portland, are determining that they “must” increase property taxes by re-MAVing to follow Measure 50 statute.
Why now? I have no idea. No one does, except for the directors of Multnomah’s County Tax and Assessment division.
The formula for how taxes are calculated is confusing. You can try to go to the County for the authoritative calculation of what the impact of an ADU will be. But, after contacting the County several times, I’ve found that their own staff haven’t fully comprehended these changes either.
When I’ve called three assessors over the last two months, some staff will explain that they just add on the assessed value of the ADU as an improvement and tax accordingly, just like they would treat any other addition to a property. I wish this were the case, simple tax staff man, but apparently it isn’t the case anymore. Some of the staff just haven’t gotten the memo. Or perhaps they got the memo, but it was so outlandish that they misunderstood what the County tax directors were suddenly imposing on its own citizens.
I’ve found that they won’t put their calculations or methods in writing. There doesn’t appear to be a way to be afforded proof of what crazy formula they’d apply, nor to confirm that there is internal consistency among their own staff.
There appears to be a major disparity between what the rogue directors have now instituted as policy, and what the staff level appraisers understood to be the common method for calculating taxes for treating detached ADUs as improvements.
The irony here is that this tax increase will do a couple things that work against the County’s own policy goals:
1-It will actually decrease detached ADU development so much that the County will receive less overall tax revenue than it would if they had just used the common “improvements” tax increase calculations they’d always used in the past.
2-It’ll cause more ADUs to be developed “underground” without permits, much like City’s expensive System Development Charges historically forced ADUs underground before the 2010 SDC waiver went into effect. The SDC waiver dramatically spurred development of permitted ADUs. This change in tax policy is contradictory of the County’s responsibility to foster and regulate safe and healthy buildings for its citizens.
What Will Be Done to Fix This?
So, what is going to be done about this? Isn’t the City going to step in?
Actually, this is not a City issue. The City of Portland has no property tax authority, and therefor, this change was not up to them, and it’s truly not in their lane of regulatory authority. It’s not even in the lane of authority for City Council or even the Mayor.
And to be super clear about my stance on this, the City of Portland has done everything right regarding supporting ADU development. Their ADU zoning code is sound, reasonable, and generally has been in true alignment with civic interests and goals. Regarding Multnomah’s new rogue tax method, you will likely find that City’s planning, zoning, and building staff will be as confused and surprised by these dramatic property tax changes as the rest of Portland’s effected citizens are.
Although the City has nothing to do with this tax policy change, it probably wouldn’t hurt for the City’s politically elected officials to tell the County to stop screwing with a critical piece of their City’s future housing stock like it was a piece of meaningless gutter trash.
It’s important to understand to target your anger to the responsible agency here–and the agency responsible for these outlandish changes is Multnomah’s County Division of Assessment, Recording & Taxation. And, furthermore, it’s really only the people in charge of this decision who should be held responsible for this insane and underhanded change to their tax policy.
For better or worse, it’s really up to individual citizens who have been adversely impacted, to take it upon themselves to appeal. And, I would definitely suggest doing just that.
Appeal this up to the highest court that will hear this case. My hope is this blog post includes the basis for the information that you need to successfully appeal your property tax increase to the State level, where more rational regulators are awaiting your call for just treatment. They won’t come to you. You have to make your way to them via an appeal.
An appeal should ultimately force Multnomah County to step back in alignment with the method that every other County uses to increase taxes after the development of a detached ADU. Even if the State’s method is applied instead of the common method used by other Counties across Oregon, it will still help you get your tax rate back down to a more reasonable increase.
Personally, I am not directly impacted by these changes, so I can’t appeal. But, I plan to convene a meeting among impacted owners. It may serve the interest of those affected to meet in person to strategize a common approach in person. If you believe that you were adversely impacted, please fill out this Google Form so that we can start some grassroots coordination of these efforts.
Depending on the actions taken by the County officials at this time, it is quite possible that this will result in a mass tort by affected homeowners. If you know of astute property tax lawyers who may be interested in helping fight for a just cause, please have them contact me directly.
And, if you were adversely impacted by this, please put a comment below for others to see.. Are you outraged? Say so.
You’re not alone.
There is power in numbers. The county tax directors would be happy to brush this issue under the rug as one that only impacts a handful of angry peasants. But, some of those peasants happen to be people I personally know, and they’re getting totally screwed, and it isn’t right. Some of those peasants’ carefully constructed retirement strategies were just totally undermined. And some of those people may have to sell their homes.
And the 20% of ADUs that are rented for zero or far below market rates, were just delivered a clear message that providing an ADU for their aging granny or disabled adult child, is deserving of a severe annual property tax treatment that they should endure forever.
Don’t roll over and stand for it. It’s not right and you have the capacity to deal with this issue head on.
I predict that moving forward, the County will start to back-peddle on this issue, or will be told to back-peddle, and they should.
Multnomah County Division of Assessment, Recording & Taxation directors will explain that this interpretation will actually help some ADU owners. It doesn’t. That’s a lie. I’ve visited over 50 homes where owners are considering building a detached ADU. And, I can tell you, this new taxing calculation totally screws over every one of those homeowners. In a Multnomah County tax cubicle vacuum, absent from any actual ADU development trends happening on the ground, they will say that this tax change could lower some people’s taxes. But, in reality, when you do the math on properties where people are actually considering building ADUs, it screws over every one of them. It is damaging to every prospective detached ADU site I’ve visited in the last two months. It screws them over just like it screws over the owners in the examples shown at the beginning of this post.
The tax directors have no idea of how damaging this policy is for the future of housing in Portland. They are acting completely out of alignment with the rest of the State and their parent agency, the State Department of Revenue, and are obfuscating facts behind these policy changes. They are falsely claiming that this is how they’ve always re-calculated taxes for properties with ADUs. This is patently false. See my example of how ADUs have been treated as “improvements” in the past.
Is that evidence not solid evidence enough? I challenge the County to identify a single example of where the addition of a detached ADU has increased property taxes by more than $3K before this year. Find one example. Please. If the County directors are telling the truth, and this formula has always been used, then plenty of properties with detached ADUs would have experienced a $3K tax increase in previous years.
No, they won’t be able to find a single example of such an increase prior to this year, let alone an increase of $4K, $5K, or $6K. Why? Because this method has never been used before.
Is that not solid evidence enough? Then, do what I also did. Ask any staff-level assessor and they will tell you that this is a new formula for the County as of this year.
It is beyond me to understand why the directors are making the claim that this is the way they’ve always conducted business. It’s a new internal policy, and that’s that.
But, more importantly than exposing the lies being perpetuated by the County Multnomah County Division of Assessment, Recording & Taxation directors, we need to stand up for a just resolution and uniform financial restitution for every citizen who is being adversely impacted by this change.
The Chilling Effect
Unfortunately, this perverse new tax calculation will put a chilling effect on detached ADU development until the issue is fully resolved by the County’s elected officials, or is corrected by the State Department of Revenue in a legal rulemaking process which could take years.
Or, thinking optimistically, perhaps there’s still time to put a stop to this madness before property taxes come due. Perhaps the County’s elected officials will come forward to intervene before the tax letters are officially sent out or at least before it’s too late for them to stop the impending detached ADU-killing-tidalwave that has now crested.
I don’t know where elected officials in Multnomah County stand on this issue. For all I know, they still have no idea that their tax staff directors went rogue and disregarded the state’s own interpretation of the state’s own tax code. I’ll leave it to the elected officials to determine whether the responsible county tax directors responsible for this decision should be permitted to retain their current positions of huge authority.
But, if the County proceeds with this outlandish interpretation, elected County officials will have to awkwardly attempt to justify why their highest staff are entitled to ignore the State’s statutory guidance on this matter.
It is also likely that the Multnomah County Division of Assessment, Recording & Taxation will ultimately spend thousands of hours correcting these mistakes, which will make for a very miserable workload.
I bet many of you readers who were adversely impacted by this ADU tax change would have far preferred to have a dental surgery for $6,061 than to suffer through what the County has now done to you. At least there would be a point to dental surgery. Unchecked, this tax change helps no one really, not even the County. And for those impacted the worst, it will slowly pick away at your pocket book over the years like unmitigated tooth decay.
I don’t believe that elected County officials are responsible for this mistake, but unfortunately for them, they are politically on the hook to help fix it.
What To Do About it
If you were adversely impacted by these changes (a $2K+ tax increase), reach out to the elected officials at the following addresses and request an explanation. The elected officials need to understand that citizens won’t stand for this irrational punitive tax treatment for those who opted to develop a little flat for granny out back.
Deborah Kafoury, Chair
Term ends: December 2018
Jules Bailey, District 1
Term ends: December 2016
Loretta Smith, District 2
Term ends: December 2018
Judy Shiprack, District 3
Term ends: December 2016
Diane McKeel, District 4
Term ends: December 2016
Rod Underhill, District Attorney
Term ends: December 2016