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Commissioner Loretta Smith from Multnomah County, District 2 stepped up last week as the first of Multnomah County Commissioners to speak out against the unfair tax re-MAV issue that has been plaguing detached ADU owners (and aspiring ADU owners) in Portland since tax bills were delivered to their mailboxes a month ago.
Thank you Commissioner Smith for helping to bring a voice of reason to this debacle.
Next, you’ll need to bring that voice to the State Department of Revenue, who are advising the Multnomah’s sneaky tax assessor to steal from the pockets of Multnomah County ADU owners, but just to steal a little less.
What the Department of Revenue Got Wrong
On Friday, November 20th, The Department of Revenue (DoR) recognized that Multnomah County’s tax assessor was treating its citizens unfairly, and, as reported in the Oregonian on November 20th, advised Multnomah County to rescind its policy and send out revised tax bills. This sounds like a victory, right?
The reMAV approach that the State DoR is advising still results in drastically increased tax bills than what citizens were promised by County tax assessors. The reMAV approach is not grounded in a Oregon Constitutional laws. This post will attempt to explain this break of public trust in detail.
In advising Mulnomah County, DoR relied on a very flawed interpretation of “rezoning” (first put forward on October 12th, 2015), which still results in re-MAVing the property (but not the primary structure).
At the time when DoR issued this novel interpretation in reaction to Multnomah County’s tax assessor’s brazen discretionary interpretation of the law, DoR probably thought they were suggesting a happy ‘compromise’ approach. But, DoR’s review of this particular issue was seemingly conducted without an appreciation or understanding of the scope or plausible impacts of their broad new reinterpretation.
Said another way, to any tax assessors across other counties in Oregon besides Multnomah County, DoR’s property re-MAV advice to Multnomah County would be considered a radical change to the tax policy and taxing methodology. All other counties’ tax assessors treat ADUs as ‘improvements’ just like Multnomah County had done till 2015, not triggering a re-MAV. Other tax assessors would never dare to interpret the Constitution in this manner with direct orders from DoR.
DoR’s broad interpretation of “rezoning” used to justify the re-MAV is actually more damaging to all of Oregon’s counties than Multnomah’s county-limited interpretation ever could have been.
DoR is advising Multnomah to apply an extremely broad definition of the word “rezoning”.
Here’s a look at the Measure 50 regulatory language from ORS 308.156(2) regarding the term “rezoning“. We’ll examine each of these definitions of “rezoning” in detail. First, this is the paragrapm from Oregon Administrative Rule (OAR) and the Oregon Revised Statute (ORS) Oregon Adminstrative Rule OAR Section 150-308.156(5)-(B)
Rezoned Property — Calculating Maximum Assessed Value (MAV)
(1) For purposes of determining MAV under ORS 308.142 to 308.166:
(a) “Rezoned” means on or after July 1, 1995, the governmental body that regulates zoning:
(A) Made a change in the zone designation of the property on the zoning map;
(B) Made a change in one or more conditions or restrictions affecting the authorized uses of the property in the zone that is applicable to the property; or
(C) Made any other change in the authorized uses of the property.
“REZONING” means when a property is “REZONED”
An example of rezoning is when a property is turned from “residential” (eg. R5) to Multifamily (R1) or, multifamily (R1) to commercial (CG). There has been no rezoning for properties that have added detached ADUs.
These residential properties have not changed their zoning. They have not been REZONED.
These have been, are, and will likely always be, zoned residential.
No planning or zoning officials would claim that there has been a “rezoning”. The constitution should be read literally in this case – only an actual re-zoning could trigger a re-MAV.
I don’t know how to communicate this more clearly. But, I can repeat it using different fonts if that will help.
These properties have not been REZONED.
These properties have not been REZONED.
These properties have not been REZONED.
I’m certain that DoR’s novel re-interpretation of the term “rezoning” was not the understanding or intent of those who voted on the passage of Measure 50 in 1997- a law apparently written with the explicit intention of keeping property taxes from ballooning.
An actual “rezoning” should be the first basis for DoR claiming that a property has been “rezoned”. What definition of the term “rezoning” is the State Department of Revenue conjuring here? Anything that falls very short of an all-out rezoning should be not be categorized as one for the purposes of Measure 50. Voters who voted for Measure 50 probably read the law in a straight forward manner, and for DoR to reinterpret “rezoning” in a such a different way than it was originally intended to be interpreted is a break of public trust.
Perhaps the State Department of Revenue would realize, “Ok, the property was not ‘rezoned’, but the City has allowed a ‘new use’.” That would be great it if were true, but it isn’t.
I’m now referring to the 2nd clause:
(B) Made a change in one or more conditions or restrictions affecting the authorized uses of the property in the zone that is applicable to the property;
The City has allowed ADUs on residential properties since well before Measure 50, which was put into law in 1997. The earliest documented regulatory allowance of ADUs was in 1991 (see the APPENDIX – REGULATORY HISTORY ACCESSORY STRUCTURES on page 94 of the Accessory Structure Code Update document).
So, while there has been a change in the size, scale, look and feel, design, and structural forms that can house an ADU, the “use” of the residential property has not changed.
Let’s try the font trick again (it seemed to work the first time).
The authorized use of the residential property has not changed.
The authorized use of the residential property has not changed.
The authorized use of the residential property has not changed.
If fact, there’s explicit language in Portland’s ADU program guide (p.4) about how properties with ADUs have no impact on how a property in a residential zone can be used.
“The total number of residents that can live in both units (the ADU and the primary house) is limited to the total allowed for a household. Under the Zoning Code, a household is defined as follows: Household. One or more persons related by blood, marriage, legal adoption or guardianship, plus not more than 5 additional persons, who live together in one dwelling unit; or one or more handicapped persons as defined in the Fair Housing Amendments Act of 1988, plus not more than 5 additional persons, who live together in one dwelling unit.”
Changes to the size, scale, look and feel, design, and structural forms on a residential property happen all the time with good zoning codes. For clarity, we’ll refer to these changes as “regulatory design changes”.
Since Measure 50 passed, there have been more than a hundred regulatory design changes in Portland alone. If DoR is referring to “rezoning” as one of these many regulatory design changes that occur from year to year in every city, town and county, where and how exactly is DoR going to draw the line in the sand on which of those regulatory design changes can suddenly be classified as a “rezoning”?
What about the all of the regulatory design changes changes that have occurred in the City of Salem, Oregon since the passage of Measure 50 in 1997? For example, a wholesale zoning code update was adopted by City of Salem’s in June of 2014. There are regulatory design changes that effect where and how structures can be placed on properties all the time.
If DoR is going to claim that the regulatory design changes that allowed for building a ‘detached ADU’ instead an ‘attached ADU’ was a “rezoning”, then they are are broadening the use the term “rezoning” far beyond its literal or common meaning. DoR’s interpration is not even remotely close to what was intended by this clause.
Did they build fences on their property since 1997? A shed? A garage? Build an addition? Add a dormer? Build a deck? A trellis? Plant a certain kind of tree? Cut down a certain kind of tree? Add a rain barrel? Add solar panels? These are all common property improvements that people make that very likely have had regulatory design changes since Measure 50 passed in 1997.
If someone builds a fence that is 8′ high instead of 6′ high, because their city told them they could do so beginning in 1998, would their property be reMAVed too?
It was one of types these regulatory design changes in 1998, which allowed detached ADUs instead of only allowing attached ADUs. So, which of these other myriads of minor regulatory design changes constitutes a “rezoning”?
Will the Department of Revenue officials start to enforce this broad property tax interpretation of “rezoning” within Marion County (where Salem, Oregon is located), forcing a re-MAV of their own employee’s properties?
Now, multiply 100 regulatory design changes like those that have occurred in Portland since Measure 50, across all of the cities and towns in Oregon, and DoR has a administrative nightmare on its hands.
If they want to advise Multnomah County to re-MAV a property with this broad new re-interpretation of “rezoning”, then logically, they would also have to advise counties to re-MAV properties if there were any improvements on their property that fall under this hugely broad and patch-worked category of confusing regulatory design changes that have occurred since Measure 50.
Without much greater discretion from DoR about where the arbitrary distinction is being drawn that constitutes a “rezoning”, this overreaching interpretation could stop anyone from wanting to do any legal improvements on their property for fear that their County may also opt to suddenly classify a minor improvement such as adding an 8ft fence to a proeprty as a “rezoning”, and re-MAV the property.
If the rules of the game are suddenly redefined in such that any form of physical ‘improvement’ made to a property for which there has been a regulatory design change since Measure 50, can suddenly and arbitrarily be classified as a “rezoning” by a County, we will see a lot of illegal construction and remodeling across homes in Oregon.
Here is a list of the zoning code updates that Portland alone has made. Each of this update packages contains tens to hundreds of regulatory design changes.
Steve Anderson, a property tax appeal specialist with 1st Class Properties, called the following counties to investigate how they were treating ADUs. None of them were re-MAVing the land or the primary house on properties with ADUs.
|Counties Not Being Told to Re-MAV||Counties Being Told to Re-MAV|
The State Department of Revenue is knowingly advising Multnomah County to do something that no other county is doing. Advising Multnomah to re-MAV its properties with detached ADU is not fair, given that the DoR has not done any open, public rule on this interpretation. This kind of “special treatment” for Multnomah County is not acceptable. Government should attempt to apply a uniform approach, and not single out a particular jurisdiction.
If DoR reaches out and tells all other counties that they should also follow this practice to change the 2015 tax roll, DoR will get confused questions and pushback by baffled tax assessors who treat ADUs as improvements, such as “But, there’s been no change in use” and “We can’t re-MAV a property that hasn’t changed its zoning”. Sending out a directive like this will cause chaos and confusion, and lend credence to the incredibly poor logic that Multnomah County’s tax assessors have been using that has caused such a stir here in Portland. Is this a battle that DoR wants to engage in with constituents across the whole state?
City of Portland and Multnomah County officials need to call out the DoR on this “special treatment”. We can’t stand by and let our City or County be treated like this, especially in the middle of an affordable housing crisis. Here are some questions you can ask:
There has been a far-reaching consensus that the correct course of action was to compel Multnomah County’s tax assessors to rescind their awful tax policy change. Oregon Department of Revenue’s is advising Multnomah to keep its same egregious interpretation of “rezoning” but to use a revised taxing method. Though DoR offers a more generous taxing methodology than Multnomah County’s methodology, the interpretation of the basis for re-MAVing is still utterly flawed at its legal core.
Back on October 12th, 2015, DoR probably thought they were striking a ‘compromise’. In August and September, I told DoR that the “improvement” method was the standard approach that Multnomah had always used and should be using for ADUs. But during this same period, Multnomah County’s tax assessors were lying to everyone (County officials, their own communications staff, me, City officials, the public) about whether they had made any tax policy change on detached ADUs at all in 2015. Therefor, it is fair to assume that the tax assessor was also telling DoR that re-MAving the entire property, including the primary house. The assessor was likely explaining that this was the correct method that they’d been doing all along.
In the Portland Tribune article on October 22nd, Multnomah County’s chief appraiser “insisted…that the county hasn’t treated ADUs any differently” since Measure 50, instead, shifting any blame to the City for promoting the construction of ADUs.
Sally Brown, Multnomah County’s chief appraiser, insisted to the Portland Tribune last month that the county hasn’t treated ADUs any differently since voters approved two property tax-limitation measures in 1996 and 1997. Since then, Brown said, the county has been obliged under state law and administrative rules to revise a property’s tax assessment when there is a new use made possible, such as via a zone change.
“What’s new,” she said, “is the push by the city and the developers to promote the construction of ADUs.”
Later in that same article, the tax assessor said that the ‘DoR wouldn’t force the county to change how it’s treating ADUs’.
Multnomah County Assessor Randy Walruff said the state agency’s determination won’t force the county to change how it’s treating ADUs.
“They have decided not to take action with Multnomah County and telling us we’re doing it wrong,” Walruff said.
Walruff wouldn’t concede the county is adopting a new policy in the 2015-16 year, but did depict the county’s approach as evolving. After a meeting with a city planner two and a half months ago, Walruff said, county assessors learned the city is being more liberal about allowing ADUs than previously thought. Part of the problem, he said, is the city is not technically making a zone change to allow ADUs, but is changing allowable uses of single-family lots.”
The City wasn’t “changing allowable uses of single-family lots”, as the tax assessor contended. What is this change in allowable use of which he speaks? This seems to be the issue on which DoR’s interpretation hinges. However, there aren’t any allowable changes in use when adding an ADU to a property.
Finally, after enough media scrutiny and public pressure, the tax assessor caved and admitted in an Oregonian article published on November 4th, that they had make a change to their tax policy.
Walruff acknowledged that his department may have been incorrectly assessing properties with detached accessory units until this year. But the sudden spike in their construction caused his employees to take notice, he said.
The article provided room for the assessor to explain his reasoning.
Walruff’s explanation for the tax hikes is that the county didn’t recognize until this year that the booming market for new detached accessory units was caused in part by a zoning change Portland City Hall made in 1998. Before then, only attached accessory units – such as a studio over the garage or a basement apartment – were allowed. (Attached accessory units are unaffected by these tax hikes.)
Due to Multnomah County tax assessors’ brazen lies in August and September about how they had been taxing ADUs, DoR was probably convinced that Multnomah had been using this re-MAV method ever since 1997.
Due to his convincing rhetoric, DoR perhaps also probably did not realize that NO OTHER COUNTIES IN OREGON treat ADUs differently than than they would treat any other property improvement (eg. additions, finishing the basement, detached bedrooms etc). No one had ever suggested treating ADUs or other property improvements as if they were “rezoning” before, so DoR apparently didn’t know how to appropriately deal with this issue.
It would have been good if DoR had done some basic research with other counties before issuing their opinion that properties should be re-MAVed after development of an ADU, but they didn’t. They probably thought were ‘striking a balance’ between Multnomah’s (radical/extreme/outlier) approach and the standard improvement approach. But it was ‘compromise’ made during a time in which they were being fed a false and distorted view of how to properly tax ADUs because of Multnomah’s County tax assessors’ ongoing lies.
With the information laid out in this post, the DoR should correct the course and tell Multnomah’s tax assessor to rescind the re-MAV tax policy altogether this year, and revert to the “improvement method” for detached ADUs that all other counties in Oregon use. Any other action places DoR in the embarrassing position of serving as an accessory to Multnomah’s tax assessors egregious misbehavior.
In the light of day, the Department of Revenue can do a rule making on this if they wish. If the rule making reveals that a re-MAV is the appropriate process for this type of improvement, DoR can then provide guidance to help decipher when, why, and how this rule should be applied in practice.
I guarantee that any attempts at guidance on this matter that leads to re-MAVing will be fraught with legal challenges and nitpicking over arcane regulatory obscura, and fought tooth and nail for years by remodelers, homebuilders, architects, homeowners, cities, and counties across Oregon.
But, at least, using an open rule making process, citizens in Multnomah and beyond would be entitled to fair and just treatment and sense of predictability, rather than having a pie thrown in their face for building affordable housing in their backyard.
We would like fair and uniform treatment afforded to all citizens in all counties in Oregon, including Multnomah’s.
Little Brother Is Watching You Big Brother
Here’s a sample of some of the recent coverage of this story, all of whom are recognizing that Multnomah County citizens are getting screwed.
The City of Portland’s Mayor Hales has now committed to resolving this matter through state legislation, if needed. See minute 11-13 of this clip on KGW’ Straight Talk: Portland Mayor Charlie Hales.
Here’s a supporting quote from an Oregonian article,
“We have to fix this crazy mix up in taxes here. We have the city saying ‘build ADUs’ and the county saying, ‘Gotcha!'” he said. “You have my commitment to work on that problem.”
Thank you Mayor Hales for stepping up.
And thanks again to County Commissioner Loretta Smith (District 2) for stepping up.
Progress is Imminent
“We are evaluating the impact and preparing the changes to individual tax bills. We will be contacting affected property owners over the next few weeks”.
But, we need the DoR to correct its guidance to Multnomah’s tax assessor before they send out modified tax bills to reflect the intention of the constitution, and not to suddenly reinterpret it.
So now, City Commissioners need to step and so do County Commissioners.
And if that doesn’t bring the pressure required to resolve the matter quickly, then State Legislators will need to step up and then the Governor will need to step up.
A final thought for our local and state government officials
There’s been a rush of damaging policies for detached ADUs in Portland in the last few weeks. As if this tax drama weren’t enough stress for the lowly detached ADU, there is another compelling and nuanced local regulation policy story underway regarding a proposed amendment to the Accessory Structure Zoning Code Update, which also targets detached ADUs.
Incidentally, ALL of these proposed design changes in the Accessory Structure Zoning Code Update, could be construed as “rezoning” by Multnomah under the DoR’s new broad reinterpretation of “rezoning”.
Here’s the thing.
Detached ADUs didn’t do anything wrong and they desperately need to have some therapeutic time off to recover from this regulatory barrage. There has not been a deliberate, coordinated approach to undermine detached ADUs. However, both of these current events (the tax debacle, and the 11th hour proposed amendment to the zoning code update) have nonetheless both accidentally targeted a cherished, grassroots form of affordable housing–detached ADUs.
There’s got to be something out there that merits being tackled besides detached ADUs. I don’t know…. coal exporting, climate change, terrorists?