Property values down but taxes up

Here in Oregon we are going to get a lot of static when property tax statements come out in November. How can it be possible that property taxes will go up when house values have gone down? This is because in about 1996 Oregon voters passed a ballot measure that restricted property taxes to an increase of not more than 3% per year. (There are exceptions, which I will address below). Yet in the time since that annual restriction became law, we have had many years of double digit appreciation. It has only been in the last two years that property values have gone down. But prior to that, in the time since the law passed, values easily doubled. So when you get your property tax statement, you will see two valuations. One is the taxable value. That is the one with the 3% annual restriciton. The other is the estimated market value. That is the one that will have dropped. And until the market value drops below the taxable value, you won't see your taxes go down. We would have to have much more loss in property values, say in the range of 50%, to get anywhere near having property taxes go down. No, taxes are not affected by the sale of a house. The 3% restriction stays with the property and is transferred to the new owner. The exceptions? If you do significant remodeling that involves taking out permits. If you gut a house and remodel it with all new features, or put on a big addition, the local tax assessor can start from zero and totally reassess your home. The other exception is any special taxes that are passed by local voters such as initiatives to improve schools or parks. If your town elects to raise $80,000,000 to rebuild the two High Schools, like my town did about 8 years ago, that will have a direct impact on your taxes. It's a screwy system. It favors areas of town that had low values at the time that the initiative was passed in the mid 1990's. It also works against new homes who start their tax assessed basis at current values. But taxes are like that. Some benefit and some don't. I doubt that there is any such thing as perfect property taxes. I will be elaborating on this subject on my local blog, www.propertyblotter.com, the week on October 7th.