The Portland Alliance Hitting the property tax jackpot

By Michael Cannarella

How can my property taxes, the cost I pay per thousand on the assessed value of my home, be 33 percent higher than my neighbors? This is the story of my investigation into the "Tax Jackpot" enjoyed by neighborhoods across the wealthier areas in Portland each year. But this isn’t just about my neighbors nestled in the hills surrounding the Zoo, but also scattered streets across the West Hills, in the most upscale neighborhoods in Portland.

Who wants to pay higher taxes? This type of question on radio talk shows and by political candidates will light up the phone lines. Needless to say, not many residents call asking to pay higher taxes. But what if you discovered the percentage of property taxes you pay is 33 percent higher than neighbors across the street or on the next block? For the majority of the City of Portland residents, this is exactly the case in the West Hills. While some of us look for great deals on Ebay and Craigslist, this great deal continues each and every year for a few thousand residents.

So why are my assessed rates 33 percent higher than the folks on the next street? A map provided to me by the City of Portland used colors to indicate the "unincorporated areas" outside the city limits. But the neighborhoods were not on the outskirts of the urban growth area or near the suburban fringe. The neighborhoods are nestled up to the downtown Portland area, surrounding the Zoo and high up on Council Crest, cascading down to Raleigh Hills. The average person, driving to and from work each day, has no idea how many times he/she may be passing through Portland each day. In fact, if you drive on Highway 26, just west of the Vista Ridge tunnel, you pass out of and back into Portland at least once, traversing a 10 foot "unincorporated" area. No signs indicate you are leaving the City. Walking the blocks around my neighborhood, I pass into and out of Portland at least six times.

The check I write every November for my property taxes is calculated by several factors: the value of the house and land; when was it purchased; how long has the Measure 5 tax limitation delayed the growth of the assessed value; the special taxes and bonds added on; and finally the simplest to understand, the cost per thousand on the assessed value of my house and the land.

Then came the question that inevitably arises and the answer that should get everyone’s attention: How can the assessed taxes every City of Portland property owner must pay be 33 percent lower for a small number of the residents? And even more importantly, what are people paying the lower assessment not receiving?
Finding the answers was a bit like eating an artichoke, after lots of leaves you finally reach the heart. But there is no short cut to the heart, especially when you start with neighborhood gossip that sounds more like urban legend.

Talking to neighbors …

Urban myth or truth? One and only one house on an adjacent block appears to enjoy the 33 percent discount on assessed property taxes. But why? And how? The entire street lies inside the City of Portland boundaries. How could one singular home in the middle of the block be outside of Portland? Neighbors repeated the myth of the Multnomah County’s chief assessor of commercial properties lived in the home for years, a curmudgeon of a guy who knew the system. Could this be true?
Portland? Neighbors repeated the myth of the Multnomah County’s chief assessor of commercial properties lived in the home for years, a curmudgeon of a guy who knew the system. Could this be true?

The City of Portland Bureau of Planning map codes unincorporated areas in yellow. West Portland is dotted with blotches of yellow. Depending upon who I spoke to, each one of yellow and unincorporated areas has a story: Why the line was drawn where it remains? Why small areas were excluded while other areas were included into the City? Why one house, one block, one neighborhood was excluded but the surrounding area become part of the City of Portland? Unfortunately, no central repository exits with all of stories, retrospective taxation maps or answers.

The City of Portland Bureau of Planning, represented by Linda Peterson, directed me to a Mr. Martin who worked as a contractor for the City for years.

Ken Martin, City of Portland resident, spent years working on annexation issues all over the state on the State Boundaries Commission, until it was eliminated in the 1990s. Now Mr. Martin handles the technical and legal aspects of the annexation process when issues arise within the City of Portland. Mr. Martin couldn’t give me any history about my neighborhood, but he shared with me the process necessary for annexation. This process is equally applicable for a single lot or an entire neighborhood, even for the yellow puzzle pieces on my map.

The most common method of joining the City of Portland is by petition from the property owners and registered voters in the area to be incorporated. When a majority of both, called a double majority, sign a petition the City schedules a hearing and subsequent election for voters in the area. Annexation occurs when supported by a majority in the area to be annexed.

Mr. Martin goes to work when the petition arrives at City Hall, looking for legal impediments to the potential annexation and insuring legal notices are sent and time lines are followed as required by law. The entire process once started by the property owner(s) could be completed in about 60 days.

The process seemed pretty straightforward. I asked Mr. Martin what could be offered to those outside the City of Portland on the next street that they don’t already enjoy, an incentive if you will. The records show that my neighbors have City water services and sewer connections. They use 911 services and City police and fire resources. Since 1984, the City has even taken on the responsibility of maintaining the streets, even the streets not in the City. As an unincorporated area, the taxes are much lower. Mr. Martin agreed all of the services are covered by intergovernmental agreements, primarily between the City of Portland and Multnomah County.

I pressed on, "So, Mr. Martin, why would those folks sign a petition to pay higher taxes without any enhanced service levels?" He didn’t have the answer. I looked to my next source: The political process for annexation.

Here’s where it gets interesting. There is an "Island Provision" in the annexation law that would allow the City Council to proceed with annexation of unincorporated areas if such area is surrounded by the City of Portland. The "Island Provision" does not rely on the residents to petition nor does it give them the ability to vote on inclusion. Island annexation is a City Council action. The "Island" method was used extensively in the mid-1980s when both Gresham and Portland actively and aggressively annexed property in east Multnomah County.

It appears the unincorporated area in the hills surrounding the Zoo is enclosed by the City. To my surprise, Mr. Martin didn’t believe this unincorporated area, so close to downtown Portland, was an island. He suggested my City map, supplied by the City Office of Planning, was not accurate. He thought a tax assessor’s map would give me more accurate boundaries needed to determine areas truly surrounded by the City.

Peeling back more leaves, I visited the Multnomah County Assessor Office to pick up a correct map. The puzzle was unraveling, I felt close to the definitive answers. As I left the office I held two new pieces, but the heart felt even more elusive.

First, the urban legend about the one home, in the middle of the block with the discounted assessment rate, was true! The assessor’s map showed one single house on the street zoned out of the City of Portland with all of the others on the block in the City. The Chief County Assessor had lived at that address for years.

Second, I found the street running through the unincorporated area one block over was in the City but the houses on either side of the street are not! This struck me as an amazing bit of gerrymandering. The City maintains the street, the residents on the street get all of the City services, but the houses as far as taxation are NOT in the City? Even the helpful County tax assessor found this unusual. The assessor, a veteran of 18 years with the office, couldn’t remember another example of the street zoned in the City and the property on either side zoned out.

This brought back a recollection of my neighboring street being completely and beautifully resurfaced just a few years ago. Would the City pay tens of thousands of dollars to pave a street in an unincorporated neighborhood while hundreds of streets in Portland are maintained by the residents of the street?
This also reminded me of Mr. Martin’s memory of the island provision. Could the street zoned as City of Portland have unintentionally created islands the City of Portland could annex?

This question took me back to the County assessor’s office and then to the State of Oregon archives in Salem for the answer. In 1995, the City of Portland began to initiate an annexation of the neighboring street — just the street, not the entire unincorporated area.

It appears the City’s motives were innocent enough; the annexation would have provided a bit of revenue from the County for maintaining the road. So why object to annexation of just the street? Because savvy and well-connected residents, understanding the "Island Provision," realized the annexation of the street, which the City of Portland was already maintaining, would have created the "islands" of unincorporated areas. So they hired the law firm of Black Helterline.

The now-extinct Portland Metro Boundaries Commission received an avalanche of objections; over 70 phone calls and letters are noted in the records. The Commission not only yielded to their concerns, but gerrymandered the map to the resident’s specifications. In a split decision, the Commission removed three small segments of the street (see Map) from the City of Portland, meeting the demands of the neighborhood not to create "islands." The properties are now connected by slender tentacles of unincorporated zones, existing solely to prevent the payment of City of Portland taxes by the residents.

But wait, it gets better. I sat down with the Multnomah County Assessor’s map and colored in the unincorporated areas and there appeared to be another anomaly. A narrow finger of land, slightly larger than baby tentacles just north, crossed Highway 26. This finger linked the unincorporated area north of Highway 26 with another just south. This land, crossing Highway 26 and owned by the State of Oregon Department of Transportation, is the only tentacle preventing this interurban area from becoming an island in the middle of urban Portland.

The last pieces were falling into place! The City, by annexing this tentacle crossing Highway 26, would create an island allowing the City Council to add this area to the City of Portland. Why do that? Because the City of Portland is providing all the City services to the area, plus complete maintenance of the roads, at a steep discount to the home owners, on average over $6,000 per year in property tax savings.

Several calls and many minutes on hold, my calls to different City Council members didn’t find any staff person who would sit down with me to hear this story. It appears none of the City Council members have staff with annexation expertise or any interest in annexation of any kind. My only recourse was to put myself on the Council agenda and present the facts publicly to the City Council.

The homes in the unincorporated areas are not low—income households. Most of the properties have assessed values of well over one million dollars. Land value by itself is in the $500,000 range. One million dollar property would yield the city $6,000 per year in property taxes. Just a few of the "Islands" could yield millions of dollars in additional income for City services. Dollars for the services residents in the area are already receiving!

After you write that property tax check in mid-November, probably the largest check most of us write all year and you’re surfing Ebay looking for your holiday gifts, remember your Portland neighbors nearby, quietly enjoying their early gift from the City, the property tax jackpot.

Following the advise of the Mayor’s office I put myself on the Communications agenda for Oct. 25. The Communications agenda gives a citizen three minutes with the City Council. Once I was on the agenda access to the staff people for each Commissioner and the Mayor became easier. I provided the staff people, the Mayor and each Commissioner with an Executive Summary of my "Tax Equity" proposal.

Since the presentation to the City Council, and after a good reception from several Commissioners, I have spoken to several staff people who are working on the proposal. The staff folks have explained that they need to work through the various bureaus while consulting their legal department on the feasibility of the "Tax Equity" plan. They have, to date, kept me in the loop.

When I spoke to the Sylvan Highlands Neighborhood Association on Nov. 14, the plan, as one might expect, received mixed reviews. Many from the unincorporated area were present at the Association meeting and left to consult amongst themselves after hearing the plan for them to join the City.

Michael Cannarella lives in Southwest Portland with his wife and daughter. For updates go to www.cannarella.com or email annex{at}cannarella.com.

Front Page > Issues > 2006>December

Hitting the property tax jackpot