By Art Hyland
In a mundane Clatsop County, Oregon press release, a $2.5 Million dollar bill due immediately from all property tax payers in this county to the Wauna Mill, a division of Koch Industries, has been described with the following headline in the County’s website:
Did you know, if you’re a county property owner, that you are paying this bill for $2.5 Million, and borrowing money to do so? Do you care? I suspect you care, but I doubt you knew. What’s worse, you used to have a savings account just for this contingency, but all the money’s gone. So you are on the hook for a 10 year loan, not for something tangible like a bridge or building, but for government expenses of long ago.
So herewith, a simpler and more descriptive headline for this entire story:
CLATSOP DISTRICTS DECLARE PROPERTY TAXPAYERS ARE ATM MACHINES
Back in 2007/8 when Wauna sued to have $4+ million of its taxes returned for what it claimed was an over-charge of its property tax bill, there was a bone fide cash account set aside by the county as a contingency reserve. The Mill had a strong enough argument that the County, which is in charge of receiving and disbursing property tax receipts on behalf of all the county districts, decided to withhold that amount in 2008 in case Wauna won their lawsuit. Very prudent move. They figured we didn’t need to spend money we just might have to give back, a wise decision back then. Actually, because that $4 Million accrued interest at a whopping 12%, plus there were other claims by the Mill, a possible award could have been $11+ Million, not the $4 Million reserved, nor the $2.5 Million luckily negotiated. (Of course it’s not lucky for Wauna, a major employer in our County, which it would seem, Clatsop county should wish to be financially viable and solid. Another story.)
But in 2009, with a $4 Million cash reserve burning a hole in the collective district pockets, several districts, especially the Seaside School District, asked Duane Cole, Clatsop County manager, to find a way to get the money right away and worry about a judgment later. A decision was made by the County Commissioners to go ahead and disburse the funds to the districts because Mr. Cole created a plan they all liked: if we all face a big judgement in 2012 or so, we’ll just issue some bonds over a ten year period, and the taxpayers of Clatsop County can absorb an increased tax assessment.
Quoting Mr. Cole, in 2009,”…instead of having 6% less property tax revenue during these difficult times, the agencies [districts] would need to plan on 1/10th of the amount of the judgment in the future for 10 years. This would be easier to plan on and absorb since generally property values and tax revenue have increased over the years and it is possible the current difficult economic times may have eased by 2012.” In other words, they’d float a 10 year bond if they had to.
Well, they now have to, and did because the contingency happened: the county and its districts have a bill they must pay now. And there is no more reserve available to pay the $2.5 Million.
Well, the economic times have not eased as hoped, and indeed things are worse now than in 2009. It would have been nice to pay Wauna from a savings reserve of $4 Million, with $1.5 Million extra in savings. But that experience evaporated with previous decisions to spend now, pay later, a common government approach.
Additionally, you may have noticed, property values haven’t increased, they’ve decreased. Who would have thunk it? Not our local governments. Not that these facts worry any local government dependent upon property taxes, since no matter what happens to property values, tax assessments (based on district budgets for any given year) allocated against all property in the county are assessed without regard to the total values of the properties in any district. No matter if all property values are worth 50% less now than before, the district budgets that help determine the amounts taxpayers pay are assigned to all properties regardless of what has occurred to market values.
I repeat: property taxpayers pay the bills allocated to their property by the government agencies and districts regardless of the direction of property values. That property values are significantly less now than before has no bearing on the total taxes levied on all properties.
This issue is just an example of how money is occasionally handled by our local governments. Beyond property tax revenues, their budgets include many other sources of money: fees, many other taxes, and fines. Grants are another source, but then they just represent more distant examples of the same revenue trio, even though local governments seem to think of grants as some sort of manna from a heaven they may not even believe in. The entities we call local government spend every dime they receive, and most do not seem capable of living within their means, because to them those means are almost as close to unlimited as possible. So often they claim they are cutting their budgets, when all they are doing is cutting an increase from the year before. If you look at the salaries and benefits lines for those employees who remain, they never go down like they routinely can and do in the private sector.
It’s not that all government is bad, nor that there are bad people working there. The problem is that government thinking creates a culture where revenues are rarely considered limited, probably because of the power and control that government assumes. Revenue, power and control are addictions, but there are no prevention facilities to send government to. Some governments in nearby states are actually going bankrupt, a rare form of government limitation for sure, but at enormous costs and disruptions, all preventable in theory, but for the culture that prohibits the reality one commonly finds in the private sector where money, power and control are actually limited.
In the Wauna case outlined above, the county and its districts are borrowing money to pay for expenses that occurred several years ago; this is wrong. It disregards how difficult it is for property owners to keep paying taxes, disregards the idea that government is nothing more than a collection of private citizens who have limited means, and disregards the prudence of saving for rainy days. Why the county and its taxing districts seem oblivious to business realities is difficult to understand, except that whenever citizens become board members they seem to spend other people’s money completely differently than if it were coming out of their own pockets directly.
So until voters demand changes to the ways local governments act, a lot of citizens in Clatsop County are just ATM machines, aka property owners. We have to pay those taxes under the law of, Pay or you lose your property. So we pay.
** One district, the Cannon Beach Rural Fire District objected to eliminating the reserve back in 2009, but went along with the decision since so many other districts wanted the tax revenue disbursed to them. The fire department may have reserved it themselves when it was disbursed.