Friday, October 23, 2009

Time for a Pay-as-We-Grow Plan

Posted By on Fri, Oct 23, 2009 at 8:05 PM

Last week, like all Deschutes County property owners, I received the most depressing piece of mail of the year: my annual tax bill.

This morning The Bulletin had more depressing news. “Bend residents may face new taxes,” the big black headline said.

It’s the familiar story: Now that the real estate bubble has popped, the city isn’t taking in enough tax dollars to pay for essential services. The city staff is projecting a shortfall of up to $12 million in the general fund over the next five years.

City Finance Director Sonia Andrews said the fundamental problem is that Bend’s permanent tax rate – $2.80 per $1,000 of assessed value – is too low for a city of Bend’s size.

“Part of the problem with Bend is that our property tax rate has never been sufficient to cover the basic services we need to provide,” Andrews was quoted as saying. “[A rate of] $2.80 has never been adequate, but we lived off of that $2.80 because we had phenomenal growth in our tax base, so that kind of bailed us out for the last five to seven years. But when the growth disappears, you’re faced with the reality of the $2.80 being inadequate to begin with.” (Emphasis added)

Translation: “We knew the tax rate was too low, but we got around that little problem by encouraging runaway growth, assuming the good times would just keep rolling forever. But then – who could have imagined it? – the growth stopped, and we were really screwed because a tax rate that was inadequate for a city of 30,000 is even more inadequate for a city of 80,000.”

Looking at it another way, the city did the same thing that many foolish home owners did during the bubble – it speculated on the (assumed) future increase in its equity (the tax base) to cover the gap between its income and its current expenses.

The city council is in a quandary: They don’t want to ask the taxpayers for a tax increase, but if they don’t the city will have to lay off more workers. Naturally they’re trying to inject the fear factor, threatening to cut the police and fire departments if the taxpayers don’t pony up.

Frankly, I can’t see any way the city can climb out of the hole it’s dug for itself without raising taxes or cutting services to the bone (and beyond) or both.

But it would provide some consolation to me and my fellow taxpayers if the city adopted, and stuck to, a pay-as-you-grow policy – not giving the green light to new development until it was sure it had the money to pay for the services and infrastructure it will demand.

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