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Special District White Paper L In considering the formation of a special district, one important practical concern for the City of Eugene and other taxing jurisdictions is whether the district's new property tax operating levies and special levies will possibly result in property tax compression. Compression is calculated on an individual property basis, rather than district wide. If new tax levies by a special district push total general government taxes beyond the $10 per $1000 RMV limit significant tax compression and loss of revenue to all general government taxing jurisdictions would likely occur. In this case total revenue collected will be Tess than the total taxes levied and all local option levies are reduced first. Once local option levies are zeroed out, additional reduction in the tax levied is then applied proportionally to permanent operating tax levies until the limit is not exceeded. This affects all local general governmental jurisdictions, not just the single special district. A second constitutional provision, Article XI, Section 11, requires that properties be taxed based on their individual assessed value (that is, their July 1, 1995 real market value decreased by 10% and then increased by 3% per year since 1997) or their real market value, whichever is lower. The relationship between real market value and assessed value is dynamic and changes from year to year. Within the city boundary of Eugene, assessed value in FY02 is about 76% of real market value. Therefore, the RMV limit applied to Eugene is equivalent to a cap of approximately $13.19 per $1000 taxable assessed value (AV). General government taxing jurisdictions currently use only part of this maximum limit; there is room for additional permanent property tax levies by special districts. Available General Government Tax Rate Capacity within Eugene It is important to understand how much of the constitutionally permitted total general government tax rate is currently in use and how much of the permitted rate remains available for use by a special district. Within Eugene in FY02, the total voter - approved permanent maximum property tax rates for the City of Eugene and Lane County amounts to about $8.29 per $1000 taxable AV. In addition, there is a City urban renewal tax levy and two City local option levies; these amount to about $0.68 per $1000 AV. Together, the current general government tax rate applied to most Eugene property totals about $8.97 per $1000 AV in FY02. Therefore, of the $13.19 per $1000 AV total general government property tax rate permitted by the Constitution to be levied on a property within Eugene in FY02, about $8.97 is being used and about $4.22 is available for special districts without exceeding the Constitutional limit. This represents about $34.23 million potential general government annual revenue capacity that is permitted but is now unused by general governments, based on FY02 property values. Applying the practical limitation of the current estimated 93% property tax collection rate to this potential revenue capacity would result in a net maximum possible amount of $31.83 million. More revenue would be possible if the special district's boundary went beyond city territory and included unincorporated areas. For example, a district's boundary might be contiguous with the 4J and Bethel School Districts' boundaries. Keep in mind that the voters must approve any use by a special district of this permitted revenue capacity. With voter approval, a special district serving territory within Eugene's boundary could utilize some of this unused constitutionally permitted potential general government rate capacity for a new permanent operating tax rate or special levies without causing significant additional revenue compression. (Appendix 8 provides additional details.) L Special Districts Paper - Final 11- 8- 01.doc Page 13 of 41 City Council Agenda page 37