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BasicLocal Budget LawProposing the Budget2022Finance, Taxation & Exemptions

Housekeeping Mute Audio/Video Update Display Name to yourFirst & Last Name (Joe Smith) Send Questions to“Questions” CE Credits – Certificate willcome via email2

Phase 1Budget Officer Proposesthe Budget3

Finance, Taxation & Exemptions TeamTrains Local Officials on Local Budget LawAnswers Questions about Local Budget Law and Property TaxesProvides Budget Manuals and Forms4

Finance, Taxation & Exemptions TeamReviews Tax CertificationsReviews District BudgetsAdvises County Assessors & Tax Collectors on Property Tax Law5

Local Budget Law Changes for 2022Covid-19 and Chapter 12 Oregon Laws 2020 First Special Session (HB 4212) Meetings may be held virtually No requirement of physical space for public Record meetings if technology available Social distancing for in person meetings Allows for alternative methods of testimony6

Local Budget Law Changes for 2022Covid-19 and Chapter 12 Oregon Laws 2020 First Special Session (HB 4212) Quorum excludes absences due to COVID Allows for emergency expenditures Expires 30 days after end of emergency7

Local BudgetLaw Changesfor 2022Chapter 493 Oregon Laws 2021(SB 732) Educational Equity AdvisoryCommittee for school districts School District BudgetCommittees must include atleast one member8

Property Tax CycleLocalGovernmentAdopts Budget andCertifies TaxJuly 15th thJune 30July 15thAssessorTreasurerAppraises &Calculates TaxDistributesRevenuesFirst PaymentDue Nov. 15thTax CollectorSends Bills &Collects TaxesSept. 25thOct. 25th9

Establish standard proceduresPurpose ofLocal BudgetLawOutline programs & fiscalpoliciesRequire estimates of resourcesand expenditures10

Encourage citizen involvementPurpose ofLocal BudgetLawControl expenditure of publicfundsORS 294.32111

Why Follow Local BudgetLaw? A district that doesn’t follow local budget law may notlawfully: Expend money (with some exceptions) Certify property taxes to the county assessor12

Why follow LocalBudget Law? A property tax made contrary to LBL isvoidable by the Oregon Tax Court ifappealed by: County AssessorCounty CourtCounty Board of CommissionersThe Department of RevenueTen or more interested taxpayersORS 294.46113

DOR v Umatilla County, otc2519 (1986)A portion of the 1986-87 tax levy was voided by the court.Umatilla County failed to republish its budget summary to allow theboard to impose a levy amount higher than the amount published in itsbudget summary.14

Civil LiabilityAny public official who expends public monies in excess of the amountsor for any other purpose than authorized by law shall be civilly liablefor the return of the money, if there is malfeasance in office or willfulor wanton neglect of duty.ORS 294.10015

Districts Not Subject to Local Budget LawORS 261 People’s utility districtsORS 440 Health districtsORS 545 Irrigation districtsORS 551 Diking districtsORS 553 Water control districts*ORS 554 District improvement companies or corporationsORS 568 Soil and water conservation districts*ORS 371 Special and Assessment road districtsORS 371 County Road district*ORS 372 Highway lighting districtsORS 547 Drainage districtsORS 221 Historic ghost towns* That will not impose taxes during the ensuing year. If district does impose property tax any year, it issubject to Local Budget Law.16

The Budget ProcessPhase 1Phase 2Phase 3Phase 4Propose thebudgetApprove thebudgetAdopt thebudgetChanges afteradoption17

The Budget ProcessPhase 1Phase 2Phase 3Phase 4Propose thebudgetApprove thebudgetAdopt thebudgetChanges afteradoption18

ActionExampleDue Date1Appoint budget officerJan. 172Appoint budget committee (BC)Feb. 13Prepare proposed budget1stnotice of BC meetingMarch 44PublishMarch 115Publish 2nd notice of BC meetingApril 16BC meeting & subsequent mtgs. ifneededApril 77Publish notice of budget hearingMay 138Hold budget hearingMay 209Enact Resolutions to adopt, etcJune 2010Submit tax certification documentsBy July 15*11Send copy of all budget documentsto county clerkBy Sept.30*CompleteSample BudgetCalendar * ORS 305.820(2) states that if any deadlinethat needs to be filed to tax collector orcounty falls on a weekend or holiday, then thedeadline is extended to the next business day.19

Prepare ProposedBudget Designate budget officer (Who canserve?) Budget Officer prepares budgetunder direction of Executive Officeror Governing Body20

What is a budgetA financial planFor one fiscal year (July 1 – June 30) , or biennial budget period (July1, 2021 – June 30, 2023)Based on estimates of revenues & expenditures and otherrequirementsThe budget is the basis for appropriations, which create the authority to spend public money.21

Resources vs Requirements22

Estimate Resources andRequirements for Each Fund Estimate resources & requirements in line item detail. All resources & requirements must be budgeted. Resources & requirements must balance. Estimates of resources & requirements must be made in“good faith.”23

Budget Resources Beginning cash or net working capital (cash, checking balance, LGIP,CD’s, etc.) User fees, assessments, charges for service Grants, gifts, donations, etc. Bond & other borrowing proceeds Interfund transfers, internal service charges Interest earned on deposits Property taxes (prior years and current)24

Estimating Property TaxesTax Rate x Taxable Value* Tax AmountReduced by: Compression losses (Measure 5 limitation) Discounts Uncollectibles*”frozen value” in urban renewal plan area25

A brief history ofOregon propertytaxhttps://www.youtube.com/watch?v Sg2iVWEyJFwSource: Deschutes County Assessor’s Office, August 28, 201326

Constitutional LimitationsArticle XI, s. 11 and 11bMeasure 50: Tax calculation is based on Assessed Value (AV)Measure 5: Operating tax on a property is limited to: 5 per 1,000 of RMV for Education, 10 per 1,000 of RMV for Gen. GovernmentM5 limit is based on Real Market Value (RMV)27

How Does M5Compression Loss Work? If a property’s tax is higher than its M5limit, the tax must be reduced(“compressed”) to fall within the limit. This loss is shared by all taxing districts(local option taxes reduced first).28

M5 Compression ExampleNeighbor 1M50 Tax Calculation:Total Combined Gen. Gov. Tax:Property’s Assessed ValueTax on PropertyM5 Limit Calculation:General Gov. limitProperty’s Real Market ValueMaximum tax under M5 limit 14/ 1,000 AV 176,384 2469.38 10/ 1,000 RMV 220,000 2,200.00Gen. Gov. Loss due to M5 Compression 269.38Neighbor 2M50 Tax Calculation:Total Combined Gen. Gov. Tax: 14/ 1,000 AVProperty’s Assessed Value 176,384Tax on Property 2469.38M5 Limit Calculation:General Gov. limitProperty’s Real Market ValueMaximum tax under M5 limit 10/ 1,000 RMV 280,000 2,800.00NO loss to compression29

How Can You Estimate Compression Loss?Summary of Assessments and Levies Report (SAL) Table 4a: Assessor prepares report in October Often mailed to every taxing district Reports taxes imposed, compression loss, taxes extended Save report and use it next spring for your budget estimate of M5 lossAlso consider levies of other districts30

Estimating tax receipts for the 3 types of advalorem taxesPermanentRate TaxesGeneralObligationBond LeviesLocalOptionTaxes31

Permanent RateTaxes Measure 50 rate limit per 1,000 of assessedvalue Limit cannot be changed by district or itspatrons Imposed as rate per 1,000 or a dollaramount Double majority required in March or Sept.election32

Local Option Taxes In addition to the permanent rate levy Temporary: For Operations - 1 to 5 years For Capital Project - Lesser of 10 years or useful life (Defined in ORS 280.060) Voters approve rate per 1,000 or fixed dollar amount per year* First to be compressed Budget options for September election (ORS 280.060)*Double majority required in March or September33

Estimating Taxes Levied as a RateTax rate: 1.5340/ 1,000Estimated Assessed Value in district: 98,769,9461. Tax rate (per 1.00 of AV)2. Value x rate3. Minus est. Measure 5 loss4. Tax to be billed5. County collection average6. Tax amount to budgetx x .0015340 151,513 736 150,777.94 141,73034

Estimating Taxes Levied as an Amount1.2.3.4.5.Total dollar amount to levyMinus est. compression lossTax to be billedCounty collection averageTax amount to budget x 45,000 2,500 42,500.94 39,95035

G.O. Bond Debt Service Levy Voter approval of bonds gives authority to tax for annual debtservice* Principal & interest (only) on voter-approved general obligation bondsfor capital construction Always imposed as a dollar amount Exempt from compression* Double majority required in March or September36

Estimating Bond Debt Service TaxesTaxes budgeted for debt serviceEstimated compression losses 60,1500(GO bond taxes are exempt from M5 limits)Amount to raiseCounty collection averageTaxes to be levied60,150 .94 63,98937

Budget is Preparedby FUND A self-balancing set of accounts Used to record estimated resources and requirements forspecific activities and objectives38

Types of FundsGeneral FundSpecial Revenue FundRevenue from permanent rate, localoption levy for operations, interestand other charges/fees received tocover general operations with norestrictions on how resources areusedDedicated to local option levy money,specific purpose grants, or other moneyrequired to be segregated by statute,charter, or terms.Capital Project FundDebt Service FundRevenue from GO bonds proceeds,local option levy for capital projectsor grant monies to finance a capitalproject.Revenue comes from special propertytax levy (such as Revenue Bonds or GObonds) to budget for payment ofprincipal and interest on long-term debt.39

Types of FundsInternal Services FundEnterprise FundRevenue from services provided fromone department to anotherdepartment. ex. Fleet Management.For revenue received in fees or chargesused to cover expenses of a businesstype entity such as running a parkinggarage or pool.Trust & Agency FundReserve FundGrants, gifts or transfers fromgeneral fund received in a fiduciarycapacity to be used for a specifiedpurpose.Transfers from general funds or grantsused to accumulate money for financingthe cost of a service, project, property orequipment. Resolution required tocreate fund.40

Resources vs Requirements41

Budget MOBJECTCLASSIFICATIONOBJECTCLASSIFICATIONLINE ITEMDETAILLINE ITEMDETAILACTIVITY42

Budget OrganizationOrganizationalUnitORProgram &ActivitiesAny administrative subdivision of a municipalcorporation, especially one charged withcarrying on one or more functions oractivitiesA group of related activities aimed ataccomplishing a major service or function forwhich the municipality is responsible43

Simple Organizational UnitCityAdministrationFacilitiesOrganizationalUnit 1OrganizationalUnit 244

Speedway’s Organizational ChartCity CouncilCityManagerAdminPublicSafetyParks ucture45

Organizational Unit Example46

Program ExampleFire igationsEquipmentMaintenance47

Program Example48

Object Classifications (Allocated)PersonnelServicesMaterials &ServicesExpenses relatedto employeesConsumables andservice expenses:Must includeassociated FTE- Contract services- Supplies- Other operatingexpenses***Always include line item detail***Capital OutlayItems withuseful life of ayear or more49

Object Classifications (Not Allocated)InterfundTransfersTransfer of resourcesfrom one fund toanotherAll transfers out requirea correspondingtransfer inDebt ServiceSpecialPaymentsThe repayment of anyloan, bond, or otherborrowing.Pass-throughpayments, grantsmade to otherorganizations, or otherone-time or unusualpayments that do notfit into any otherexpenditure category50

Object Classifications (Not gexpenses.Only budgetedin operatingfundReserved for FutureExpenditure (RFE)UnappropriatedEnding Fund Balance(UEFB)Saved for futurespendingCarry-over fornext year’sbudget to coverrequirementsprior toresources beingavailable51