OAG 98-5.

Case DateJune 02, 1998
CourtOregon
Oregon Attorney General Opinions 1998. OAG 98-5. 77OPINION NO. 98-5[49 Or. Op. Atty. Gen. 77]No. 8258June 2, 1998The Honorable Kurt SchraderState RepresentativeThis opinion concerns possible legislation that would authorize school districts to impose a system development or other charge, known as a "school impact" fee, on developers of real property for the costs of capital construction of public schools needed to serve the residents of the development.FIRST QUESTION PRESENTEDMay the legislation be structured so that the school impact fee would not be a "tax" for purposes of Article XI, section 11b(3)(b), of the Oregon Constitution, which requires voter approval of bonds used to fund capital construction if the "taxes" to repay the bond debt are not to be subject to the rate limitations of section 11b? If so, how? Would the answer be different if:(a) there is a cap set on the fee?(b) the fee is subject to a graduated fee scale?(c) low-income housing is exempted from the fee?(d) the fee is based on the occupancy, size or value of the residential improvement to real property?ANSWER GIVENLegislation authorizing a school impact fee may be structured so that the fee would not be a "tax" for purposes of Article XI, section 11b, of the Oregon Constitution by imposing the fee on the person who develops the property, not on the property, and tying it to the privilege of engaging in the development activity, not to the mere ownership of the property. Assuming that these conditions are satisfied, the fee would not be a "tax" for purposes of Article XI, section 11b, whether or not: (a) there is a cap set on the fee; (b) the fee is subject to a graduated fee scale; (c) low-income housing is exempted from the fee; or (d) the fee is based on the occupancy, size or value of the residential improvement to real property.SECOND QUESTION PRESENTEDMay a bill authorizing a school impact fee be structured so that it would not be a "bill for raising revenue" for purposes of Article IV, section 25, of the Oregon Constitution, which requires approval by three-fifths of the members of both houses of the Legislative Assembly? If so, how?78 ANSWER GIVENA bill authorizing a school impact fee would not be a "bill for raising revenue" for purposes of Article IV, section 25, of the Oregon Constitution, if the fee is structured only to defray additional costs caused by the development. Moreover, it is at least questionable whether Article IV, section 25, of the Oregon Constitution even applies to state legislation authorizing local governments to impose taxes. DISCUSSIONI. Article XI, Section 11b of the Oregon ConstitutionThe first question concerns Article XI, section 11b, of the Oregon Constitution. This provision, which was created through initiative and approved by the people on November 6, 1990, as Ballot Measure 5, establishes separate rate limitations on property taxes for public schools and for all other government operations. In general, Article XI, section 11b, does not require voter approval of property taxes, although voter approval of bonds is needed to exclude from the section 11b rate limitations those taxes to pay bonded indebtedness incurred for capital construction. In this regard, Article XI, section 11(b) provides in pertinent part:
(3) The limitations [on tax rates] apply to all taxes imposed on property or property ownership except
* * * *
(b) Taxes imposed to pay the principal and interest on bonded indebtedness incurred or to be incurred for capital construction or improvements, provided the bonds are offered as general obligations of the issuing governmental unit and provided further that either the bonds were issued not later than November 6, 1990, or the question of the issuance of the specific bonds has been approved by the electors of the issuing governmental unit.
Or Const Art XI, § 11b(3). The building of schools is obviously capital construction. Thus, in order to exclude from the tax rate limitations of Article XI, section 11b, taxes to repay bond debt on bonds issued after November 6, 1990, to fund school construction, voters must approve the issuance of the specific bonds. This voter approval requirement does not apply, however, if the charges imposed to repay the bonds are not "taxes" for purposes of Article XI, section 11b because only "taxes" are subject to the rate limitations of section 11b. Consequently, the answer to this question turns on the following definition of "tax," which applies to Article XI, section 11b:
A "tax" is any charge imposed by a governmental unit upon property or upon a property owner as a direct consequence of ownership of that property except incurred charges and assessments for local improvements.
79Or Const Art XI, § 11b(2)(b). A school impact fee imposed to pay the principal and interest on bonds used to fund the construction of schools would be a "tax" requiring voter approval of the underlying bonds under Article XI, section 11b, if it were: (1) imposed by a governmental unit, and (2) imposed upon property or upon a property owner as a direct consequence of ownership. A. Charge Imposed by Governmental Unit We assume that the school impact fee would be imposed by a governmental unit. If it were not, it would not be a "tax" for purposes of section 11b. See Comeaux v. Water Wonderland Improvement Dist., 12 OTR 132 (1992), aff'd 315 Or 562, 847 P2d 841 (1993). B. Charge Imposed upon Property or Property Owner A school impact fee imposed by a governmental unit would be a "tax" for purposes of section 11b only if it would be imposed "upon property or upon a property owner as a direct consequence of ownership." As described to us, the school impact fee would be a charge assessed on developers of real property within a school district for the cost of capital construction of public schools needed to serve the residents of the development. This fee appears to be a "system development charge" as defined by ORS 223.299(4)(a). A "system development charge" is
a reimbursement fee, an improvement fee or a combination thereof assessed or collected at the time of increased usage of a capital improvement or issuance of a development permit, building permit or connection to the capital improvement. * * *
ORS 223.299(4)(a) (emphasis added). We have previously concluded that, as so defined, a system development charge is not imposed on property or on the owner of the property as a direct consequence of ownership, but rather
the charge is imposed because the owner elects to exercise a right of ownership, and to burden public facilities.
Letter of Advice dated May 13, 1991, to Representative Kelly Clark (OP-6407) at 5. Thus, we concluded that the system development charge was not a "tax" for purposes of Article XI, section 11b, of the Oregon Constitution. Id. This advice was based, in part, on our analysis in an earlier formal Attorney General opinion in which we concluded that an amusement device tax was not a charge "upon property" under Article XI, section 11b(2)(b), because it was not imposed solely because the property was present in the taxing jurisdiction. 46 Op Atty Gen 442, 444 (1991) (relying on Fox v. Galloway, 174 Or 339, 348, 148 P2d 922 (1944)). Similarly, the amusement device tax was not imposed "upon a property owner as a direct consequence of 80ownership of that property" because the owner was not liable for the tax merely because she or he owned the property 46 Op Atty Gen at 445. Instead, the amusement device tax was a charge imposed for the privilege of engaging in the activity of operating the amusement device. Id.(fn1) This distinction between property taxes subject to Article XI, section 11b, and privilege...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT