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Eugene's Tax Levy Nullified By Judge

Posted on: Friday, 17 February 2006, 21:00 CST

By Susan Palmer, The Register-Guard, Eugene, Ore.

Feb. 18--The Eugene and Bethel school districts may be millions of dollars poorer next year because of a decision Thursday by the Oregon Tax Court.

Judge Henry Breithaupt ruled that a city-sponsored tax levy funding school activities such as physical education, library services and health care was unconstitutional.

Eugene voters passed the four-year levy in 2002, and it is projected to have raised a total of $31.5 million for the two districts by the end of this school year.

But Nick Urhausen, a Eugene resident and Social Security Administration employee, believed that the levy ran counter to the Oregon Constitution, which caps the amount of money school districts can raise through property taxes. The cap was put in place by voters in 1990 as Measure 5.

With help from anti-tax activist Don McIntire, Urhausen sued the city over the tax levy. He was pleased to learn of the judge's decision.

"I was elated," Urhausen said. "Does the constitution mean what it says?

Apparently it does. It doesn't mean just what people want it to mean."

McIntire wrote the constitutional amendment limiting property taxes that voters approved in 1990 as Measure 5. Under it, school districts may collect up to $5 per $1,000 of market value in property taxes. The rest of their funding comes from the state. Judge Breithaupt ruled the city levy illegally circumvented the constitution because it involved the city raising taxes and passing along funding to the schools outside the $5 per $1,000 limit for education.

Eugene attorney Glenn Klein said his office will review the decision with city staff in the coming week to consider whether to appeal it. If an appeal is filed it will go directly to the Oregon Supreme Court, he said.

While the bulk of the money raised through the levy -- 93 percent -- has gone to schools, the city kept 7 percent to spend on after-school and summer activities for children. The decision will have no effect on that 7 percent, Klein said. But it will have an impact on how much the city will be able to provide to schools.

"How much of an effect, we don't know," Klein said. "That will require additional analysis."

Not all property tax accounts have reached the $5 per $1,000 value cap for education, so the special levy taxes still could be collected from those properties, he said. In the Eugene School District, about 16,000 properties fit that description, compared with 26,000 at the cap. In Bethel the number is about 8,000, with nearly 5,000 maxed out, he said.

But whether the tax will continue to be collected also depends on voters.

The levy expires this year, and the City Council had planned to put it on the November ballot, asking residents to renew it.

This school year, it is projected to boost the Eugene district's budget by $6.2 million. About 43 percent of the money is being spent on counselors, librarians and nurses, with 23 percent going to athletics and activities and 13 percent to elementary schools for music and physical education instruction, school district spokesman Kelly McIver said. The rest of the funds go to maintenance, charter schools and PERS, the state's public employee retirement account.

"Obviously we're very disappointed," McIver said. "We'll continue now to work with our legal counsel and see what the next move will be."

Organizers who worked to persuade voters to support the levy were stunned by the Tax Court decision. The levy was based on a similar program in place in Ashland for 10 years, said Betsy Boyd, co-chairwoman on the Yes for Schools Campaign in 2002.

"I think we all felt that due diligence had been done to guard against this kind of finding," she said.

Supporters believed that if the money was not spent on core curriculum programs, it would not run afoul of constitutional limitations, she said.

Judge Breithaupt saw it differently, writing in his decision: "This court has concluded in the past that where co-curricular activities such as sports, drama and music are conducted in the school context, they take on the character and color of education.' " He still must decide on what relief is due petitioners, who had asked for attorneys fees and costs and any other relief the court deems fair.

The loss of the levy funds would put tremendous budget pressure on schools already suffering from state monetary woes that drove years of belt tightening in schools throughout the state, Boyd said.

But Urhausen said the decision would encourage Eugene officials to work harder at the state level to improve things for students.

"They're in the same boat as kids in Springfield, Veneta, Junction City and Cottage Grove," he said.

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Copyright (c) 2006, The Register-Guard, Eugene, Ore.

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Source: The Register Guard

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