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Portland Public School bond will give Portland the highest property taxes in the state

December 7, 2010

Portland Public School bond issue will give Portland the highest property taxes in the state
by Eric Fruits, Economist
EconInternational

In my life as an economist, I have never seen the word “historical” attached to a bond issue. But “historical” is the word local media has attached to Portland Public Schools “school modernization” bond issue. And with good reason: The $548 million in bonds (plus interest) will be the largest bond issue in Oregon’s state history.

It seems school board has recruited the Oregonian to promote the bond issue. An article in Saturday’s paper ordered readers to “Do the math.” The article carved out a small slice of property owners’ tax bills and proclaimed that Portland’s property taxes are really pretty small and this “historic” bond measure won’t increase property taxes that much. (It’s a bit like telling someone knee deep in credit card debt that because they don’t own a car, they can afford a new car payment.)

Today, Portland residents who live in the PPS taxing area pay the 10th highest taxes of any city in Oregon.

The figure above shows that, if the bond measure passes, the parts of Portland in PPS will have just about the highest taxes in the state of Oregon (exceeded only by the cities of Spray and Heppner, two cities with combined population of less than 1,700).

But wait, there’s more …

PPS has a plan to get this “historic” bond issue passed. It has been revealed that the school board may put an operating levy on the ballot at the same time. School board member Bobbie Regan reports:

I want to be sure you know that we are looking at the possibility of going out for the local option in the spring also. We haven’t yet had a thorough discussion about this but all board members are keenly aware of the budget situation we face and it could make sense to look at renewing our operating levy at the same time as we begin to address our facilities needs.

  
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Discuss this article

Taxpayer Extreme December 7, 2010

I already pay enough. I will be voting no on all new taxes.

Bob Clark December 7, 2010

Mr. Fruits, what did you think of the PPS contracted study done by EcoNorthwest showing net economic benefits of some $340 million plus to the local area from this PPS bond measure? It smells of over hype to me. I suspect what the IMPLAN model is doing is simply replicating the Keynesian argument if left in the pocket of the property tax payer, some monies would be left idle in savings. If I recall my economics, this is called the balanced budget multiplier. But I suspect property tax payers may actually boost their rate of savings if property taxes are boosted in such dramatic fashion as PPS proposes. This would offset a significant portion of the predicted net benefits. I don’t think property tax payers put much stock in the boost of home property values caused by PPS’ proposed renovation, especially when it looks like PPS is overspending by a factor of two what the normal construction costs should be according to Cascade Policy Institute.

Isn’t it odd national leaders talk of boosting economic activity by reducing tax rates, and here we have PPS and EcoNOrthwest telling us a tax rate hike will have huge net benefit?

I am not against renovating some old schools but I just want the rate of increase in total property taxes to be held down to a first year increase of 4 to 5%, which is more in keeping with historical rates of total property tax increases in the PPS area. I think PPS should sell some very under used and in disrepair properties such as Washington Highschool (&now Marshall Highschool) to help with the financing of its proposed measure.

EcoNorthwest also calculates over 2,500 in net job gains but I suspect these are largely temporary jobs whereas job loss from less discretionary spending by the tax payer may be of a more permanent nature.

Eric Fruits December 9, 2010

I have some preliminary thoughts. However, I have requested some more info from PPS because the ECONorthwest memo is incomplete in places (e.g., assumed interest rate). I hope to have more thoughtful thoughts soon. In the meantime …

IMPLAN is a Keynesian multiplier model. One of the features of the model is that “wasteful” spending, such as paying guys to lean on their shovels, will generate as many jobs as “productive” spending. According to this type of modeling, cost overruns are good because they “create” more jobs.

The other problem is that the Keynesian model implicitly assumes some portion of household income is saved. It’s only a slight exaggeration to say that Keynesian models view savings as wasted money. (In fact, one of the left’s biggest gripes about extending tax cuts to upper income households is that they save “too much.”)

So, as an economist, I am bothered by the implicit assumption if you have a choice of giving $400 per household per year to PPS or allowing households to keep that money, giving the money to PPS will be more productive.

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