Two voluntary measures by utility companies will reduce revenue losses but not eliminate them

MADRAS, Ore. (KTVZ) — Jefferson County officials met Friday with representatives from dozens of taxing districts — from the library to cities to fire districts — to discuss a $1.8 million property tax overpayment by Portland General Electric. They updated them on the utility’s recent agreements to reduce the impact of the repayments on its budgets.

Initially, it was believed that PGE’s error in reporting a higher assessment and the resulting overpayment of taxes would only affect the county’s 12 taxing districts that receive a share of those tax dollars. However, it was recently revealed that based on the tax allocation formula, all of the county’s nearly 40 taxing districts would lose a share of their expected tax revenues in order for the county to make the required refunds.

PGE is by far the state’s largest taxpayer, holding 17% of Jefferson County’s total taxable value as of 2022 and paying $3.5 million to $5 million in taxes annually, the Madras Pioneer reported.

According to state law and IRS requirements, the overpayment identified earlier this year must be returned to the taxpayer – PGE, County Administrator Jeff Rasmussen said as he distributed a draft list of the original and revised refund/refund impacts to all taxing entities in the county.

Since the decision came into effect in late July, Rasmussen said there have been discussions with PGE, which has agreed to two voluntary measures to mitigate the impact of the refunds and the resulting loss of revenue. One of these is that $230,000 in interest on the overpayment of taxes will not be collected.

Additionally, tax districts that need help will be offered three-year interest-free loans to make the repayments, reducing the burden by $270,000 for a total of $500,000, which the table calls the “pass-through PGE grant.” Rasmussen noted that the funds for this would be provided by the company’s shareholders, bringing the total burden to the district to about $1.3 million.

The chart showed that each tax district was initially expected to see a nearly 4.5% decrease in tax distribution, and also showed the lower amount that is now expected after the $500,000 reduction.

For example, for Jefferson County’s general levy – the largest single item on the list, accounting for about 21% of the county’s total tax revenue – the original estimated overpayment of $371,580 was reduced by over $104,000 to $267,433.

While minor property tax adjustments due to underpayments or overpayments are not uncommon in Oregon counties, Rasmussen said new process controls have been put in place to reduce the risk of such a serious error coming to light in this way.

While the county has worked with the state tax agency in the past to resolve such cases, PGE encourages county tax assessor Ray Soliz to contact the agency directly on such large increases or decreases in assessed value to expedite the investigation and outcome, he said.

This is intended to address a concern that has arisen since the error occurred: a problem discovered months ago meant that the various districts were not informed of the repayment requirements until after the start of the new tax and budget year on July 1.

Former county tax assessor Jean McCloskey said a tax overpayment situation of this magnitude was “probably unprecedented in Oregon.”

And Rasmussen pointed out that this is not a literal refund to the county – “it’s just revenue that you won’t receive” after property tax payments begin in the fall.

Soliz explained that his office had seen a sharp increase in PGE’s property value in utility registers and that demand for it had set the ultimately costly ball rolling.

While one representative at the in-person and virtual meeting wondered if the whole mess could have been avoided by remaining silent, Soliz said, “I believe that PGE would have ultimately checked its own books and noted it, and we would still be faced with the task of repaying the overpayment.”

Another idea was also raised that will be part of county commissioners’ discussions that continue next week: the possible use of about $650,000 in uncommitted ARPA (COVID-19 relief) funds in the county budget to mitigate the tax districts’ repayment impacts. It was noted that other tax districts in the county also received their own ARPA funds, but fire districts did not.

One official at the meeting asked whether the Treasury’s reserves could help in this situation, since, as they said, they were “only a little bit to blame” for the sequence of events. But that sounded unlikely.