If Oregon authorizes school districts to charge homebuilders a 'school impact fee' to cover the cost of new schools, would that fee count as a property tax under Measure 5 that needs voter approval?
Subject
The Honorable Kurt Schrader, State Representative
Plain-English summary
Representative Schrader was thinking about legislation to let school districts charge a "school impact fee" on developers of new residential property, the way local governments already used system development charges (SDCs) for water, sewer, and parks. The question was whether such a fee would run into two constitutional walls: Measure 5's property tax cap, and Article IV section 25's three-fifths supermajority requirement for "bills for raising revenue."
Article XI section 11b (Measure 5). A "tax" under Article XI section 11b(2)(b) was "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." A charge that fit that definition was subject to the section 11b rate limits, and any bonds payable from such charges required voter approval under section 11b(3)(b).
The AG concluded the school impact fee could be structured to avoid that label. The trick was to impose the fee on the person who developed the property and tie it to the privilege of engaging in the development activity, not to the property itself or to mere ownership. A fee that triggered when someone took the action of developing was a fee on the development activity, not a charge on property ownership.
That structural choice could survive even with optional features: a cap on the fee, a graduated fee scale, an exemption for low-income housing, and a fee amount calculated by reference to the occupancy, size, or value of the residential improvement. None of those features by themselves converted the fee from an activity-based charge into a property tax, as long as the trigger remained the development activity rather than the ownership itself.
Article IV section 25. Article IV section 25 required three-fifths approval in both houses for any "bill for raising revenue." The AG concluded that a school impact fee bill structured only to defray additional costs caused by the development would not be a "bill for raising revenue." Revenue-raising bills aim at generating government revenue beyond what's needed to cover specific costs. A bill that ties fee amounts to the costs the development creates is a cost-recovery measure, not a revenue measure.
The AG added a hedge: it was "at least questionable" whether Article IV section 25 even applied to state legislation that authorized local governments to impose taxes, as opposed to a state legislation that imposed taxes directly. So even if the AG's revenue-bill analysis were wrong, the supermajority requirement might still not apply.
Practical takeaway. A school impact fee was constitutionally feasible if drafted with care. The drafter had to make sure the fee fell on the developer's activity rather than on the property, and had to peg the amounts to costs the development created.
Currency note
This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Why did Measure 5 even reach school impact fees?
Because Measure 5 set rate limits for property taxes for schools, and any new "tax" within section 11b's definition would slot under those limits. If a school impact fee were a property tax, capacity might already be exhausted, and any bonds payable from such taxes would need voter approval.
What was the constitutional fix?
Structure the fee as a charge on the act of development, not on property ownership. The fee would trigger when the developer applied for a permit or pulled a building permit, would be paid by the developer, and would be tied to the privilege of engaging in development.
Could the legislation cap the fee?
The AG said yes. A statutory cap did not convert an activity-based fee into a property tax. The fee remained tied to the development activity rather than to property ownership.
Could the legislation include a graduated fee scale or size-based formula?
Yes, the AG concluded. A graduated scale or a formula tied to occupancy, size, or value of the residential improvement did not change the character of the fee. The fee was still imposed on the developer's act of developing, even if the amount varied with characteristics of the resulting improvement.
Could the legislation exempt low-income housing?
Yes. An exemption for low-income housing did not convert the fee into a property tax.
Would the bill need three-fifths approval to pass?
The AG concluded no, if the bill was structured to defray costs caused by the development rather than raise general revenue. The AG also flagged a deeper question: whether Article IV section 25 even applies to state legislation authorizing local fees. The opinion did not resolve that, but suggested it was at least debatable.
Background and statutory framework
Article XI, section 11b, of the Oregon Constitution, added by Ballot Measure 5 in 1990, separated property tax rate limits for schools from those for other government operations. Section 11b(2)(b) defined "tax" as "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."
Section 11b(3)(b) required voter approval of bonds payable from property taxes if the taxes were to be excluded from the section 11b rate limits. New schools require capital construction, so school bonds funded by property taxes needed voter approval to escape Measure 5.
ORS 223.297 to 223.314 set out Oregon's system development charge framework, which already authorized SDCs for water, sewer, drainage, transportation, and parks. ORS 223.299(4)(a) defined "system development charge" as a "reimbursement fee, an improvement fee or a combination thereof assessed or collected at the time of increased usage" of public services.
Article IV section 25 required three-fifths approval in both legislative chambers for "bills for raising revenue." The doctrine distinguished revenue-raising bills from cost-recovery and regulatory bills.
Comeaux v. Water Wonderland Improvement Dist., 12 OTR 132 (1992), aff'd 315 Or 562 (1993), held that a charge imposed by a non-governmental entity could not be a Measure 5 "tax" because the definition required imposition by a governmental unit.
Citations
- Oregon Constitution Article XI, section 11b (Measure 5 property tax rate limits)
- Oregon Constitution Article XI, section 11b(2)(b) (definition of "tax")
- Oregon Constitution Article XI, section 11b(3)(b) (voter approval for bond-payable taxes)
- Oregon Constitution Article IV, section 25 (three-fifths approval for revenue bills)
- ORS 223.297 to 223.314 (System Development Charges Act)
- ORS 223.299(4)(a) (definition of "system development charge")
- Comeaux v. Water Wonderland Improvement Dist., 12 OTR 132 (1992), aff'd 315 Or 562 (1993)
Source
- Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
- Original PDF: https://www.doj.state.or.us/wp-content/uploads/1998/06/op8258.pdf
Original opinion text
June 2, 1998
No. 8258
This opinion is issued in response to a request from The Honorable Kurt Schrader, State Representative, concerning
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 PRESENTED
May 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 GIVEN
Legislation 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 PRESENTED
May 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?
ANSWER GIVEN
A 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.
DISCUSSION
I. Article XI, Section 11b of the Oregon Constitution
The 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.
Or 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 ownership 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.(1)
This distinction between property taxes subject to Article XI, section 11b, and privilege taxes related to the use of property
has been affirmed in subsequent court cases. The Oregon Tax Court addressed the very issue that was addressed in 46 Op
Atty Gen 442, concluding that because the amusement device tax of ORS 320.011(1) is imposed upon a person who
engages in "the business of display or operation * * * for gain, benefit or advantage," it is a privilege tax imposed upon a
person engaging in a business, not a charge on property for purposes of Article XI, section 11b. Alien Enterprises, Inc. v.
Dept. of Rev., 12 OTR 126, 130 (1992). Conversely, the Tax Court found that the City of Gresham's storm drainage user
charge was a tax "on property" because it applied to all "impervious surfaces," which by definition meant virtually all
improvements, and hence it was a "tax" under Article XI, section 11b. Dennehy v. City of Gresham, 12 OTR 194, 197
(1992).
The Oregon Supreme Court determined that a differently worded city storm drainage utility fee was not a "tax" under
Article XI, section 11b, however, because it was not a charge upon property, but a fee for service, and it was imposed on
the person responsible for paying the city's water utility charge, a person who was not necessarily the owner of the land.
Roseburg School Dist. v. City of Roseburg, 316 Or 374, 851 P2d 595 (1993).
In this case, City structured the storm drainage utility fee in an effort to avoid the limitations of [Article XI, section 11b]. *
* * Under the [Roseburg Municipal Code], the person responsible for paying City's water utility charges for a particular
piece of property is responsible for paying the storm drainage utility fee. * * * Thus, the fee is not necessarily imposed on
the owner, who may not be the occupier of the property and responsible for its water usage.
Id. at 379-80.
C. School Impact Fee and Article XI, Section 11b
Based on the foregoing analysis and authorities, we conclude that legislation may be enacted authorizing a school impact
fee that would not be a "tax" for purposes of Article XI, section 11b, of the Oregon Constitution. To avoid the limitations
of this constitutional provision, the fee must fall on the person who develops the property, not on the property, and must be
a consequence of being granted the privilege of engaging in development activity, not a consequence of mere ownership of
the property. Assuming that these conditions are met, the fee would not become a "tax" for purposes of Article XI, section
11b, whether or not (a) there was a cap set on the fee, (b) the fee was subject to a graduated fee scale, (c) low income
housing was exempted from the fee, or (d) the fee was based on the occupancy, size or value of the residential
improvement to real property.
II. Article IV, Section 25, of the Oregon Constitution
The next question concerns Article IV, section 25, of the Oregon Constitution, which requires that "bills for raising
revenue" be passed by three-fifths of all members elected to each House of the Legislative Assembly. Article IV, section
25, states in pertinent part:
(1) Except as otherwise provided in subsection (2) of this section, a majority of all the members elected to
each House shall be necessary to pass every bill or Joint resolution.
(2) Three-fifths of all members elected to each House shall be necessary to pass bills for raising revenue.
In interpreting a constitutional provision adopted through the initiative or referendum process, we apply the same method
of analysis outlined by the court in PGE v. Bureau of Labor and Industries, 317 Or 606, 612 n 4, 859 P2d 1143 (1993).
We first look at the text and context of the provision to determine the intent of the voters, giving words of common usage
their plain, natural and ordinary meaning. Id. at 611. The context of a constitutional provision adopted by ballot measure
includes related ballot measures before the voters at the same election and pre-existing provisions of the constitution.
Ecumenical Ministries v. Oregon State Lottery Comm., 318 Or 551, 559, 871 P2d 106 (1994). If the voters' intent is clear
from the text and context, the search ends there. If the voters' intent is not clear from the text and context of the
constitutional provision, we look to its history to attempt to discern that intent. Id. at 559. The history of an initiated or
referred constitutional provision includes information available to the voters at the time the measure was adopted, such as
the ballot title and arguments for and against the measure included in the Voters' Pamphlet, as well as contemporaneous
news reports and editorials on the measure. Id. at 560 n 8.
A. "Ordinary Meaning" of the Words
The pivotal expression in Article IV, section 25, is found in the common words "bills for raising revenue." Taken
individually, each of these words has an ordinary, non-technical meaning. Thus, "bills" refers to written proposals for laws
that have been introduced in the legislature. The word "for" is merely the preposition pointing to the intended effect of the
bill, as "in order to bring about or further." Webster's Third New International Dictionary (Webster's) 886 (unabridged
1993). In this context, "raising" is the present progressive tense of "raise," which means "to bring together : collect, gather,
levy." Id., at 1877. And, the word "revenue" means the "yield of taxes, excises, customs, duties, and other sources of
income that a nation, state, or municipality collects and receives into the treasury for public use : public income of
whatever kind." Id. at 1942. This suggests that when the people approved the three-fifths requirement, they may have
intended it to apply to bills that raise all forms of income produced by state government. Nevertheless, we must also
consider the meaning of the phrase "bills for raising revenue" in the context of other, related provisions of the constitution.
The phrase "bills for raising revenue" also appears in Article IV, section 18, of the Oregon Constitution, which requires
such bills to originate in the House of Representatives. In the only case concerning the three-fifths requirement in Article
IV, section 25, the court observed that the phrase "bills for raising revenue" has been part of the basic constitutional law of
Oregon since statehood and of the nation since its founding. Dale v. Kulongoski, 322 Or 240, 242, 905 P2d 844 (1995)
(citing Or Const, Art IV, § 18; US Const, Art I, § 7). Article IV, section 18, was part of the original Oregon Constitution
approved in 1857, and is similar to, and was probably based on, Article I, section 7, of the United States Constitution and
similar provisions of many other state constitutions.(2) As to the meaning of the phrase "bills for raising revenue," the court
observed:
While it cannot be gainsaid that the phrase [bills for raising revenue] includes general taxation bills, for such bills do
produce revenue, the phrase itself historically has not been deemed to require interpretation or translation in order that it be
understood. See, e.g., Northern Counties Trust v. Sears, 30 Or 388, 401-03, 41 P 931 (1895); 25 Op Atty gen 100-01
(1950-52); Twin City Bank v. Nebeker, 167 US 196, 17 S Ct 766, 42 L Ed 134 (1897).
322 Or at 242-43. Although viewing the meaning of the words "raising revenue" to be "simple and understandable," id. at
243, the court did not provide a definition, let alone address the issues of what might be a bill for "raising revenue."(3)
Because the court cited state and federal Origination Clause cases as a basis for its statement that the words "bills for
raising revenue" did not require interpretation, we look to the historical meaning of that phrase as construed by those cases.
See Davis v. O'Brien, 320 Or 729, 741, 891 P2d 1307 (1995) (prior case law interpretations are part of contextual
analysis).
B. Historical Meaning of "Bills for Raising Revenue"
We look first to the Oregon case cited in Dale v. Kulongoski and the cases cited therein. In Northern Counties Trust, 30 Or
388, 401-03, 41 P 931 (1895), the Oregon Supreme Court addressed whether an 1893 act of the legislature that provided
salaries for the counties' sheriffs, clerks and recorders and levied taxes for the same in lieu of local fees previously charged
was one for raising revenue and, therefore, unlawful in that it originated in the Senate in violation of Article IV, section 18,
of the Oregon Constitution. In concluding that the law was not one for raising revenue, the court commented as follows:
The controlling feature which characterizes bills of this nature, says JOHNSON, J., is that they "impose taxes upon the
people, either directly or indirectly, or lay duties, imposts, or excises, for the use of the government, and give to the
persons from whom the money is exacted no equivalent in return, unless in the enjoyment, in common with the rest of the
citizens, of the benefit of good government": United States v. James, 13 Blatch. 207 (Fed. Cas. 15464) [challenging the
validity of an act originating in the U.S. senate that increased the rate of postage] * * * Mr. Story, in discussing this clause
of the national constitution, says "the history of the origin of the power already suggested abundantly proves that it has
been confined to bills to levy taxes in the strict sense of the words, and has not been understood to extend to bills for other
purposes, which may incidentally create revenue. * * * And this is the trend of subsequent decisions of the national courts
touching the construction of this clause of the constitution: * * * .
30 Or at 401-02 (emphasis added; citations omitted).
The Northern Counties Trust opinion cited Dundee Mortgage Co. v. Parrish, 24 F 197, 201 (D Or 1885), which held that a
bill repealing a property tax exemption was not a bill for raising revenue because the bill did not authorize or provide for
the levying of a tax.
A bill for raising revenue is a bill levying a tax on all or some of the persons, property, or business of the country, for a
public purpose; and the assessment or listing and valuation of the polls or property preliminary thereto, and all laws
regulating the same, are merely measures to secure what may be deemed a just or expedient basis for the levying of a tax
or raising a revenue thereon.
Id. at 200 (emphasis added).
The court also noted Mumford v. Sewall, 11 Or 67, 4 P 585 (1883), which held that a bill repealing a mortgage tax
exemption was not a bill for raising revenue, and made this observation:
But it is not sufficiently clear that a law which merely declares that certain property heretofore exempt from taxation shall
thereafter be subject to taxation is strictly a law for raising revenue. We do not feel warranted, therefore, as at present
advised, in declaring the law unconstitutional on this ground.
Id. at 71 (emphasis added).(4)
The discussion of "bills for raising revenue" in Northern Counties Trust ends with this comment:
Considering the similarity of the state and national constitutions touching bills for raising revenue, and the high and
unbroken line of authority upon the proper construction of the latter, it is certainly a very persuasive and weighty argument
for applying the same construction to the former.
30 Or at 403.
The U.S. Supreme Court case cited in Dale v. Kulongoski addressed whether an act of Congress that provided for a
national currency and imposed a tax to meet the expenses of the new currency program was a revenue bill which, under the
federal constitution, must originate in the House of Representatives. Twin City Bank v. Nebeker, 167 US 196, 17 S Ct 766,
42 L Ed 134 (1897). The Court concluded that it was "clearly not a revenue bill" and stated:
Mr. Justice Story has well said that the practical construction of the Constitution and the history of the origin of the
constitutional provision in question proves that revenue bills are those that levy taxes in the strict sense of the word, and
are not bills for other purposes which may incidentally create revenue. 1 Story, Const. § 880.
Id. at 136 (emphasis added).(5)
Traditionally, bills imposing fees and special assessments have not been viewed as "bills for raising revenue," either
because the charge is an exercise of governmental power for regulatory purposes or is to reimburse the government for
certain expenses. For example, the Oregon Supreme Court found that a bill requiring liquor to be sold only by licensed
vendors and imposing a fee for a liquor license was an exercise of the state's regulatory power and not a bill for raising
revenue. State v. Wright, 14 Or 365, 374, 12 P 708 (1887), overruled on other grounds, Warren v. Crosby, 24 Or 558, 34 P
661 (1893). Similarly, this office concluded that a bill requiring payment of fees relating to agricultural motor fuel was not
a bill for raising revenue because the fees would be credited to the motor fuel fund and not used for payment of the general
expenses of state government. 19 Op Atty Gen 258 (1939); see also 17 Op Atty Gen 242 (1935) (bill that increased certain
pilotage fees was not a bill for raising revenue). In contrast, we concluded that a bill that would impose fees on race
licenses and on gross receipts from mutual wagering must originate in the House because the revenues would far exceed
the cost of regulation. 25 Op Atty Gen 100 (1951); see also 15 Op Atty Gen 113 (1931) (bill requiring local governments
to levy a privilege tax on gross earnings of utilities was a bill for raising revenue because revenue would far exceed cost of
regulating the utility).
In the Head Money Cases (Edye v. Robinson), 112 US 580, 5 S Ct 247, 28 L Ed 798 (1884), the United States Supreme
Court determined that a fee imposed by the federal government on ship operators, rather than on the passengers (the
"direct" beneficiaries of the fee), was not a "tax." The Court found that a tax was, in general terms, an exaction that goes to
the general support of government. Id. at 595-96. Thus, the Court also held that a bill that imposed a property tax in the
District of Columbia to pay for certain railroad improvements in the district was not a bill for raising revenue under the
federal Origination Clause. Millard v. Roberts, 202 US 429, 26 S Ct, 50 L Ed 1090 (1906). More recently, the Court held
that a bill imposing a special assessment does not raise revenue within the meaning of the Origination Clause. United
States v. Munoz-Flores, 495 US 385, 398, 110 S Ct 1964, 1972, 109 L Ed2d 384 (1990)
In summary, the courts have generally tended to favor a narrow construction of what constitutes a "bill for raising revenue"
which must originate in the lower house. Sutherland Stat Const § 9.06 (5th Ed 1994 rev), at 582; see also Barnum v. Dept.
of Rev., 5 OTR 508, 524 (1974). A "high and unbroken" line of both federal and state cases discussing the Origination
Clause has held that the phrase "bills for raising revenue" will be construed narrowly to apply only to those measures
whose primary purpose is to raise revenues for general governmental uses. A bill that creates a particular governmental
program and raises revenue specifically to support that program is not a bill for raising revenue.
It may be argued that a bill authorizing a new fee or assessment to defray part or all of an expense that traditionally has
been borne by government effectively raises revenue for traditional governmental expenses because it "relieves" the
government from funding that expense from "tax" revenues and makes those "extra" tax revenues available for other,
general governmental purposes. Although it is conceivable that the courts might agree with this argument, for a number of
reasons we believe that is unlikely. First, we have found no cases suggesting a willingness to adopt this view if presented.
Second, as noted above, the courts generally have favored a narrow construction of what constitutes a revenue bill which
must originate in the lower house, and we believe the courts will apply similar principles in construing Article IV, section
25, of the Oregon Constitution as to whether a bill requires approval by three-fifths of both legislative houses. Third, even
though the legislature is now subject to a permanent duty, under Article XI, section 11(9), of the Oregon Constitution
(Measure 50 (1997)) to replace from the General Fund revenue lost by the public school system because of the limitations
of that section, this duty is not related specifically to school construction costs, particularly additional costs due to
development. In fact, the additional cost of such schools arises not from the limitations of Measure 50, but rather from
growth in the school age population brought about by development. Finally, the fact that such costs have traditionally been
defrayed by tax revenues does not imply a legal duty to continue paying for such costs with tax revenues. Thus, a new fee
that funds a category of government expense that historically has been funded by tax revenues does not "raise revenue" for
general governmental uses by freeing up the tax revenues for other purposes because it is not necessary for the government
to fund the original expense with taxes or otherwise.
Accordingly, if the same meaning is given to the phrase "bills for raising revenue" in Article IV, section 25, as has been
given to that phrase in Article IV, section 18, we believe that a court would conclude that legislation authorizing a school
impact fee is not a "bill for raising revenue" for purposes of the three-fifths requirement.
C. Enactment History of Three-Fifths Requirement
Because it is possible that the cases interpreting the Origination Clause, Article IV, section 18, may not govern the
interpretation of Article IV, section 25, we also consider the history of section 25. The three-fifths requirement to pass bills
for raising revenue was added to Article IV, section 25, on May 21, 1996, when the people approved Ballot Measure 25,
which had been referred to the people by House Joint Resolution 14 (1995). Additional evidence of the meaning of the
expression "bills for raising revenue" is found in the Legislative Argument in Support of Measure 25, which constitutes
part of the history of the measure.(6) The Argument states, in pertinent part:
Voting yes on Ballot Measure 25 will make it more difficult for the Oregon Legislature to increase tax rates or to impose
new taxes. * * * Ballot Measure 25 would thus ensure that higher tax rates or new taxes could be passed by the legislature
only if there was broad consensus throughout the state on the need for such measures.
Adopting Ballot Measure 25 will result in a state government that is more responsive to voters by limiting the state's
ability to impose higher taxes or new taxes on the public to only those cases where there is substantial majority support for
those taxes.
(Emphasis added.) None of the other arguments for or against Measure 25 that appeared in the Voters' Pamphlet took issue
with the emphasized language. Thus, we may reasonably assume that voters understood that the three-fifths vote
requirement of Measure 25 would apply to laws that "increase tax rates," "impose higher taxes" or "impose new taxes."
In this way, the Voters' Pamphlet is consistent with the historical meaning of the words "bills for raising revenue," which is
discussed above. The ordinary meaning of the word "tax" is a "pecuniary charge imposed by legislative or other public
authority upon persons or property for public purposes : a forced contribution of wealth to meet the public needs of a
government." Webster's at 2345. Similarly, as the Northern Counties Trust, Dundee Mortgage Co. and other Origination
Clause cases indicate "bills for raising revenue" impose "taxes" on people for the general use of the government. Taxes are
distinguished from assessments, which give to the persons from whom the money is exacted an equivalent government
benefit in return. Northern Counties Trust, 30 Or at 402; Dundee Mortgage Co., 24 F at 201.(7)
Indeed, the distinction between taxes and assessments is not limited to Origination Clause jurisprudence; rather, it is one of
general law. See Dennehy v. Dept. of Rev., 305 Or 595, 603, 756 P2d 13 (1988) (holding that tax increment financing of
urban renewal districts was not subject to tax base limit of then Article XI, section 11, of the Oregon Constitution because
the charges were more "akin to special assessments for the benefit of the property," than a property tax). In Northern Pac.
Ry. Co. v. John Day Irr. Dist., 106 Or 140, 211 P 781 (1923), the court observed:
The difference existing between taxation for general governmental purposes by the state or its political subdivisions, and
assessment for local improvements, was well understood by the people of the state for a period of half century [sic] prior to
the adoption of the Six Per Cent Tax Limitation Amendment.
Id. at 164.
Because we may assume that the voters read the Voters' Pamphlet, we may also assume that they understood that the
phrase "bills for raising revenue" in Measure 25 referred to bills that would impose new or higher "taxes." This
understanding of "bills for raising revenue" is consistent with that developed in cases addressing the same phrase in the
Origination Clauses of the state and federal constitutions.
D. Bills Authorizing Local Taxes
Assuming arguendo that a school impact fee is viewed as a "tax" creating revenue for general governmental purposes, it is
still unlikely that the courts would hold that a bill authorizing the school impact fee is subject to Article IV, section 25, of
the Oregon Constitution. By its terms, Article IV, section 25, applies only to state legislation, for it refers to "bills" and
requires approval of each "House" of the Legislative Assembly. In fact, the Legislative Argument in Support of Measure
25 states that the measure will limit the "state's ability" to impose higher or new taxes. Thus, the amendment is a limitation
on state, not local government, legislation. As we understand it, the legislation at issue would not itself "raise revenue" or
"impose" taxes. Rather, the legislation would only authorize school districts to raise revenue through the school impact fee.
E. School Impact Fee and Article IV, Section 25
Applying the foregoing points and authorities, we conclude that the courts probably would hold that a bill authorizing
school districts to impose school impact fees would not be a bill for raising revenue under Article IV, section 25, of the
Oregon Constitution. If the Oregon Supreme Court adheres to the line of cases it has followed in interpreting the same
phrase in Article IV, section 18, it is very unlikely the court would find that a bill authorizing school impact fees requires
three-fifths approval of both houses of the Legislative Assembly. In reaching this conclusion, we assume that such
legislation would authorize funding for only those capital expenditures of school districts that are necessary to provide
school services to new residential developments, not to raise revenues for general government purposes.(8)
HARDY MYERS
Attorney General
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Likewise, in 46 Op Atty Gen 447 (1991), we concluded that motor vehicle registration fees, weight-mile taxes,
snowmobile vehicle registration fees, title transfer fees and commercial vehicle proportional registration fees were not
"property taxes" under Article XI, section 11b, of the Oregon Constitution because they were not imposed on property or
property owners as a direct consequence of ownership of that property.
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Apparently, the concept was borrowed from the British Parliament by the Commonwealth of Virginia for its constitution
of 1776. The provision in the Virginia constitution was the progenitor of that found in the federal constitution. Dale, 322
Or at 243 n 1, (citing 2 Story's Commentaries on the Constitution 338-65 (1st ed 1833)).
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The issue before the court in Dale was whether the words "raising revenue" in the title of the ballot measure proposing
the three-fifths requirement adequately described the measure.
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Although neither Northern Counties Trust nor Mumford expressly acknowledges the point, the validity of their
conclusion that a bill repealing a property tax exemption is not a "billing for raising revenue," may depend upon the fact
that, under the levy-based property tax system authorized by former Article XI, section 11, of the Oregon Constitution that
existed at the times of those decisions, the repeal of an exemption did not increase the total amount of taxes that lawfully
could be imposed. Rather, the repeal simply shifted taxes from those taxpayers who had not enjoyed the benefit of the
exemption to those who had. Under the current rate limitations of the Article XI, section 11, however, it is conceivable that
a bill repealing an exemption could result in an increase in the total amount of taxes collected and, thus, constitute a bill for
raising revenue.
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- Twin City Bank v. Nebeker has been frequently cited as leading authority on the meaning of the words "bills for raising
revenue" in Article I, section 7, of the United States Constitution. See, e.g., United States v. Munoz-Flores, 495 US 385,
397, 109 L Ed2d 384, 399, 110 S Ct 1964 (1990) (finding that an act, that may have originated in the U.S. Senate, which
imposed a special assessment on persons convicted of federal offenses did not violate the Origination Clause of Article I,
section 7, of the United States Constitution). It is ironic, then, that the Court that issued the Twin City Bank opinion
disclaimed such intent:
The case is not one that requires either an extended examination of precedents, or a full discussion as to the meaning of the
words in the Constitution, "bills for raising revenue." What bills belong to that class is a question of such magnitude and
importance that it is the part of wisdom not to attempt, by any general statement, to cover every possible phase of the
subject.
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42 L Ed at 136.
6. The explanatory statements and arguments published in the Voters' Pamphlet concerning a measure are part of the
history of the measure that may be considered in ascertaining the voters' intent. Ecumenical Ministries v. Oregon State
Lottery Comm., 318 Or 551, 560 n 8, 871 P2d 106 (1994); see also Lipscomb v. State Board of Higher Education, 305 Or
472, 484-85, 753 P2d 939 (1988); Northwest Natural Gas Co. v. Frank, 293 Or 374, 381, 648 P2d 1284 (1982). Although
the Oregon Supreme Court has admonished that "[d]iscriminating and cautious use must be made of such material because
of its partisan character," see State ex rel Chapman v. Appling, 220 Or 41, 68-69, 348 P2d 759 (1960), such cautions have
been given in the context of initiated measures. We are unsure whether they apply as well to legislatively referred
measures. In any case, because no arguments appear in the Voters' Pamphlet that contradict those identified here, we
believe the court would assume, as we do, that the voters would accept the Legislative Argument as an accurate
description of the intended effect of the proposed constitutional amendment and, thus, give it weight.
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Taxes are also to be distinguished from fines and penalties which are intended to regulate and punish misconduct.
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For similar reasons, the school impact fee should not be considered a "property tax" for purposes of Article XI, section
11 (Measure 50 (1997)). Nevertheless, the "fee shifting restriction" in Article XI, section 11(19), limits not only property
taxes but also other charges. It provides, in part:
(a) The Legislative Assembly shall by statute limit the ability of local taxing districts to impose new or additional fees,
taxes, assessments or other charges for the purpose of using the proceeds as alternative sources of funding to make up for
ad valorem property taxes revenue reductions caused by the initial implementation of this section, unless the new or
additional fee, tax, assessment or other charge is approved by voters.
We have not been asked to consider whether and, if so, how a school impact fee might be subject to this provision. We
note, however, that Oregon Laws 1997, chapter 541, section 456(5) defines "shift" in terms of new or increased fees being
imposed only "during the initial implementation period" to replace property tax reduction amounts. Section 456(9) defines
"initial implementation period" as "the fiscal year for which property tax reductions are calculated under sections 20 to 35
of this 1997 Act [310.200 to 310.242]." ORS 310.200 to 310.242 relate to the ad valorem property tax reductions for the
tax year beginning July 1, 1997. ORS 310.200. Thus, assuming for the sake of discussion that the "fee shifting restriction"
in Article XI, section 11(19), would apply to a school impact fee, its effect would be limited to the initial implementation
period" of Measure 50, i.e., tax year beginning July 1, 1997.
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