Oregon Advisory Opinions October 04, 1954: OAG 54-64 (October 4, 1954)

Oregon Attorney General Opinions

1954.

OAG 54-64.

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You have requested the opinion of this office as to the interpretation of § 11, Article XI, of the Oregon Constitution. The request involves three questions which shall be taken up in their order. The first question is as follows:

"Jackson County has had at least three elections in taxing districts to create a new tax base. One town which had a legal base of $2,700 has increased it to $12,000. The question has arisen as to whether this figure must be used for the new budget, or any amount under that. If a lower figure is used what will be the effect on the three year base if the higher figure is not reached in three years?"

As you are very well aware, § 11, Article XI, of the Oregon Constitution, was amended, as proposed by H.J.R. No. 9 of the Forty-sixth Session of the Legislative Assembly, by a vote of the people at the general election held on November 4, 1952. This section of the Constitution in so far as it is applicable to the problem under consideration is as follows:

"(1) Unless specifically authorized by a majority of the legal voters voting upon the question, no taxing unit, whether it be the state, any county, municipality, district or body to which the power to levy a tax shall have been delegated, shall in any year so exercise that power as to raise a greater amount of revenue * * * than its tax base, as hereinafter defined. The tax base of each said taxing unit for any given year shall be: (a) The total amount of the tax lawfully levied by it in any one of the three years immediately preceding * * * plus 6 percentum of the said total amount; or, (b) an amount approved by a majority of the legal voters voting upon the question of establishing a tax base.

"(2) The question of establishing a tax base shall be submitted at a regular general or primary election. Every such measure shall specify in dollars and cents the amount of the tax base in effect and the amount of the tax base sought to be established, and the new tax base, if adopted, shall first apply to the levy for the fiscal year next following its adoption." (Emphasis supplied)

A canon of constitutional and statutory construction is that "The provisions of written law, both constitutional and statutory, should be construed in a manner reflecting the purpose of such legislation." School District No. 1 v. Bingham, 174 Or. 540, 547. The purpose for the amendment of § 11, Article XI, Oregon Constitution, was fully understood particularly by those persons who dealt with the revenue law of the State of Oregon and its political subdivisions. Prior to the

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1952 amendment the tax base was controlled by the highest levy made in the previous three years plus six per cent. All levies authorized by a vote of the people were considered outside of this limitation and could in no way affect the permanent tax base. It was also considered by many that upon failure of any tax-levying body to exercise its taxing power for three years immediately preceding the proposed levy would give rise to a condition where the tax base would be entirely lost. The limitations imposed an impractical and unrealistic condition, in that the tax-levying body could not exercise its power of taxation to secure the necessary revenue to meet the inflationary trends of the time without resorting to the burdensome procedure of special authorization. In other words, the prevailing six percent limitation was not geared to meet the economic trends of the time, that is, decrease in the purchasing power of the dollar and the heavy increase in the population of the state. With these well known factors in mind the 1952 amendment was proposed and adopted.

The purpose of the constitutional limitation was clearly reflected in the Bingham case, supra, where the court speaking of § 11, Article XI, Oregon Constitution, prior to the present amendment, said:

"Manifestly, the purpose thereof was two-fold, first, to place a limitation upon the amount of taxes which can be livied without first securing the approval of the electorate, and second, to give assurance that an amount shown by actual experience during the preceding triennium to have been sufficient plus 6 percentum thereof could be made available to the public without the necessity of a referendum thereon."

These two purposes have not been changed by the present amendment except in so far as the people now have reserved to themselves the power to establish a new base upon which the operating force of the six percent limitation is to apply.

The express wording of the amendment clearly discloses that the three year limitation, plus the six per cent, was to continue to operate as it had in the past except that such operation, rather than being confined to the levy of the previous triennium could now be increased by establishing a new base upon which the levy of the next fiscal year would apply. Subsection (1) of § 11, Article XI, of the Oregon Constitution, expressly provides that no taxing unit shall in any year exercise its taxing power to raise a greater amount of revenue than its tax base as defined. The tax base for any given year is the total amount of the tax lawfully levied in any one of the three years immediately preceding plus six percent or an amount approved by the majority of the legal voters voting upon the question of establishing the tax base. Under these provisions it is clear that in any given year there is only one tax base in existence; that is, the highest amount levied in the previous triennium plus six percent or an amount approved by the people. It is either one or the other but not both.

The language of subsection (2) of § 11, Article XI, of the Oregon Constitution, expresses the manner in which the new base etsablished by a vote of the people is to be applied. It provides that the new base "shall first apply to the levy for the fiscal year next following its adoption." This provision is an important and controlling factor in the application of the constitutional limitation. It requires the levying body of the taxing unit to put into operation the new tax base at the beginning of the next fiscal year following its approval by the people and by so doing brings into operation the six percent limitation. It gives effective force to the purposes of the Constitution in that the six percent limitation has continuous operating force and becomes immediately controlling upon the new base.

In applying the above interpretation to your first question it is apparent that it is the amount of the levy that is controlling and not the amount established by the new tax base. If the levying body finds it unnecessary to levy an amount up to the limit established by the new base, it is obvious that there has been a miscalculation in the amount of revenue necessary to meet the expenses of the taxing unit for that year. To allow the new base to become the controlling factor would read out of the Constitution the limitation imposed by subsection (2) of § 11, Article XI, as to the application of the base to the "levy for the fiscal year next following" and would also nullify the operating force of the six percent limitation § 11, (1) (a), Article XI, during the next triennium. This latter condition is clearly demonstrated if circumstances existed where the necessary expenditures of the taxing unit in subsequent years would not require a levy which would equal the base established.

The vote of the people, in authorizing the new base, only enlarges or extends the power of taxation within the new limits. By this vote the people do not levy a tax but only authorize their representatives, the tax-levying body, to exercise its taxing power within the limits approved. The vote, if a majority of the

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people are in favor of approving the question, carries into effect for that year a new tax base upon which the power of taxation may be exercised to become operative and reflected in the levy imposed the next following fiscal year. The Constitution makes no provision for a break or hiatus in the levying process by the taxing unit.

Your second question arises out of the following facts: It appears that the Port of St. Helens has filed a budget each year with the county assessor, but the current year is the first time in twelve years that a levy has been made by the Port. You ask what is the constitutional tax base of a taxing unit that has made no levy in any one of the three years immediately preceding the tax year in question? Is it necessary that the taxing unit hold an election upon the question of establishing a new tax base? The answers to these questions must be found in § 11, Article XI, set out above. As expressly provided in § 11, Article XI, the tax base in any given year is the total amount of the tax lawfully levied in any one of the three years immediately preceding plus six percent or an amount approved by a majority of the legal voters voting upon the question of establishing a tax base. The Constitution being a limitation upon the exercise of the taxing power by the legislative body, it is fundamental that this power be exercised within the limitations imposed. If no tax has been levied within any one of the three years immediately preceding the proposed levy, then it is apparent that there is no base upon which to exercise that authority and a new base must be established by a vote of the people. See answer to first question, supra.

Under the present amendment to § 11, Article XI, of the Oregon Constitution, it is only too clear that the people reserve to themselves the power to control the power to tax except in the case where a taxing unit has had continuing existence and a levy has been made during the preceding triennium. It is my opinion that the Port of St. Helens has no constitutional tax base and must seek a new tax base at the next general or primary election by submitting the question to the people for adoption.

Your third questions is as follows:

"A taxing district votes a new tax base [in conformity with Constitutional Amendment to § 11, Article XI] and levies the full amount of the base in the first fiscal year next following its adoption. May the district add 6 per cent to the succeeding year and continue to do this in subsequent years, or is the tax base a ceiling that can be exceeded only by the adoption by the people of a new tax base?"

This question appears to be fully discussed and settled by our answer to question No. 1. I again reiterate that I do not believe that it was the intention of the people in adopting the amendment to § 11, Article XI, of the Constitution, to remove from its operating force the six percent limitation. See Voters' Pamphlet, November 4, 1952, p. 19. The only purpose of the amendment, as I see it, was to allow an increase of the tax base within the six percent limitation and to do away with the necessity of the numerous special levies outside of this limitation. The very wording of the above quoted section compels such a practical construction and gears the amount of the taxes to be levied to the current operating expenses of government. Any other conclusion would tend to nullify the operating force of the constitutional limitations upon the exercise of the power to tax and would permit the establishment of an unrealistic tax base far in excess of the expenses of government.

To answer your questions specifically, the new base applies to the levy for the fiscal year next following its adoption and thereafter subsection (1) (a) § 11, Article XI, of the Constitution, comes into operation. The vote of the people only removes the constitutional limitation on the exercise of the power to levy a tax and establishes in any given year a new base upon which this power may operate. It is the total amount of taxes that has been lawfully levied in any one of the three years immediately preceding plus six percent that determines the tax base in the subsequent year following the establishing of the new base.

The establishment of a new tax base by a vote of the people pursuant to subsection (2), § 11, Article XI, of the Constitution, does not create a static condition in so far as the exercise of the power of taxation is concerned but does just what the Constitution says, establishes a new base for the given year upon which the six percent limitation may operate.