Decision could mean $9.5 million in lost revenue to taxing districts
Benton County taxing districts are facing a multimillion-dollar budget hit after the Oregon Department of Revenue lost a high-stakes property tax appeal filed by Hewlett-Packard Co., the county’s largest taxpayer.
The state has until June 15 to appeal.
In a decision issued last week, Oregon Tax Court Judge Henry Breithaupt ruled that HP’s Corvallis campus was significantly overvalued on property tax bills from 2008-09, 2009-10 and 2010-11. The tax assessments were prepared by the state Department of Revenue, which handles valuations of large industrial and utility accounts.
As a result of the decision, Benton County may have to refund an estimated $9.5 million in property tax payments and interest from the three years in question, plus a yet-to-be-determined amount for the subsequent tax year.
“To be perfectly honest, we were dumbfounded by this decision,” Benton County Assessor Tami Woodward said. “It wasn’t the news we were hoping for.”
All 53 of the county’s taxing districts will share in the pain.
Based on initial estimates by county revenue officials, it appears the city of Corvallis will take the biggest hit at about $2 million, followed by the Corvallis School District at $1.9 million, Benton County government at $1.7 million, Linn-Benton Community College at $385,000, the city of Albany at $373,000, the county library district at $211,000, the Linn-Benton-Lincoln Educational Service District at $176,000, the city of Philomath at $155,000 and the Corvallis Rural Fire District at $126,000.
Other area school districts besides Corvallis will feel the pinch as well, although the amounts were not immediately clear. The state school funding formula will make up part of the loss in at least some cases.
Dozens of small road, fire and water districts also will be impacted.
Barring an appeal, taxing districts would begin to see deductions starting this November, the next time property tax disbursements go out, according to Mary Otley, the county’s finance manager.
“We have the option to repay (Hewlett-Packard) over a five-year period, but we’d still be paying them 12 percent interest,” Otley said.
The case hinged on the widely divergent valuations placed on the 180-acre high-tech campus by HP and the state Department of Revenue. For the 2010-11 tax year, for instance, the state valued the property at $337 million while the company placed the value at $204 million.
By any measure, property values at the site have fallen steadily since the glory days of Hewlett-Packard’s inkjet printer business, which was centered in Corvallis.
The campus expanded rapidly from the mid-1980s to the mid-1990s, growing to about 2 million gross square feet of space in 11 buildings and employing as many as 8,000 people, according to court documents. But many of those jobs have since been outsourced to low-wage countries, and much of that space now stands idle or has been leased to other users.
HP argues that the highest and best use of the site should be calculated on what it calls the “core property,” roughly 1.2 million square feet of rentable space that could be used by a potential buyer if the property should ever be sold.
Candence Robinson, the Department of Revenue appraiser in the case, did not submit a highest and best use analysis, an omission that earned a stinging rebuke from Judge Breithaupt.
“On this subject particularly, and in other areas of the testimony generally, the appraiser was so evasive and confusing that the court cannot place much, if any, weight on her testimony or work,” Breithaupt wrote.
Elsewhere in his 12-page opinion, he called Robinson’s testimony “evasive, inconclusive and, at times, actually or seemingly contradictory.”
Department of Revenue spokesman Derrick Gasperini said the agency was still reviewing Breit-haupt’s opinion and had not yet decided whether to appeal to the Oregon Supreme Court. He declined to comment on the judge’s criticisms of Robinson.
“Obviously, we’re disappointed in the entire decision,” Gasperini said.