A couple of Deschutes County residents are banging the drum about fixing an expensive loophole. But the details on how to fix the problem have proven challenging, and the exact cost to taxpayers has proven elusive.
Thousands of rural residents in Deschutes County have opted to defer property taxes on farmland through a state program designed to encourage commercial farming on lands designed for that purpose. But there’s a catch: some of them aren’t farming at all.
Some residents have residential mortgages that don’t allow commercial farming, and skirt the rules by taking a deferral, said Yon Olsen, a Deschutes County resident and hemp farmer.
The loophole has Olsen and others calling for the residents to pay the money they owe or risk jeopardizing the program.
“This has been going on for a long time; this is multigenerational,” Olsen said .
For years, Olsen has been working to get attention on the issue, and his efforts may be paying off. A handful of Central Oregonians, including Eileen Kiely, a retired financial controller who ran for the Oregon House of Representatives in 2018, and Ed Barbeau, the owner of a Tumalo pizza shop who ran for the Deschutes County Commission the same year, have spoken up about the issue.
“Tax fraud is not a victim-less crime,” Kiely wrote in an email. “If local government is being cheated out of their major revenue source, we all pay for it in loss of critical services.”
Still, Scot Langton, Deschutes County’s assessor, said the county’s hands are tied when trying to deal with it, as the deferral program operates through Oregon law.
“I’m not seeing where the county has any ability to redefine state law,” Langton said.
Oregon’s land-use policies date back to 1961, when the Legislature first allowed special property tax assessments for land use exclusively for farming, according to Rich Hoover, public information officer for the Oregon Department of Revenue. Under the law, Deschutes County and other Oregon counties offer tax deferrals to residents who own farmland and are looking to farm commercially on their property. Langton said the program is designed to keep land zoned for agriculture available for farmers.
In Deschutes County, however, parcels zoned exclusively for farm use tend to be smaller than comparable parcels in other counties, a quirk in Oregon’s byzantine land-use system. Barbeau noted that some parcels are virtually un-farmable.
Consequently, Olsen said many of the rural parcels have been used for hobby farming or for residential use.
“These (properties) have all been soaked up by people over the last 15 years as trophy homes,” Olsen said.
Olsen, who sold mortgages for 14 years in Deschutes County, said federally backed residential mortgage contracts typically contain language preventing the property from being used for farming.
Moreover, the Oregon Department of Revenue’s farm use manual notes that, on parcels zoned for exclusive farm use, any use considered incompatible with returning the land to farm use, including residential, industrial or other types of commercial operations, are ineligible for tax deferral.
Olsen owns a commercial operation in the rural county, and said he’s been frustrated for years at what he sees as an undeserved tax deferral, one that could be costing the county money that could go to other projects.
“I don’t understand how that’s going on in this county,” he said.
Langton said the size of the deferral varies based on factors like location and whether the land is dry or irrigated. For example, a particular property on SW 46th Street outside Redmond would owe $3,293 in taxes if the property was assessed at its maximum value, Langton wrote in an email. With the deferral in place, however, that tax rate drops to $2,291.
Because of that, there is disagreement over how much the county could be receiving. Olsen and Barbeau said the county could be missing out on millions of dollars. However, Langton vigorously disagreed with that assessment, saying the number is likely significantly lower, though he did not provide an estimate.
Langton said the county does require signed affidavits from residents seeking deferrals, stating that their primary purpose is farming. He said the county will audit these properties on an annual basis, and he said they’re looking for livestock, fences and other evidence of farming. Still, he acknowledged it isn’t a rigorous examination.
“It’s a pretty low bar,” Langton said.
Langton said he spoke with Olsen, and called his proposal “intriguing.” Still, he said the county has little discretion to interfere with state land use policy. Deschutes County Commissioner Phil Henderson echoed the same sentiment, noting that the county couldn’t interfere with mortgage agreements between citizens.
“That’s a private contract, and we don’t really have immediate access to that,” Henderson said.
However, Hoover wrote in an email that individual counties are the responsible parties for administering and monitoring the properties in the special assessment programs.
Barbeau called for the county to put together a study to determine how widespread the issue is, and potentially to send out a letter asking residents to get the deferral removed if they aren’t farming.
“We really realized that (some residents) were getting away with something,” Barbeau said Friday.
— Reporter: 541-617-7818, firstname.lastname@example.org