Metro's 2009 extension of the regional construction excise tax was legal, an Oregon Court of Appeals court said Wednesday, putting another hurdle in front of efforts by regional homebuilders to stop the tax.
In his opinion, Appeals Court Judge Timothy Sercombe said the extension did not violate a 2007 statewide moratorium on new construction taxes, in place until 2018. Homebuilders argued that the extension of the construction tax was in fact a new tax, because Metro changed what the money from the tax would be spent on.
The builders also said Metro didn't follow its own rules by failing to convene a tax study committee before imposing new taxes. The plaintiffs included the Home Builders Association of Metropolitan Portland, Eastview Development and Matrix Development, the parent company of Legend Homes.
A Multnomah County circuit court ruled against the plaintiffs before the issue went to trial; Sercombe heard oral arguments on the case on June 6, 2011.
In the ruling, Sercombe said the state law that created the moratorium on construction taxes, Senate Bill 1036, is clear.
"Metro's 2009 ordinance did not conflict with SB 1036," Sercombe wrote, adding "because … Metro's ordinance was, in its pertinent part, an extension or continuation of a tax, rather than the imposition of a 'new tax,' Metro was not required to convene a 'tax study committee.'
"The trial court did not err in entering judgment for the defendant," Sercombe wrote.
When Metro initially created the construction excise tax – a fee of 0.12 percent of the value of new construction, or $180 for a $150,000 building – it was designed to raise $6.3 million to pay for planning in urban growth boundary expansion areas. The tax was set to expire when the $6.3 million was raised.
SB 1037, passed in 2007, said taxes that existed before May 1, 2007, could be extended. In 2009, about six months before the excise tax was projected to hit the $6.3 million mark, Metro got an advisory group together to talk about whether the tax should be extended, and what the money from an extended tax should be used for.
Some leaders from cities in the Metro region, but not on the urban edge, were frustrated that new construction in those areas was paying for planning in new communities. The extension of the excise tax allotted proceeds to fund planning grants for any community within Metro's jurisdiction, not just the newer areas.
A portion of the proceeds from the tax was also set aside to plan the still-nascent urban reserves, which were approved in 2010.
The plaintiffs said that change – from planning for new urban areas to offering grants to existing cities – amounted to creating a new tax.
Tom Brown, an attorney for the builders, said Wednesday afternoon that he and his clients were still reviewing Sercombe's opinion.
"We continue to evaluate the opinion to determine whether it's appropriate to ask the Supreme Court to review the case," he said.
Metro Attorney Alison Kean Campbell said the regional government believes it's within the bounds of applicable laws.
Note: An earlier version of this story indicated that Judge Timothy Sercombe was the only Court of Appeals judge reviewing the case. The case was also heard by judges David Brewer and Darleen Ortega. Sercombe wrote the opinion for the court.