‘Frustrated:’ Jefferson County government agencies, large and small, facing impact from PGE tax overpayment

(Update: adding video, comments by Jefferson County Commissioner, Fire & EMS Chief)

MADRAS, Ore. (KTVZ) – Jefferson County officials met Friday with officials from dozens of taxing districts, from the library to cities and fire districts, to discuss a $1.8 million property tax over-payment by Portland General Electric, letting them know utility has agreed to reduce the repayment impacts on their budgets.

Jefferson County received an overpayment to local taxing districts by PGE while another county in the state saw an underpayment of $1.8 million.

"It was just kind of a misappropriation of where that asset was across the state," says county Commissioner Mark Wunsch said Monday.

Due to the accounting error, the county will now receive $370,000 less revenue than expected for its operating budget this fiscal year.

Only 12 of 37 taxing districts in Jefferson County receive a share of the tax revenue from PGE. But now, all taxing districts within the county will have to contribute to the refund, due to a state Supreme Court ruling in 1974.

"That could really affect, especially a small district, of not having that cash flow," Wunsch said. And so if you can pull things together and soften the blow for for everyone in the community, whether it's a school or fire district, a library, pool, whatever it is, and then to soften that blow."

Jefferson County Fire & EMS Chief Jeff Blake said, "We have never received any direct benefit, such as tax money from PGE, so the fact that we have to give up $54,000 is a little frustrating."

"We're going to do everything we can not to have it impact the public directly, such as we're not going to turn out, you know, turn off an ambulance," Blake said. "We're not going to cut line staff or anything like that, because that dollar amount isn't so big that it requires us to do that."

Blake says the cuts may have to come from equipment and training budgets.

In regard to the $500,000 dollar reduction in the refund, Wunsch said, "They didn't have to do it, and they did it generously to minimize the impact to Jefferson County and all the taxing districts."

Blake said, "We identified a problem - yes, it was a little late, but we're all working together to fix it, which I think is a fine example for how things need to get done in Central Oregon at the state level or even at the federal level."

Jefferson County commissioners are meeting Wednesday to discuss how the $500,000 reduction will be spread out over all the county tax districts.

PGE says the've implemented checks to reduce the amount of overpayments or underpayment in the future. The $500,000 grant is taken from the PGE's general fund, paid for by shareholders.

PGE, by far the state’s largest taxpayer, holds 17% of Jefferson County’s total tax valuation as of 2022 and pays $3.5 million to $5 million in yearly taxes, the Madras Pioneer reported.

Under state law and Department of Revenue requirements, the overpayment discovered earlier this year must be repaid to the taxpayer – PGE, county Administrator Jeff Rasmussen said Friday as he distributed a draft list of the original and revised refund/payback impacts on each taxing entity in the county.

Since the order was finalized in late July, Rasmussen said there have been discussions with PGE, which agreed to two voluntary efforts to ease the impacts of the paybacks and resulting revenue reductions.

One is that the potential $230,000 in total interest on the tax overpayment would be offered back to the taxing districts. However, the state Department of Revenue has since confirmed that no interest is required to be paid.

Also, tax districts that need help may be offered zero-interest three-year loans to make the repayments, reducing the impact by $270,000, for a total of $500,000 in what the chart referred to as a “pass-through PGE grant.” Rasmussen noted that the funds for that would be paid by company shareholders, trimming the total impact in the county to about $1.3 million.

The chart showed that each taxing district was initially expected to face a nearly 4.5% drop in their tax distribution and also showed the lower figure they’re now expected to face after the $500,000 reduction.

For example, for the Jefferson County general levy - the largest single item on the list, at about 21% of the total county tax revenue distribution - the originally estimated overpayment impact of $371,580 was reduced by over $104,000, to $267,433.

While much smaller under- or over-payment property tax adjustments are not unusual for Oregon counties, Rasmussen said they have instituted new process checks to reduce the risk of such a major error coming to light this way.

 While the county worked with the state Department of Revenue to resolve such matters in the past, he said PGE is encouraging county Assessor Ray Soliz to contact them directly when such large increases or drops in assessed value are discovered, to expedite the investigation and outcome.

That’s an attempt to address one concern raised since the error arose – that an issue first discovered months ago only led to word to the various districts of the repayment requirements after the new fiscal and budget year began July 1.

Former county assessor Jean McCloskey said the tax overpayment situation of this magnitude was “probably unprecedented in Oregon.”

And Rasmussen noted that it doesn’t mean a literal repayment to the county - “it’s just revenue you’re not going to receive” after the property tax payments begin this fall. The districts are not expected to cut a check to the county for the repayment, he said.

Soliz explained that his office saw a large increase in PGE’s property value on the utility rolls, and inquiring about that started the eventually costly ball rolling.

While one representative at the in-person and virtual meeting wondered if keeping quiet might have avoided the whole mess, Soliz said, “eventually, I believe PGE would have audited their own books and noted it, and we’d still be faced with having to refund” the overpayment.

There also was another idea raised that will be part of county commissioner discussions that resume next week: the possible use of some $650,000 in uncommitted ARPA (COVID-19 relief) funds in the county budget to ease those the taxing districts’ repayment impacts. It was noted that other taxing districts in the county also received their own ARPA funds, although fire districts did not.

One official at the meeting asked if state Department of Revenue reserve funds could also help in this situation, since as they put it, they were “just a little culpable” in the sequence of events. But that didn’t sound likely.