Register-Guard: Tax Error Discounts $1.3 Million

The Register Guard | Jan. 30, 2014 7 p.m. | Updated: Jan. 31, 2014 10:19 a.m.

Contributed By:

Christian Hill

A clerical error handed Lane County’s top taxpayer an unwarranted discount of more than $1.3 million on its property tax bill last fall.

Lane County Assessor Mike Cowles confirmed that an employee entered an incorrect value into his office’s computer assessment system for one of the largest tax accounts belonging to International Paper Co., which owns and operates the linerboard mill in Springfield. The incorrect value on the account reduced the total property tax owed by International Paper by one-third , or $1,343,931.

State law says the office can’t bill International Paper for the tax owed until this year’s tax statements go out in late October. Public agencies, primarily in Springfield, that are counting on the revenue for their current budgets are left to wait.

International Paper alerted the county office about the error. In early December, the office sent a notice to International Paper that it owed the unpaid tax and that it had to be paid later this year.

Cowles said there’s always a small possibility of an error when county staff members enter tax data into the computer system manually. In a typical tax year, he said, his office will see errors in a handful of tax accounts identified by property owners or through audits.

But Cowles said mistakes in major accounts are rare.

“It happens to be a high-profile account,” he said. “The bottom line is we strive for the most accurate tax roll within the constraints of human nature and the computer system.”

Cowles said the employee was not disciplined and that he viewed the mistake “as a learning experience for staff rather than a process to point fingers.” He said he is working to change procedures in the office to prevent a future mistake.

The temporary delay in receiving the funds may cause some inconvenience for the agencies to which the cash is due.

Bob Duey, finance director for the city of Springfield, estimated that the error temporarily will cost the city a total of about $400,000. That money goes to pay for day-to-day government operations and levies that provide additional funding for the fire and police departments.

Duey said the impact on city coffers is lessened because his staff was conservative in estimating the amount of property tax it would receive because of the slow pace of the economy.

Even without the owed tax dollars, Duey said, property tax collections to the city have matched what it projected to receive so far.

“Obviously, we’d like to have some additional resources,” he said. “The actual hit wouldn’t be as great as if we were counting on the high return, or the higher amount of property taxes, this year.”

The error also means that about $300,000 won’t be paid, in the short term, to Springfield Public Schools. But because of the statewide school funding system, that doesn’t mean the district will be out that much in the short term.

It does mean, however, that every school district in the state will receive a little less money in the near term to make up temporarily for Lane County’s mistake.

State income taxes and local property taxes levied by school districts are distributed across the state in a funding formula so that richer and poorer districts receive the same amount of per-student funding for their education.

The short-term loss at districts statewide will be made up as school districts receive a funding bump later this year after International Paper pays the property taxes it owes.

Springfield schools spokeswoman Devon Ashbridge said that while the district understands that it will be made whole in the future, the mistake does prevent the district from potential additional investment in the classroom now.

“It’s certainly not ideal, but it’s not resulting in an immediate loss that our students will feel,” she said.

A spokesman for International Paper declined comment.

The tax account the county assigned the incorrect value was among the largest, if not the largest, of International Paper’s two dozen property tax accounts in Lane County. The account in question lists the value of machinery and equipment within the paper mill.

The state Department of Revenue sets the values for this equipment. The state conducts appraisals for industrial machinery and equipment accounts valued at $1 million or more.

Lane County staff members can shift the assessed value of machinery and equipment from one tax account to another, and that’s what led to the error, Cowles explained.

In moving numbers around, the machinery was given an incorrect value of $90,848,207 instead of the correct value of $170,800,020, Cowles said.

International Paper should have been billed a total of $4.03 million in property taxes, but instead received a bill for $2.69 million. The company has 23 individual tax accounts in Lane County. It was billed $3.77 million in 2012.

No interest will be accrued on the owed tax if International Paper pays at least one-third of the amount by Nov. 15.

On paper, the error dropped International Paper to the No. 2 top billed taxpayer in Lane County, behind Comcast. But in reality, it retains the title of top taxpayer in Lane County even with the error.

The cable television and Internet provider is appealing a decision by the state Department of Revenue that substantially increased its property taxes in Lane and other counties starting in 2009.

The company was billed more than $2.9 million in property taxes last year, but the annual payment suggested by Cowles’ office while the appeal is pending was $541,207, records show. It’s unknown when the Oregon Supreme Court, which heard oral arguments a year ago, will release its decision. Comcast would be required to pay millions of dollars in back taxes to Lane County if the company lost the case.

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