Construction Excise Tax
The Oregon Legislature passed Senate Bill 1036 to help growing school districts, such as Newberg, pay for a portion of the cost of new or expanded facilities needed to accommodate growth.
Senate Bill 1036 allows school districts, in cooperation with cities and counties, to tax new residential and non-residential construction. This excise tax option was created with bipartisan support by the Oregon Legislature. Agencies and groups supporting it include the Oregon Home Builders Association, the Oregon Parent Teacher Association, and the Oregon School Boards Association.
The revenue generated from SB 1036 alone will not raise sufficient revenue to cover the cost of new or expanded schools; voter-approved bonds are still necessary. However, every dollar collected from new construction may be one less dollar taxpayers will have to pay in a bond measure.
What Can School Districts Spend the Money on?
School districts may only spend construction excise tax revenue on capital improvements, including:
- Land acquisition
- Construction, reconstruction, or improvement of school facilities
- Costs to purchase and install equipment and furnishings or other tangible property that has a useful life of more than one year
- Architectural, engineering, legal, or similar costs related to capital improvements
School districts may NOT spend construction excise tax funds on operating costs or costs of routine maintenance.
How Much Money May Be Collected?
The total amount a school district may collect will vary based on the amount and type of new construction in the school district. For the 2024-2025 school year, DSD may collect a maximum of:
- $1.63 per square foot of new residential construction
- $0.82 per square foot of new non-residential construction (subject to a cap of $40,000 per non-residential project)
Is All Development Subject to the Tax?
No. The law exempts private schools, public improvements (schools, libraries, fire stations, etc.), affordable housing, hospitals, religious facilities, agricultural structures, and limited developments on environmentally contaminated sites (brownfields.)
What Is Required to Implement a Construction Excise Tax?
To impose a construction excise tax, school districts are required to:
- Adopt a long-term capital facility plan
- Enter into an intergovernmental agreement with local cities and counties that will oversee the collection and disbursement of the construction excise tax.
- Adopt a resolution establishing the amount and terms of the tax
How Are Construction Excise Taxes Collected?
The tax is collected by the city or county and is paid by the person undertaking the construction at the time a building permit is issued. Under an intergovernmental agreement, the city or county collecting the construction excise tax passes the funds through to the local school district. The city or county cannot charge more than one percent of the amount collected as an administrative fee.