The Bulletin recently had an article and an editorial on a topic I have been writing about for a very long time. I first had an opinion column in the paper about how property taxes can encourage water waste about 6 years ago. It took the paper a while to fact check what I wrote, like most everyone they had not previously heard about this issue, but they did publish it. I wish I kept a copy of that column, but here’s a quick summary, followed by a discussion of the pros and cons of the bill recently introduced in the Oregon State Legislature intended to fix the problem. As always, the devil is in the details.

As everyone should know by now, most water rights holders must use their water even if they don’t need or want any or all of it. Irrigation districts allow only a very small amount of water to be voluntarily kept instream. Even if you are one of the few patrons who are allowed to keep water instream you must still pay your irrigation district at the same rate as if you were taking water delivery.

Another wrinkle is property taxes. Exclusive farm use (EFU) zoned land pays dramatically lower taxes than non-EFU land. For better or worse, EFU designations were established a long time ago and there may be little correlation between the zoning and actual productive farm use today. Non-productive EFU lands are required to use their water, sometimes just “watering rocks”, to maintain their low tax rate. Worse, taking land out of EFU requires the property owner to not only have a higher tax rate going forward but to pay 10 years of back taxes to make up the difference between the old and new tax rates.

The proposed bill, HB 2731, would address part the taxation issue. If you look at the available text of the proposed bill it seems simple and reasonable. Briefly, the definition of farm use is modified to include “the voluntary in-stream leasing of water rights” which would protect the tax benefits for EFU land.

Here’s the problem: how long does a land owner get the tax breaks after the land has been taken out of production? Indefinitely? Shouldn’t there be a time limit or does a farm get a tax break forever even when it has ceased to be a farm? How about resetting tax rates to a normal assessed value after a reasonable period of time? And what about the need to pay back taxes, shouldn’t that be addressed as well? We should all want to encourage water being kept instream but the rest of us should not have to pay the taxes for others who are no longer providing beneficial use for their water right.

This bill is definitely a step in the right direction but the devil is in the details and they don’t seem to be worked out at this point.