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TRIBUNE FILE PHOTO  - Property taxes on James Peterson's house were set to balloon after he added this small dwelling unit atop his garage. But Multnomah County Assessor Randy Walruff has backed down on what some saw as punitive property tax increases. Portland’s “granny flat” construction boom is back on track.

Multnomah County has agreed to retract unusually high property tax increases levied on homeowners who built accessory dwelling units last year on their lots.

“There are a lot more ADUs on the drawing boards that will be built because of this,” said Steve Anderson, of First Class Property Tax Appeals in Clackamas. He successfully represented 27 ADU owners who appealed what they viewed as exorbitant property tax increases.

The county abandoned its latest ADU tax policy after the Oregon Department of Revenue circulated a draft new state regulation in late-April. That clearly states that allowing homeowners to build ADUs on their lots, as Portland has done to promote construction, doesn’t constitute a zone change — the rationale Multnomah County Assessor Randy Walruff used initially to double, triple and even quadruple the property taxes of 103 new ADU owners last fall. Under the Measure 50 property tax limitation enshrined by voters into the Oregon Constitution in 1997, a zone change is one of a handful of exceptions that allow assessors to raise property taxes more than the 3 percent annual cap.

Walruff reduced those property taxes soon after sending November tax statements in response to complaints, but he still raised taxes on the land held by ADU owners. Now he's abandoning those tax increases as well and reverting to the county's old tax policy, which charges owners based on the value of their new construction.

The draft state regulation isn’t yet approved and awaits a public hearing June 23. But the county assessor — stung by criticism from ADU owners, city leaders and others — didn’t wait. Walruff’s staff has sent notices to ADU owners that they will revert to past policy on ADU property taxes, and will send rebates to those whose taxes spiked. One ADU owner shared his letter, which he received Thursday, with the Portland Tribune.

Multnomah County's chief spokesman Dave Austin declined to comment for this story and said Walruff was on vacation.

The county's change of heart is not the only good news this month for ADU advocates, who prize the small dwellings as a way to provide more affordable, environmentally friendly housing in Portland, especially in closer-in neighborhoods, and as a way to enable grandparents and others to live near their families.

Portland city commissioners recently voted to renew a tax break that waived several thousand dollars in development fees to spur more ADU projects. That waiver was set to expire July 1, but was extended two more years.

The combined impact of the two changes is “a huge boon for the ADU market,” said Kol Peterson, an ADU consultant and blogger who helped lead the fight against the county’s tax policies.

Multnomah County Commissioner Loretta Smith, who openly questioned Walruff’s tax increases, said she’s pleased the issue has been resolved.

“Some of these folks who built ADUs, their taxes went through the roof,” Smith said. “We were happy we were able to stand up and fight for the little guy.”

She said it made no sense for the county to put up new barriers to ADU construction while the city was trying to encourage it.

Anderson still isn’t done fighting. He asked the county to refund his clients’ costs of appealing the ADU tax increases, which amounts to $982 per person, including his fees.

When Anderson went before Multnomah County’s Board of Property Tax Appeals on behalf of 27 clients in March, the board sided with Walruff and rejected every one of the appeals, Anderson said.

Anderson has since filed appeals of those rulings on behalf of 23 of the clients, to Oregon Tax Court's Magistrate Division, the first of two state appeals available. Though the county now is promising to send rebates to his clients and others, “they are denying to the court that they made a mistake,” Anderson said.

Anderson hopes the county will provide the $982 per client reimbursements, lest he have to continue with the state appeals, where his clients’ costs would rise to $4,000 or $5,000 each. If he wins reimbursement for his clients, Anderson notes, the money would come from taxpayers, and he’d rather see lower costs.

“We just want to be made whole,” he said.

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