Rezoning and Maximum Assessed Value

We, the Oregon Department of Revenue, have identified concerns regarding the proper treatment of
maximum assessed value (MAV). They have recently come up in relation to accessory dwelling units
(ADUs). It quickly became apparent that the issue goes well beyond ADUs and is really a question of
treatment of MAV after a change in zoning. We plan to convene a group of county assessors in the near
future to determine the scope of the issue and potential problems to be addressed in a larger
workgroup to follow. To broaden understanding of this topic, we want to share some of our thinking,
and what led us to take the approach we did on the ADU issue. The opinions below are our current
opinions after consultation with the Department of Justice. These opinions could be revised based on
discussions with the workgroup.

Defining rezoning and used consistently with the rezoning

Article XI, section 11, of the Oregon Constitution imposes a limitation on the MAV of property for
taxation purposes, but then provides events, called exception events, that call for an exception to that
limitation. Value added to property under an exception event is referred to as exception value. One
such event occurs when property is rezoned and used consistently with the rezoning. In that event,
the constitution requires that the MAV be calculated by multiplying the real market value (RMV) by the
ratio of average MAV to average RMV of all property in the county within the same class of property
(residential, industrial, etc.). That ratio is known as the changed property ratio (CPR).
Understanding of the phrase rezoned and used consistently with the rezoning is key to determining
the proper calculation of MAV. The relevant text of Article XI, section 11, was adopted by the people
through the referendum process. Therefore, a court construing the text would attempt to determine the
intent of the voters who adopted it. To do so, the court would focus first on the text and context of that
provision, but also consider the measures history if it appeared useful.
The seventh edition of Blacks Law Dictionary, published close to the time that Measure 50 (1997) was
adopted by the voters, defines rezone as to change the zoning boundaries or restrictions of (an
area)1. The reference to restrictions indicates that, if the restricted uses of property under the zoning
laws are changed, the property is rezoned.
Contemporary legal definitions of zoning likewise focus on both the division of regions into districts
and the regulation of property within those districts. The 1999 edition of Blacks defines zoning as the
legislative division of a region into separate districts with different regulations within the districts for
land use, building size, and the like2. The definition in the 1990 edition of the same dictionary is similar:
The division of a city or town by legislative regulation into districts and the prescription and
application in each district of regulations having to do with structural and architectural designs
of buildings and of regulations prescribing uses to which buildings within designated districts
may be put. Division of land into zones, and within those zones, regulation of both the nature of
land usage and the physical dimensions of uses including height setbacks and minimum area.3
Other relevant legal definitions also emphasize that zoning consists of both division and a region into
districts and of the regulation of property within those districts: The division of a city or community into
1

Bryan A. Garner (1999) Rezone. In Blacks Law Dictionary (p. 1321) Eagan, MN: Thomson West
Ibid. (p.1612)
3
Bryan A. Garner (1990) Zoning. In Blacks Law Dictionary (p. 1612) Eagan, MN: West Publishing Company
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districts in which regulations are imposed on the structure and architectural designs of buildings and the
uses to which they may be put4.
All of these definitions focus on two aspects of zoning: the division of a city or other region into
districts, and the regulation of the use of property within those districts. It follows that a change in
either the boundaries of such a district, or the permitted uses of property within that district, would
change the zoning of that district, and thus would be a rezoning.
A court looking to determine the legal meaning of the term rezoned might also review how it was
used in statutes at the time that Measure 50 was adopted. In this case, Oregon Revised Statutes (ORS)
chapter 215, which governs the zoning authority of counties, also indicates that rezoning encompasses
all changes in use allowed under the zoning laws. As of 1997, ORS 215.503 required a countys governing
body to provide notice of a land use change before enacting an ordinance that proposes to rezone
property. The statute doesnt define rezone or indicate that it had anything other than its ordinary
legal meaning. The requirement of a notice of land use change, therefore, indicates that the ordinary
legal meaning of rezone at that time was a change in the zoning laws that changed the permitted uses
of property. Again, that could be either a change in the zoning designation of the property, or a change
in the uses permitted within a given zone.
We also considered rezoned as a term of common usage, rather than a legal term, and looked to
Websters to define its meaning. The result is the same. Websters defines rezone as to zone anew:
alter the zoning of5. Alter means to cause to become different in some particular characteristic (as
measure, dimension, course, arrangement, or inclination) without changing into something else6.
Zone, in turn, is defined as follows: [T]o partition (a city, borough, or township) by ordinance into
zones or sections reserved for different purposes (as residence, business, or manufacturing or
combinations of these) and governed by appropriate building regulations (as of the height and area of
all structures7.
Under that definition, rezone can mean to repartition an area into zones reserved for different
purposes and governed by appropriate building regulations, or to cause those zones to become different
in some particular characteristic without changing them into something else. In other words, Websters
indicates that the ordinary meaning of the word rezone would include either changing a zoning
designation entirely, or changing the permitted uses of property without changing the designation itself.
The Oregon Constitution allows an exception event for property that is rezoned and used consistently
with the rezoning. The focus on whether property is used consistently with the rezoning indicates
that rezoning refers to a change in the permitted uses of property, whether that occurs by a change in
zoning designation or a change in uses permitted within a designation.
In order to trigger an exception event, the property must be both rezoned and also used consistently
with the rezoning. Although the rezoning is required, the use is the triggering event for the exception.
Because rezoning refers to a change in the zoning laws governing the property, we interpret used
consistently with the rezoning to refer to a use that is newly permitted under the rezoning, as opposed
4

William P. Statsky (1991) Zoning. In Wests Legal Desk Reference (p. 231) Eagan, MN: West Publishing Company
(2002) Rezone. In Websters Third New Intl Dictionary (p. 1945) Springfield, MA: Merriam-Webster
6
Ibid. (p. 63)
7
Ibid. (p.2660)
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to a use that was permitted under the prior zoning. For example, if a vacant lot zoned for single-family
dwellings is rezoned to allow multifamily dwellings, and a new single-family dwelling is built on the lot,
the lot is not used consistently with the rezoning, because construction of a single-family dwelling
already was permitted prior to the change in the zoning laws.

City of Portland zoning codes and accessory dwelling units (ADUs)

Our analysis of the situation involving the construction of detached accessory dwelling units (ADUs) in
Portland is based on two chapters of the Portland City Code (PCC): chapter 33.205 (Accessory Rental
Units) and chapter 33.405 (Alternative Design Density Zone). Because the constitution refers to
property that has been rezoned and used consistently with the rezoning on or after July 1, 1995, we
focus on the citys zoning laws as they existed before and after that date.
Prior to July 1, 1995, the city of Portland did not allow detached ADUs. The city allowed houses to have
an accessory rental unit (ARU), which was an additional and auxiliary living unit in an existing house8.
In most neighborhoods, ARUs could be created only through internal conversion of an existing house,
and could not be created in detached structures:
Creation of an accessory rental unit. The accessory rental unit may be created only through an
internal conversion of the existing living area, basement or attic. An accessory rental unit may
not be created through the conversion of an existing garage.9
In certain areas designated as alternative design density zones, the city also permitted the creation of
ARUs by addition of new square footage to the house or construction of new single-dwelling
detached house with an internal accessory unit. PCC 33.405.040 (1995). However, no part of the city
permitted the construction of ARUs or ADUs that were independent of a dwelling.
In 1996, the city amended its code to allow the construction of detached ARUs in a limited subset of
alternative design density zones, to allow:
Creation of an accessory rental unit. An accessory rental unit may be created through:
1. Internal conversion of existing living area, basement or attic;
2. Addition of new square footage to the house;
3. Construction of a new single-dwelling detached house with an internal accessory unit.
Addition of an accessory rental unit is prohibited in a new or existing attached housing
constructed under the provisions of 33.405.060, Attached Residential Infill on Vacant Lots.
4. In the area shown on Map 405-1 at the end of the chapter, construction or conversion of a
detached accessory structure is allowed if it meets the following standards:
a. It is in a single-dwelling zone; and
b. The structure is at least 60 feet from the front lot line.10

PCC 33.205.020 (1995).

PCC 33.205.030 (1995).
10
PCC 33.405.040 (1997).
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In 1998, the city adopted Ordinance Number 171879, which permitted ADUs in all residential zones,
except in certain attached houses11. This change permitted detached ADUs:
1. Creation. An accessory dwelling unit may only be created through the following methods:
a. Converting existing living area, attic, basement or garage;
b. Adding floor area;
c. Constructing a detached accessory dwelling unit on a site with an existing house,
attached house, or manufacture[d] home; or
d. Constructing a new house, attached house, or manufactured home with an internal or
detached accessory dwelling unit.12
Based on those code sections, it appears that in 1996 and 1998, the residential zones in the city were
rezoned as contemplated under Article XI, section 11(1)(c)(C) of the Oregon Constitution. The city
amended its zoning laws to permit detached ADUs after the adoption of Measure 50. Before those code
amendments, owners of residential property in Portland could not construct detached ADUs on their
land, or convert existing detached structures into ADUs. After those code amendments, they could do
so. The city amended its zoning laws to permit a use of property that was not previously permitted in
residential zones; therefore, property in those zones was rezoned. Once a homeowner used that
property to construct a new ADU, or convert an existing structure to an ADU, the property was used
consistently with the rezoning, and the county assessor was entitled to calculate exception value for
whatever portion of the property was used consistently with the rezoning.
Some taxpayers have argued that ADUs have been allowed by right in many residential zones in Portland
since 1991. They argue that addition of exception value should be determined by whether ADUs were
allowed before Measure 50 as opposed to the form of the physical structure of the ADU. We disagree.
Internal ARUs were allowed before July 1, 1995, but detached ADUs were not. The code amendments
discussed above permitted residential property owners to construct an additional detached building on
their property, or convert an existing detached building, for use as a residence. Prior to the code
amendments, they couldnt do so. That represents a new allowed use of the property.
The city code supports that conclusion. The citys purpose in permitting detached ADUs was:
Accessory dwelling units are allowed in certain situations to:
Create new housing units while respecting the look and scale of single dwelling
neighborhoods;
Increase the housing stock of existing neighborhoods in a manner that is less intense
than alternatives;
Allow more efficient use of existing housing stock and infrastructure;
Provide a mix of housing that responds to changing family needs and smaller
households;

11

PCC 33.205.020 (1999).

PCC 33.205.030 (1999). See also City of Portland Bureau of Planning and Sustainability, Accessory Structures
Zoning Code Update: Discussion Draft, 95-98 (June 2015), providing a history of the Citys regulation of ARUs and
ADUs.
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Provide a means for residents, particularly seniors, single parents, and families with
grown children, to remain in their homes and neighborhoods, and obtain extra income,
security, companionship and services; and
Provide a broader range of accessible and affordable housing.13

All of those statements indicate that the citys purpose in allowing detached ADUs was to permit
residents to make broader use of their property by constructing and using detached ADUs. Detached
ADUs represent a permitted use of property distinct from the internal ARUs that were previously
permitted. When the city amended its zoning laws to permit detached ADUs, it rezoned property.

Defining the affected property when a residential lot is rezoned

Under ORS 308.156, the MAV of property that has been entirely or partially rezoned is calculated by
identifying the portion of the property that is affected by an eventin this case, being rezoned and
used consistently with the rezoningand calculating its value under ORS 308.156(5)(b). OAR 150308.156(5)(B) further clarifies that the MAV of property that has been rezoned is calculated by
identifying what portion of a given property has been both rezoned and used consistently with the
rezoning.
As discussed above, property is rezoned when a governing body with jurisdiction changes the uses of
that property that are permitted under the zoning laws. In this case, the PCC was amended to permit the
creation of a detached ADU by converting [an] existing garage or constructing a detached
accessory dwelling unit on a site with an existing house14. Those uses were previously not permitted
under the zoning laws. Therefore, the land in those areas was rezoned to allow the construction of
ADUs, and any existing garages were rezoned to allow their conversion into ADUs.
Likewise, the portion of the property that has been used consistently with the rezoning includes land
on which the ADU is sited, and any existing garage that was converted into an ADU. Again, consistently
with the rezoning means that the use is newly permitted by a change in the zoning law. The only such
newly permitted uses identified for detached ADUs, after the 1996 and 1998 amendments to the
Portland zoning ordinances, are siting and constructing a new ADU or converting a garage into an ADU,
and using that ADU as a dwelling. In this case, the affected property would be the lot that is now
allowed to have two detached residential structures, and any existing garages converted into ADUs.
Affected property also includes other areas of the land or site improvements, insofar as the land or
improvements support the ADU. Because the previously existing primary dwelling is used for the same
use as permitted prior to the rezoning, the assessor shouldnt calculate exception value for the existing
primary dwelling.

Next steps
Well work with assessors in early 2016 to identify any inconsistencies in assessing properties in relation
to rezoning and consistent use. Well then hold meetings with representation from all interested parties
and stakeholders to address the inconsistencies and consider additional issues. Any guidance that we
issue at the end of that process will likely be in the form of an administrative rule.
13
14

PCC 33.205.010 (1999).

PCC 33.205.030 (1999).

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