LOS ANGELES - Standard & Poor's Corp. this week cautioned that a recent Oregon tax court decision could affect urban renewal agencies statewide by subjecting their bond-related tax collections to limits imposed by Measure 5.

If the Oregon Tax Court decision is upheld and extended to all urban renewal agencies, Standard & Poor's said it will examine its outstanding ratings on debt issued by those agencies. Concern may arise in instances where tax-rate cutbacks reduce the financial cushion for bond financings, Standard & Poor's added.

But even if the ruling stands, "it would not result in across-the-board reductions in the creditworthiness of urban renewal bonds in the state," Standard & Poor's added in this weeks's edition of Credit Week Municipal

The case in question stems from implementation of Measure 5, which state voters approved in November 1990 to limit property tax collections by setting maximum tax rates.

In May, the Oregon Tax Court ruled that taxes levied by the Portland Development Commission's South Park Urban Renewal District to pay debt service on its tax increment bonds are subject to Measure 5 limitations.

By contrast, state statutes implementing Measure 5 exclude urban renewal taxes, when they secure bonds, from the tax limits.

The tax court found that the state constitution does not prevent renewal agencies from collecting the property taxes, commonly known as tax increment revenues.

But the court also held that "the constitution does not explicitly or implicitly authorize the agencies to issue bonded debt," Standard & Poor's noted.

That lack of specific authority led the tax court to determine that the debt of an urban renewal agency is subject to Measure 5 limits.

Portland is Appealing the tax court ruling, and the Oregon Supreme Court heard the city's arguments last week. Although the case applies only to the Portland district, the high court could extend a judgment to all Oregon urban renewal agencies, Standard & Poor's said.

About $175 million of urban-renewal tax increment bonds were outstanding in Oregon as of June 1, 1992, according to the Oregon Municipal Debt Advisory Commission.

Measure 5 limits property tax collections by imposing maximum tax rates for nonschool governments at 10 mills. The measure also phases in property tax limits for schools, restricting them to five mills by fiscal 1997.

"Some tax increment financings would come under financial strain as a result of having the tax rates of the overlapping taxing districts reduced to meet Measure 5's limits," Standard & Poor's said.

"Other agencies will not see any rollback of tax rates, as the combined tax rates of overlapping governmental entities will fit within the 10-mill limit for nonschool governments."

To evaluate the impact on creditworthiness from an adverse court ruling, Standard & Poor's said it will examine the tax rates of overlapping taxing jurisdictions and "make judgments regarding the potential for the combined nonschoool tax rate of exceed the 10-mill limit."

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