After more than three years of discussion, the Medford School Board voted Monday to impose a tax on new construction projects within district boundaries.

After more than three years of discussion, the Medford School Board voted Monday to impose a tax on new construction projects within district boundaries.

The board voted 5-1 in favor of the construction excise tax, which will go into effect after the district enters into an intergovernmental agreement with the city.

The Oregon Legislature granted school districts the right to collect the tax in 2007, but Medford School Board members have been in limbo about whether to implement it.

The law allows school districts to collect $1.07 per square foot of residential construction and 54 cents per square foot for commercial construction. The cost for a 2,000-square-foot house would be $2,140, while the cost for a 10,000-square-foot commercial building would be $5,700.

The fee will be capped at $26,800 per permit, and the city and county can keep up to 4 percent of the gross proceeds from the tax as payment for their work in collecting the funds.

The tax can be used for capital improvements in the district, such as land acquisition, new construction or reconstruction, and acquisition of new equipment and property. It cannot be used for general fund expenses, such as salaries and supplies.

There are several building categories that are exempt from the tax, including schools, affordable-housing projects, hospitals, churches and other public buildings.

Board member Kim Wallan cast the single vote against adopting the tax, but said her reservations were minimal.

"I didn't feel very strongly about it one way or another," said Wallan.

During the board's Nov. 7 meeting, a public hearing and board comments about the tax produced no opposition.

At least one local construction company does have concerns about the new tax, which a spokesman said could be problematic in already tough economic times.

"Implementing an excise tax on new construction projects in the midst of the most challenging economic conditions of the past 70 years presents a real conundrum," said Mark VonHolle, vice president of S&B James Construction Management. "We need to work toward reducing the cost of doing business in our region in order to maintain our competitive advantage over numerous other communities."

But VonHolle, who also serves as board president for Southern Oregon Regional Economic Development Inc., said he was also sympathetic to the dire financial situations that school districts face.

"We cannot allow our schools to decline into a state of disrepair," VonHolle said.

The tax will affect local developers seeking permits to construct new buildings, and the city of Medford will work with the district to collect the fees.

"We haven't had any feedback, positive or negative," said Christy Taylor, development services administrator for the Medford Building Department.

"We're going to collect the fees as required for the district," Taylor said. "We've been waiting for it."

Though more than 50 districts statewide now collect the tax, only the Ashland School District and the Central Point School District have been doing so in Jackson County.

In the 2010-11 fiscal year, the Ashland School District collected roughly $59,000 and the Central Point School District collected $80,000 from the tax.

Board Vice Chairman Jeff Thomas voted in favor of adopting the tax, but said it was debatable whether this was the right time.

"For years I've been on the fence about it," Thomas said. "You could argue it's a good time because there isn't much construction going on, or you could argue it's a bad time because of the economy."

Thomas said that since the Oregon Legislature designed the law to help education, schools should take the opportunity given that they are also facing ongoing budget cuts.

"We're continuing to see decreasing funds for education," Thomas said. "It's terrifying what is coming down the pike from the state."

Reach reporter Teresa Ristow at 541-776-4459 or