For sheer gobbledygook, Ohio’s real-estate property tax system – which dates to 1825 – is hard to beat. That’s why a proposal by two downstate Republicans in the General Assembly deserves passage.
Reps. Adam Mathews, of Lebanon, and Thomas Hall, of Middletown, are prime sponsors of House Bill 344, to eliminate “replacement” property tax levies in Ohio.
As cleveland.com’s Jake Zuckerman recently reported, replacement levies, if voters OK them, typically fund townships, schools, public libraries, and mental health and addiction service boards. But there’s a terminological problem. Ohio also authorizes “renewal” levies, which in the mind of some taxpayers may be synonymous with “replacement” levies.
Not so, the Legislative Service Commission (LSC) reports. A replacement levy lets the subdivision it funds benefit from the increases in property values that occurred during the span of the levy being “replaced.” In contrast, renewal levies remain based on property values at the time the levy being “renewed” was adopted.
“That is, unlike a renewal levy, a replacement levy” – of the same millage as the original levy – “allows subdivisions to realize the benefit of any increase in property values that occurred during the life of the existing levy,” the LSC, the General Assembly’s research arm, reported. Plainly put: Same tax rate, but larger tax take.
Of course, to be fair, a lot of the confusion goes back to 1976?s House Bill 920, now part of the Ohio Constitution. It uses “tax reduction factors” to offset inflationary increases in taxed property values. That, more or less, keeps the property tax that Ohioans pay at the level when the levy was first passed.
Concrete example, from the Ohio School Boards Association: With a renewal levy, “a 5-mill, five-year levy that has been (rolled back) by the (anti-inflation) reduction factor to 3.8 mills would be renewed at the 3.8-mill rate” – not 5 mills.
But the same 5-mill, five-year levy, if being replaced, would be reimposed at the former levy’s full, 5-mill rate, “(giving) the district the benefit of any growth in local value that occurred over the life of the previous levy.” Translation: Higher tax bill.
So, while “replacement” may imply that such a levy will collect no more revenue than the levy it is replacing, in fact – even at the same millage rate – the replacement likely would collect more. In the word-salad that is Ohio property tax law, that fact may elude voters.
Yes, by the same token, voters who are told they’re voting on a “5-mill” levy renewal are actually voting on a 3.8-mill renewal, and its millage will continue to decline as property values go up — more confusion and gobbledygook.
Still, Mathews and Hall, in sponsor testimony, noted that, “Renewals are easy to understand as they … (provide) the same bill to the homeowner and same benefit to the school district.”
“Replacements, however,” they said, “reset the effective millage due to property values rising and raise the tax bill on homeowners while, to many, appearing to keep the same ask …. This incongruity can lead to surprises by voters when they think they had just voted to keep things as they were, especially since districts could run elections stating, ‘This levy will not increase your tax rate.’” That may be literally so, but the amount of tax collected may well increase.
Among Statehouse lobbies testifying in favor of the Mathews-Hall bill were the Ohio Chamber of Commerce and Americans for Prosperity-Ohio.
Local government associations generally oppose abolition of replacement levies, which, after all, do require voter approval and which fund vital public services. Among groups testifying against the bill have been the Ohio Library Council; a coalition of public school administrators and school boards; and the County Commissioners Association of Ohio.
Nicole Piscitani, deputy director of legislative services for the Ohio School Boards Association, told Zuckerman that replacement levies were comparatively rare in school levies. “Of 979 school levies that were extended over the past decade, only 40 of them were replacement levies,” she said.
That doesn’t alter the fact that the term “replacement” can imply entirely different things to different taxpayers. The underpinning of taxation, as with other governmental activities and initiatives, must be transparency. And transparent is one thing replacement levies aren’t.
Yes, replacement levies aren’t the only source of taxpayer confusion in Ohio’s convoluted property-tax system. But they’re one part of it. The House and Senate should pass HB 344 and send it to Gov. Mike DeWine’s desk.
