For those of us fortunate enough to own real estate, a tax payment is due this month. In Allen County, Friday was the due date. Other counties’ due dates vary throughout the month of July.
Real estate taxes operate under a unique structure in Ohio. And this column’s very simple explanation is not reflective of all of the complexity of that structure.
Real estate taxes are typically defined in terms of “mills.” Mills are created by local governments or through citizens’ votes for “levies.” Mills or millage is understood to be a certain percentage of the value of the property. That sounds simple enough. However, the calculation process is much more complex because real estate tax levies generally fall into two different categories.
The first category of real estate levies is relatively simple. The millage is calculated as a percentage of the property value, and whatever the math shows is what the property owner owes.
However, the second category of tax levies introduce immense complexity to county auditors’ work. Many real estate tax levies are technically defined as mills (calculated as a percentage of the property value) but are capped at the total dollar amount of money that the tax levy brings in during the first year of the levy.
For example, a real estate tax levy may indicate that it is a 1 mill continuing levy for a school district. Let’s presume that the amount received in year one of the levy is $1 million. In year 2, the school district experiences significant economic development within its geography. If the math is calculated in year 2, the calculation process may total $1.2 million. However, if the levy fits into the category of levies that have a capped total amount, the amount for the school district remains at $1 million in the second (and later years), and every property owner’s tax bill is decreased proportionally.
This is why some political subdivisions/governments will ask for a continuing levy to be replaced. The new levy will allow increased property values to actually result in more revenue being collected for the entity that is to receive the money.
Additionally, Ohio law requires that property values be updated every three years and that all property be reappraised every six years. Although county auditors (whose duties include the calculation process and valuation process) can do much of the work themselves, they sometimes hire outside consultants to assist them, especially for appraisal work.
This complex and immense work can take 10 or 11 months each year to complete. Therefore, real estate taxes are paid the year after the year that is being taxed. For instance, 2016 taxes were not known until the end of 2016. The tax for the first half of 2016 was due in February 2017. And, the tax due this month is for the second half of 2016.
County auditors and their staffs work year-round to complete this intricate and complex work to ensure fairness and consistency in our real estate taxes.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.