Local school districts complete budget forecasts
Results show the vulnerability of school systems
Local public school districts just completed their second, semi-annual review of budget forecasts for the next five years.
But those numbers, and how those numbers are reached, take into account multiple formulas of property taxes upon private residential and agricultural property, industrial/commercial property and public utility property.
Last week, Fort Frye Local Schools’ district treasurer explained what this means to a private property owner, and in turn how the disparity between total “land value” can hurt school districts with lower household incomes.
That inequity is still up for debate into December as the Ohio state legislature looks to overhaul state funding to schools with hopes for balancing out land-rich but income-poor areas.
The most recent attempt at this overhaul is House Bill 305.
According to Ohio Department of Education and U.S. Census Bureau data:
Belpre City Schools District has an average household income of $44,668, with 3,964 households inside 21 square miles.
Fort Frye Local Schools covers 647.61 percent more land than the city school district (136 square miles) with fewer households to send portions of their income toward property taxes.
The northern-most district within Washington County has 2,560 households with an average household income of $48,463.
Head east to Frontier Local School District and 163 square miles of land, much of which is not taxable due to the presence of the Wayne National Forest, only holds 2,132 households with an average household income of $44,425.
Comparably, Marietta City Schools and Wolf Creek Local Schools cover similar square mileage but differ in income. Wolf Creek has a richer tax base (by income) but only 13.13 percent of the number of households.
Then in the largest area coverage and second-most populated district rests the second-wealthiest household average.
Warren Local School District covers 196 square miles and is home to 5,610 households with an average household income of $57,583.
But income isn’t reflective of the taxes collected semi-annually by the Washington County Treasurer on the property owned by those households, and then, there’s the higher-valued properties like energy plants and industrial plants to account for, which according to Fort Frye Superintendent Stephanie Starcher put schools’ budgets in precarious danger.
“This shows the vulnerability of school systems to a ‘T,'” Starcher said when the district received a courtesy heads-up from the Washington County Auditor last month to tighten the belt and plan for an estimated $1.6 million loss in revenue next year.
HOW ARE HOUSEHOLDS TAXED?
“Whenever you hear property taxes, it’s always millage– how many mills you have,” Stacey Bolden, Fort Frye’s treasurer, said. “For every thousand dollars in assessed value, a homeowner will pay $1 per mill.”
But the assessed value is not the market value, she explained.
“The true value of a property that’s what the property is worth on the market … if you are going to go and sell it,” she said.
Taxable value is what is assessed, or more plainly to what the millage rates are applied.
“The taxable value is 35 percent of that market value. So if you’re talking about $100,000 house, they’re only being taxed for $35,000,” she explained.
Likewise, for a home that at market value is worth $50,000, the taxable value is only $17,500. Upon that $35,000 or $17,500 is then the formula of millage applied.
But then enters a second nuance: inside rates, outside rates, effective rates for millage and reduction factors.
What is an inside rate? A rate of taxation that continues to fully apply regardless of a change in valuation of a property.
For example, in the Marietta City Schools District, the inside rate is 5 mills which sends funds directly from the property owners’ bill to the school district.
But this isn’t the only application of taxation on that property that heads toward the schools.
For Fort Frye, Bolden explained, the inside rate is 3.6 mills.
The maximum inside millage rate a school district in Ohio can apply is 10 mills, according to the Ohio Department of Taxation.
“Since taxable value is less than 100 percent of true value for all types of property, the (Ohio) Revised Code is more restrictive than the (Ohio) Constitution,” the department described in its 100-page “Property Taxation and School Funding” publication last updated in 2012. “The 10 unvoted mills are shared by all overlapping political jurisdictions (i.e. county, city, township, school district, special district, etc.). Schools generally receive between four and six of these 10 mills.”
Then there are outside rates.
Within a school district, when any other levies are passed by voters those become an outside rate that is able to be impacted by reductions.
So while in Fort Frye’s jurisdiction the total outside millage is approximately 39.22 mills, which combined with the 3.6 mills would make 42.82 total mills, that $100,000 household (taxed on $35,000) is not sending $1,498.70 specifically to the school district in addition to other county-wide levies like the county library, county home, children services and senior services, plus any fire and EMT levies.
“Our homeowners aren’t paying 42.82 mills,” Bolden explained. “They’re paying less money because of that reduction factor.”
What is a reduction factor? It’s a threshold which the effective millage cannot fall below, while not growing the applicable taxes upon a residential or agricultural property annually alongside inflation.
“Effective millage rate reflects the fact that the original number of voted mills has received adjustments,” explained Bolden. “That’s the reduction factor. This is the current rate that taxpayers pay.”
Combined, the calculation then spits out an effective rate which is applied to each residential or agricultural property.
“The easiest way to think about this is taxes collected on property will not exceed the amount collected on the property’s value in the first year the taxes were collected,” said Bolden, explaining in an example that while in year one of a new levy, the millage may be 5 mills, the following year if the market value and subsequently the assessed value increased, the effective rate applied would be lower.
Washington County Auditor Matthew Livengood added further clarification Wednesday.
“So your levy is voted on to raise X amount of dollars, and that is your gross rate at the time. That is what your rate needed to be in order to collect that amount of dollars,” he said. “As time goes by, as values (of property) go up but the dollar amount that’s being collected cannot change. So, the rate to collect that dollar amount (the applied or effective millage rate) is what’s adjusted.”
“Because they’re not going to pay us anymore,” Bolden summarized to the district’s board of education. “It reduces the taxes charged by and voted levy to offset increases in the value of the property. (For example, if) we passed (a) 5-mill levy this year, next year, that millage that that property owners pay might be 4.7.”
Note: Fort Frye did not specifically discuss or propose a new levy last week, this was used to illustrate an example.
But reduction factors based on an increase in property valuation do not apply the same to public utilities, instead, energy plants like the one in Beverly are taxed at the full inside and outside millage.
Their only hopes for reprieve are tax credits like the one applied for this year which reduced the projected public utility tax income Fort Frye is to expect from 2020 taxes paid in 2021.
“They don’t get a reduction faction, this is why we get so much money from them,” explained Bolden last week.
But that’s also why the tax credit is such a financial hit ($1.6 million) upon the district’s budget.
The district was informed this month that the state will make a one-time payment of $826,000 in June to help offset a drop in revenue next year, but is also undergoing budget cuts and considering consolidation options and rearrangement of school grades to break even moving forward.
Janelle Patterson may be reached at email@example.com.