“Nothing in life is certain except death, taxes, and the second law of thermodynamics.”
— Seth Lloyd
“The best measure of a man’s honesty isn’t his income tax return. It’s the zero adjust on his bathroom scale.”
— Arthur C. Clarke
Delaware city voters will decide a school levy issue next month, and all Delaware County voters will pass judgment on continued funding for 911 services. All of this comes on the heels of the triennial property value reassessments conducted by the Delaware County Auditor’s Office.
With all the talk of mills (inside and out), reduction factors, renewals, replacements and permanent improvements, the tax talk can make your head spin. So, just how do property taxes work, and how does the property tax reassessment affect them?
County auditors are required by Ohio law to reappraise the value of property every six years, and to conduct a midterm assessment every three years. The six-year full assessment requires a visual look at the property (now often done by drone), and the three-year is done based on recent similar sales of property in the area. All counties don’t do the reassessments in the same year, but several central Ohio counties, including Delaware, Franklin and Union, conducted reappraisals this year. The housing market is currently very, very healthy in central Ohio, as reflected by the recent sale prices of residential properties across the board, and thus property values are increasing rapidly.
So does that mean that schools, parks, senior services and other levy-funded programs will see a huge increase in funding? In a word: No. Absolutely not. So, why not?
There are two kinds of property tax in Ohio. There is a base rate of up to 10 mills that eligible political subdivisions can collect without the need for voter approval. That’s called “inside millage.” (10 mills mean $10 per $1,000 of taxable value.) Any property tax beyond that has to be approved by a vote — those are voted tax levies, and they are also collected in mills. These voted tax levies do not increase because of increases in property value, though they can collect more because they apply to new construction that increases the overall tax pool. Thus, when reappraisals happen, there is a “reduction factor” applied to the levy.
This reduces the effective tax rate so that the voted levy collects the same amount of tax revenue as was collected in the prior year. That amount of tax revenue is collected from the entire tax base, not just a single property. So if the average reappraisal value goes up by 10% and your value goes up 30%, then you’re still going to pay a bit more because your value has increased by more in proportion to the average increase. If your value goes up 5% and the average goes up 10%, then you’re going to pay slightly less. But in either case, the levy is only going to collect the amount from the entire tax base that it collected in the prior year.
For example, the emergency operating levy that Delaware City Schools passed in 2017 was listed on the ballot at 8.35 mills, but was actually collected at only 7.6 mills in the first year of collection since that reduced rate is what was actually needed to bring in the dollar amount authorized in the measure.
The only time voted levies can collect more money than they did in their first year is on new construction — the new housing development that got built down the street that wasn’t there at all when the levy was passed. The levy is applied to those new houses and that “new” tax value gets collected, too. Of course, those new houses are also sending new kids into the school district.
But the bottom line is that if the voted levy was collecting $5 million on $5 billion of taxable property value, it’s still going to collect the same $5 million in tax revenue from the houses and businesses that made up the initial $5 billion of property value even though the values have increased, because the effective tax rate would be reduced proportionately. The voted levy will only collect more tax revenue if new construction has been added to the tax base.
The reassessment does nothing to change the overall collection amount.
The next question is whether the levy you are voting on is a renewal levy or a replacement levy. If a taxing entity comes back for a “renewal” levy, that levy collects at the original tax rate with the reduction factors in place. The taxpayers don’t pay more, and the entity doesn’t collect more. If a taxing entity asks for a “replacement” levy, the new levy collects at the new tax value. Taxing entities can also ask for a combined levy, as is the case with the 911 levy this year. The overwhelming majority of that levy, 0.58 mills, is a renewal, and a small portion, 0.05 mills, of the levy is new. The renewal levy of 0.58 mills will be collected at the same rate as last year, with all of the reduction factors in place. The Delaware City Schools levy also operates as a renewal and will collect at the reduction factor rate, which is why you see the “no tax increase” label on the pro-levy yard signs.
Thus, in order to assess the effect of a levy on your property taxes, you have to know what kind of levy it is and what your new taxable value is. But know that the reassessment is not a windfall for existing levies.
Election Day is Nov. 3. You can view a sample ballot and check your voting location online at www.delawareboe.org.
David Hejmanowski is judge of the Probate/Juvenile Division of the Delaware County Court of Common Pleas, where he has served as magistrate, court administrator, and now judge, since 2003. He has written a weekly column on law and history for The Gazette since 2005.