BY NICK EVANS
Ohio House lawmakers approved several property tax reforms in recent weeks, and now state senators are debating those proposals.
One of the measures is already on its way to the Senate floor. Another four are still working their way through committees.
Following last Wednesday’s session, Senate President Rob McColley promised action and laid out a brisk timeline.
“We will be passing those, in all likelihood here this month, before we’re done this month,” he said.
“Which ones rise to the top, which ones pass, and in what form, we’ll see. But I think there’s a desire among the caucus to try and see that stuff get across the finish line.”
Flipping the script
State senators advanced a measure out of committee last week which gives county auditors greater control over the home valuation process.
County auditors reappraise homes on a six-year cycle.
But midway through, they adjust those values based on a statistical sample, known as the triennial update.
Under current law, state tax officials review the auditor’s work, and if they disagree, they can order an auditor to adjust valuations.
The auditor can appeal that decision, but they carry the burden of proof.
Ohio House Bill 124, known colloquially as the “flip the script” bill, puts the onus on tax officials.
Instead of an auditor appealing, they’re given the benefit of the doubt, and tax officials can appeal if they believe the auditor got it wrong.
Lake County Auditor Chris Galloway said that’s as it should be.
“County auditors are in the best position to determine which sales are valid within their counties,” he said.
There are several instances where local knowledge matters.
A home sale between John Smith and Jane Doe looks normal on paper, Galloway said, but the auditor might know they’re siblings.
Since it’s not an arm’s-length sale, it shouldn’t be included.
Other sales could be outliers, due to renovation for instance, and they’d skew the formula for other homes.
The measure “allows for these kinds of inaccuracies to be corrected,” Galloway said. “This creates a fairer and more accurate valuation process for all taxpayers.”
No one testified against the proposal, and it passed out of committee unanimously.
What counts?
Ohio House Bill 129 would count more levies toward what’s known as the 20-mill floor.
Property taxes are collected in mills — like a percentage but calculated out of 1,000 instead of 100.
Twenty mills is the equivalent of 2%.
Since the 1970s, Ohio law has reduced homeowners’ tax rates to keep a levy’s revenue steady.
It means taxing authorities get only what voters approved even if home values climb.
But there’s an important caveat: School funding can’t dip below 20 mills, so if home values rise high enough there’s no more room for reductions.
Meanwhile, certain taxes like emergency and substitute levies are set aside from that 20-mill calculation.
By including them, the legislation creates slack, allowing tax rates to come down further.
School officials didn’t even push back on the idea.
“We are not here to disagree with whether these levies should be counted toward the floor,” Paul Imhoff from the Buckeye Association of School Administrators explained.
Instead, they want lawmakers to allow districts to renew those levies at the ballot rather than starting over with new ones.
That’s because back in 2014, lawmakers stopped paying a 12.5% state share for any new levies.
“In effect, homeowners would face a tax increase for the same amount of school revenue,” Imhoff said. “Put simply, House Bill 129 would have homeowners pay more for the same.”
That state share, known as the ‘rollback,’ accounts for roughly $96 million in school revenue across the state.
And in some districts, Imhoff said, the levies that stand lose state funding account for as much as a third of operating revenue.
Committee chair, state Sen. Sandra O’Brien, R-Ashtabula, seemed unmoved.
She said the state stepped in to help, “really out of their goodness,” but the total cost of the rollback isn’t that significant.
“Over all of the taxpayers, it’s going to be so minute no one’s going to even notice it,” she said. “So, I think maybe that could be a little bit disingenuous when you keep calling that a tax increase or losing tax dollars.”
Who really set rates?
The Ohio Constitution gives local governments the right to levy 10 mills of property tax, but every levy beyond that amount requires voter approval.
Ohio House Bill 309 would give county budget commissions, made up of the local auditor, treasurer and prosecutor, the authority trim those voted levies after the fact if they’re deemed unnecessary or excessive.
Policy Matters Ohio Research Director Zach Schiller said that’s “fundamentally undemocratic.”
The bill’s backers point to school districts on the 20-mill floor.
Because their tax rates haven’t been able to drop, their tax bills have risen with home values.
Supporters argue that subverts the will of the voters by increasing taxes without their approval.
“Yet here is a bill that would allow voter decisions to be overridden,” Schiller said.
After some last-minute tweaks in the House, the measure includes explicit definitions for “unnecessary” and “excessive” collections, as well as a five-year safe harbor for new levies.
But there is no safe harbor, Schiller noted, for renewal levies.
That means even if lawmakers maintain the rollback, county budget commissions could immediately reduce a levy renewed at the ballot.
Pounding his fist on the lectern, Schiller said he’d heard complaints about ‘unvoted’ levies “dozens and dozens and dozens of times.”
“So, if we’re going to respect the voters,” he said, “if we’re going to say that voters have to have the power, why are we going to pass a bill that expressly takes that power away from the voters?”
Even the typically tax-allergic Buckeye Institute gestured toward additional guardrails as it expressed its support.
Research fellow Greg Lawson warned lawmakers may need to ensure, “levies remain high enough to satisfy their original purposes and over-zealous commissioners do not substitute their personal tax-cutting preferences for the will of the voters.”
Lawson noted possibilities like specific metrics for “excess” and limits on the time period or amount of tax cuts.
That said, he continued, “the need for those manageable safeguards should not preclude the bill’s enactment.”
Setting the ceiling
Ohio’s constitutionally permitted 10 mills of property tax is known as ‘inside’ millage, while any other levies approved by voters are known as ‘outside’ millage.
A pair of bills would cap the increase of both kinds of millage at the rate of inflation in the broader economy.
The measure related to outside millage, Ohio House Bill 186, would affect the roughly two-thirds of school districts at the 20-mill floor.
Ohio’s longstanding program that lowers rates to hold taxes steady would control taxes in the remaining districts.
Auditor Galloway from Lake County said providing an inflationary cap “eliminates the single largest unvoted tax increase in Ohio history.”
And Elizabeth Baumgartner from the Ohio Chamber of Commerce warned rising property taxes discourages businesses interested in moving to Ohio and those that want to expand.
She explained a chamber-backed study found Ohio’s property taxes were 72% higher than in six peer states.
State Sen. Kent Smith, D-Euclid, agreed that Ohio’s property taxes are high, but dug a bit deeper.
He described a study his office conducted of income, sales and property taxes in ten nearby states.
Ohio came in near the top for property and sales taxes, but dead last in income tax for high earners.
“We’ve continued to whittle down one of those three legs of the stool to the point where now we’ve created an imbalance,” he said.
“Whereas if you look at Pennsylvania and Michigan, states next to us, very similar to us in terms of economy, population, etc., all three of their categories are in the bottom half.”
Because Ohio’s rate reduction program doesn’t apply to inside millage, those taxes have always grown with property values.
Galloway stressed that by capping inside millage at inflation, as well, lawmakers would affect property taxes statewide.
“House Bill 335 provides relief for all,” he said, noting the overall savings for homeowners amounts to roughly $700 million.
Galloway’s only suggestion was for lawmakers to include an emergency clause so the bill takes effect before auditors begin their next round of valuations.
Smith asked if time is short, why not delay implementation until the next tax year so auditors have time to prepare?
“Yes,” Galloway said, “it would potentially be easier on our offices to have an entire year to put all this together and manage it — a certain comfort level. But I would suggest that our taxpayers don’t have that comfort level.”
