There’s some evidence that higher tax bills are making it harder for schools to pass levies. In the Nov. 5 election, 51% of tax issues passed, compared to 70% the previous year, according to the Ohio School Board Association.
Howard Fleeter, a Columbus-based economist who studies and advises districts on school-funding issues, thinks that the worst of the property value increase is likely over and that lawmakers need to focus on how to protect taxpayers in the future when home prices rise dramatically.
“The way our system works, it was kind of working OK,” Fleeter said. “Then you get this really unusual change in property values, and the system, I wouldn’t say it fell apart, but it was extremely stress-tested over the last couple years.”
Some, including Geauga County Auditor Charles Walder, have argued school districts share part of the blame. Walder, a Republican, said that’s because district officials understand how to game the complexities of state property tax law to maximize their revenue.
Walder said some savvy school district officials design their levy requests so their tax rates are just at the 20-mill floor, a term that describes the point at which homeowners don’t benefit as much a safety valve meant to keep taxes in check when home values rise. This ensures that when the reduction factor causes a district to drop below 20 mills, the state formula guarantees that increased property values will translate to greater revenue.
“My biggest worry with this is there’s something un-American about raising somebody’s taxes without their vote,” Walder said.
Fleeter, the economist, said that larger economic conditions, not school district maneuvering, are the primary reason for the breakdown in the state property tax collection system.
“It was a perfectly fine strategy for school districts to handle their finances this way. But it blows up when you’re getting a 35% increase in your valuation. That’s hard for people. I get that. It’s also highly abnormal,” he said.
Last year, property value updates occurred in counties in the Columbus and Cincinnati area, including in Republican State Sen. Bill Blessing’s district, which includes Hamilton County.
“It’s literally everything that I heard on the campaign trail,” said Blessing, who was reelected in November. “It’s easily the top issue.”
Map by April Urban/Signal Cleveland
Property tax relief stalls in Republican-led legislature
State legislators who might be interested in easing property taxpayers’ sticker shock have plenty of bipartisan options to consider. But major changes are unlikely to happen before the end of the current legislative session, according to Blessing, who’s co-chairing a special legislative committee studying the issue.
He said the inaction basically comes down to disagreement over whether state or local governments should pay for the tax relief.
“There are two competing camps on this particular issue,” Blessing said. “I think if everybody were on the same page with either approach, something would have been done.”
State Rep. Dani Isaacsohn, a Cincinnati Democrat who’s sponsored several property tax bills lawmakers have considered this year, acknowledged that property taxes are a complex subject. But he said Republicans who control the legislature could act if they wanted to.
Democrats more generally also have faulted Republicans for focusing on controversial social issues, like transgender restrictions in schools, while failing to act on more front-and-center issues like property taxes.
“Issues that are just purely important to voters and constituents, like high property taxes, but don’t have any special interests backing them don’t get the attention of the majority,” Isaacsohn said.
There are roughly six major property tax relief proposals pending in the state legislature. Most would tweak state property tax law by increasing existing tax exemptions, some of which target specific groups, like lower-income people, long-time homeowners or widows of military members. These changes would come at the expense of schools and other local government bodies that rely on property taxes.
The most far-reaching proposal is House Resolution 6, introduced by state Reps. Beth Lear and Scott Wiggam, two of the chamber’s most conservative Republicans.
The resolution, a proposed state constitutional amendment that eventually would need to be approved in a statewide vote, would roll state property values back to their 2022 levels and limit annual property valuation increases to 4%. The LSC estimates this change would cost local governments – and conversely save property owners – “hundreds of millions of dollars,” with the results compounding over time.
Another possibility could come when the new legislative session begins in January. David Thomas, a Republican who was just elected to the Ohio House, said he and the rest of the incoming freshman class of legislators are motivated to address rising property tax bills.
Thomas, who’s currently the Ashtabula County auditor, said he’s discussing two possible approaches and working on a bill with a current legislator, Rep. Jim Hoops.
Their “main plan” would be to limit property-tax increases at the rate of inflation.
But Thomas said they’re also discussing eliminating the 20-mill floor completely. Doing so would simplify the state’s property tax system and permanently insulate homeowners from big property tax increases. But it also would significantly slash local funding for school districts and potentially force them to ask voters to approve levies more frequently.
Thomas, who suggested cuts in local funding could be offset with increased state funding, said he’s seen more Ashtabula County residents seek out payment plans to avoid falling behind on higher tax bills.
Property values went up an average of 30% there last year, and all seven of the county’s school districts are at the 20-mill floor, meaning homeowners there aren’t protected by the reduction factor.
“There’s a lot of ways to do this,” Thomas said. “I think people are very open because it’s such an issue.”
Property tax legislation being considered by state lawmakers
Another set of major bipartisan property tax bills puts the onus on the state to foot the bill. The main proposal creates a “circuit breaker” to prevent someone’s taxes from going up too much at once.
House Bill 645 would give up to $1,000 to eligible Ohioans whose property tax bills exceed 5% of their income. The state would pick up the tab, estimated to cost almost $900 million annually, via a refundable tax credit, according to the nonpartisan Legislative Service Commission research agency.
A couple other bills would make more significant changes to the state’s property tax system.
Senate Bill 308, sponsored by Ashtabula County Republican Sandra O’Brien, would change how local school levies are assessed by making the reduction factor apply to more types of levies, a change that would save taxpayers an estimated $336 million annually by 2026 while costing schools and other local governments an equivalent amount, according to the LSC.
Senate Bill 244 would allow cities and some townships and counties to designate areas in their communities where property owners could apply for temporary tax exemptions. The legislation, sponsored by Republican Sen. Michele Reynolds and Democratic Sen. Hearcel Craig, requires local officials to set rules that limit eligibility to people who make 80% or less of the median income of the community and require owners to keep the property for one year.
Ohio House considers doubling ‘homestead’ tax exemption
The Ohio House on Tuesday approved another proposal, House Bill 274, that doubles the “homestead” tax exemption received by many senior citizens from $26,200 to $50,000 for those who have lived in their homes for 20 years or more.
The measure now heads to the Senate, which must approve it for it to become law.
State Rep. Dan Troy, a Lake County Democrat, said during a speech before HB274 passed that lawmakers need to act – not only to help their constituents but also to keep Ohioans from pursuing a more “draconian” approach.
“I think we have to do something, because we don’t want something to be initiated by the citizenry that is basically a property tax revolt,” Troy said.
Map by April Urban/Signal Cleveland
Tax report coming
Republican State Sen. Bill Blessing, whose district includes Hamilton County, said he’s concerned that bills that broadly expand property tax exemptions would just benefit large landlords and other institutional investors who in turn would raise rents. He said it might also increase demand for homes, driving home prices up.
But he said some have balked at the “circuit breaker” legislation’s price tag as the state prepares for what’s expected to be a fiscally tougher situation than in previous years. He said he doesn’t expect the disagreement to get resolved by the time the legislative session ends at the end of the year.
“We’re kind of at an impasse at this point,” Blessing said.
Nevertheless, the special legislative committee Blessing is co-chairing must issue a report by the end of the year. Blessing said he at least plans to get his own personal view into the public and is studying how to pay for the “circuit breaker” bill by eliminating existing state tax exemptions.
Blessing said there’s political unrest in his district over property taxes, and he only expects the issue to get more attention as more counties update their valuations.
“It’s been a huge issue this year, and it’s going to be a massive issue next year in Northeast Ohio,” Blessing said.
The voter anger is translating to grassroots political organizing. Several anti-tax groups gathered at the Ohio Statehouse earlier this month to protest and lobby lawmakers. Protesters included Brian Massey, a conservative activist from Lake County.
“Many of the people that we are talking to I would say have a conservative bent,” Massey said. “But there are an awful lot of people on the left side, and they’re not going to be happy about being priced out of their homes either.”