A Senate Republican is pushing a bill that would stop Ohio school districts from challenging real estate owners who think they’re paying too much in property taxes, a move that could reduce funding for schools or shift a greater tax burden onto homeowners.
The plan, proposed in Senate Bill 85 by Sen. Bill Coley of Hamilton, was deleted at the last minute from the two-year $130 billion budget bill and also died in the last General Assembly.
Coley re-introduced the plan during testimony in June, saying that schools and other government entities — though supported by property taxes — have “no direct stake in the property” yet get a “bite at the valuation apple.”
Coley is referring to the complicated and drawn-out process of setting property values, which in turn determine taxes. The county sets property values, then property owners and tax-funded agencies, like schools, get to challenge those values.
Ideally, the process ensures each property owner, whether owning a house or a factory, pays a fair share to fund the government.
The process
Every three years, county auditors adjust property values up or down after reviewing recent improvements or sales.
If property values increase too much, property owners get a couple of months to review and challenge the higher valuation that would drive up their tax bills.
School districts, many hiring lawyers, also keep an eye on property values. If values drop too much, then the school district either loses revenue or other local businesses pay more, depending on what kind of levy each community has passed.
Akron, for example, has fixed-rate levies, while Barberton has fixed-sum levies, said Akron schools treasurer Ryan Pendleton. Akron would lose revenue when property values decrease while Barberton would see other businesses pick up the slack. For those that would lose revenue, passing more levies or cutting costs are the only alternatives.
So schools look for blips in the county records (maybe a property sells for twice its listed value). School boards also are notified by the county when a property owner, often a commercial or industrial property owner, requests that county auditors lower a property value by more than $50,000.
Schools then file claims — seeking to raise a property value — or challenge property owners who say they’re paying too much in taxes. A county board of revisions settles the dispute. Any decision can be appealed to the Board of Tax Appeals in Columbus.
Backlog in dispute
When Coley introduced his bill in the Senate Ways and Means Committee this year, he said the Board of Tax Appeals “is currently experiencing a substantial backlog in cases” which were kicked up from each of Ohio’s 88 county-level boards of revisions.
Coley’s claim of a serious backlog may have been true when he first introduced his plan years ago. But not now.
“When I became director at the [Summit County] board of revision in 2011, we had a backlog of Board of Tax Appeals (BTA) cases dating back to as far as tax year 2006,” said Jon Poda. “As of today, all of our BTA cases are from the current 2014 tax year, except for one remaining from tax year 2013.”
“At one time there was a backlog, but we are current now,” said Kathleen Crowley, executive director of the Board of Tax Appeals in Columbus. “We do not have a backlog.”
A taxing dilemma
Last week, school treasurers and a statewide school board association gave the first testimony opposing Coley’s latest attempt to pass the bill.
The treasurers described the process of challenging property owners as a way to prevent the loss of revenue and to protect homeowners, who might see more levies or education cuts.
Local taxes are increasingly important. They account for the lion’s share of school funding, according to state records. Meanwhile, legislators have passed laws that favor businesses over homeowners by limiting what local governments can tax.
After a decade of Republican control in the governor’s office and state legislature, Ohio began in 2005 what the Ohio Department of Taxation considers the “most significant tax reforms in decades.” As part of the reforms, taxes on business equipment would be outlawed, slowly.
School treasurers have worried since about when the revenue, better known as the Tangible Personal Property Tax, would actually disappear. After years of waiting, Gov. John Kasich ripped off the Band-Aid in the most recent budget, vetoing $84 million in funds that have eased the transition. The House and Senate quickly passed a bipartisan bill to replace $44 million of the cut. Kasich signed the bill this month.
With the reduction in state funding, Ohio lawmakers this year will dedicate less than 17 percent of the state budget to K-12 education, the lowest contribution in more than 20 years, according to a Beacon Journal review of state budgets available online back to 1997.
Abuse?
Meanwhile, treasurers say Coley’s concern that public schools are going after property taxpayers is blown out of proportion.
“The basis for the proposed SB85 works off a premise that school districts abuse their right to challenge property tax values, putting an unfair burden on taxpayers,” Akron treasurer Ryan Pendleton said. “I see or hear of no evidence locally or statewide that supports this.”
Records collected by the Summit County Board of Revision show eight of the county’s 17 school districts challenged no properties that looked under-priced based on recent sales. And nearly three-quarters of all property valuation cases are initiated not by schools but by property owners — almost exclusively seeking to lower their tax bills.
Of the 406 current cases filed or countered by school districts, only 35 involve residential property owners. The rest are commercial or industrial properties. As a rule, school districts tend not to bite the hand that votes on their levies.
Akron Public Schools — which hires a Cleveland attorney to monitor changes in property values — is contesting one residential property and 179 commercial or industrial properties: 88 with requests to lower tax bills and 92 that appear to be undervalued, and under-taxed, based on recent sales. Hanging in the balance is nearly $3 million in tax revenue, which if lost would require the school district to make cuts or seek another levy.
Doug Livingston can be reached at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow on Twitter: @DougLivingstonABJ.