Tuesday, October 23, 2007

Millage hullabaloo

Here's an interesting spin from the Olentangy School District ...

Districts do not "contend with two tax millage amounts," they simply apply the effective rate against their property valuations in order to calculate tax revenue. Couldn't be simpler.

Funny, when pushing levies, the district never implies that the tax effect on individuals due to a new levy will increase with property values. Yet, when it's in their favor, the district acts dumbfounded that the tax payments on individual properties do not increase with property values.

What the district fails to mention -- and the reason for its spin -- is that property taxes have been increasing at an annualized rate of between 7% and 9% (depending on the years included). Your voted mills reduce to the effective rate even as your wallet gets thinner.

The district implies that residents are paying less, yet tax bills detail a whole different story. Hmm.

School Funding: Millage Collection and Reduction – an explanation
by Becky Jenkins, Treasurer

Millage. What does it mean, and why do some Ohio schools collect less than what is voted?

The question is an interesting one and is often related to the frequency with which Ohio school districts are on the ballot.

Millage is the factor applied to the assessed or taxable valuation of real and personal tangible property to produce tax revenue. In a technical sense, a mill is defined as one-tenth of one percent or one-tenth of a cent (.01) in cash terms.

Schools often contend with two types of millage amounts. One is the full “voted millage” and the other is the “effective millage.”

The voted millage amount is the amount that voters approve. However, the amount goes through a reduction each year to adjust for rising home values, a factor commonly referred to as House Bill 920 (HB920). The millage amount that is actually collected by a school district after that reduction is then called the total effective millage.

How significant can that reduction be for a school district? As an example, while Olentangy residents have voted in 62 mills, currently the district is only collecting 35.36 mills.

Another way to think about it is to consider the last operating issue passed by Olentangy voters. While the request was for 10.5 mills, even in the first year of collection Olentangy only captured 10.2 mills. Fast forward to today and we are only collecting 8.66 mills.

Each school district has a different effective (or actually collected) millage. For a comparison of some of our local school districts, see the chart.

School funding is a very complicated issue, and millage is only one part. Because Olentangy is so heavily reliant on local tax dollars, millage is one area we monitor very closely.


Anonymous said...

Hi, I was wondering where you found this stat?

"What the district fails to mention -- and the reason for its spin -- is that property taxes have been increasing at an annualized rate of between 7% and 9% "


Jim Fedako said...

It's not available anywhere I can find. So ...

First, you have to pick a beginning year and an ending year for your analysis.

You have to impute the average property value increase over your time period based off of county auditor reappraisal increases (use Ohio Dept of Taxation online data).

Apply the increase to the value of a hypothetical property -- $100,000 is always an easy starting value. This will give you the ending property value.

Next, apply the beginning and ending property values to the effective mills at both the beginning and end year (again Dept. of Tax data for effective mills). This will give you taxes paid on your hypothetical property for the two years.

Once you get the two taxes paid values (beginning and end), calculate the tax increase as a percentage.

Finally, calculate the annualized rate.

Or, just use my numbers since I did the heavy lifting for you.