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'Safety valve' meant to limit OH property tax hikes doesn’t help some

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Monday, December 30, 2024   

By Andrew Tobias for Signal Cleveland.
Broadcast version by Brett Peveto for Ohio News Connection reporting for the Signal Ohio-Public News Service Collaboration


Ohio’s property tax system is supposed to protect homeowners. It’s designed to prevent big increases in their home’s value from translating to big increases in their tax bills. 

This is done by the “reduction factor” in the state’s current tax formula, which in most cases automatically reduces tax rates when property values go up in a given community. This reduction factor, or safety valve of sorts, is the heart of House Bill 920, a 1976 reform that established Ohio’s modern system of property taxation. Lawmakers passed it in response to an historic rise in home prices. 

But today the formula is showing signs of breaking down. As a result, homeowners in a record number of school districts – mostly concentrated in rural and exurban areas – won’t get the full benefit of that safety valve on the taxes they pay to local schools.

That means homeowners in these communities – which have a lower tax base experts call the “20-mill floor” – are seeing bigger hikes in their tax bill compared to homeowners in some other parts of the state.

Last year, property values jumped by an average of 35% in counties that updated their values. For homeowners in communities where the safety valve was shut off, this would translate to a roughly 25% larger tax bill. For areas where it stayed on, the increase likely would be more like 5%. 

Several state lawmakers describe rising property taxes as the single top issue for their constituents, especially for seniors and others on fixed incomes. So they have introduced various bipartisan bills meant to lessen the financial damage on homeowners. But none of the bills has gotten final approval, and it’s unclear whether any will before the legislature breaks at the end of the year.

“We’re going through something that’s pretty unusual, and it’s having this extreme effect,” said Howard Fleeter, a Columbus-based economist who studies and advises school districts on school-funding issues.

Why the safety valve doesn’t help all communities

Ohio assesses property taxes in units called “mills,” each one of which translates to $35 in taxes per $100,000 in property value. Local governments are allowed to charge property owners up to 10 mills, or $350 per $100,000 in value, in taxes without taking any special steps. 

But voters must approve any property taxes beyond that. This is why school districts and other local governments commonly put tax levies on the ballot.

Setting up taxes this way could mean approved property taxes would rise indefinitely without another vote as home values rise. That’s why the state’s complex tax formula has a safety valve to protect homeowners. It automatically lowers tax rates for most voter-approved levies via the reduction factor when property values go up while guaranteeing the tax raises the same amount of money it did when voters first approved it.

The combination generally keeps a homeowner’s tax bill stable even if their property value goes up.

But if the tax rate drops to 20 mills, the state formula shuts off the reduction factor and locks in the rate. The technical name is “20-mill floor,” and it’s meant to make sure school districts get enough funding to operate.

In communities at or below the 20-mill floor, homeowners get no protection from the reduction factor on the portion of their tax bill that goes to schools – which is around two-thirds of most homeowners’ tax bills. So their tax bill would go up significantly if their property sees a significant increase in value.

Who is most likely to see the larger hikes on their property tax bills? 

As of January 2024, 409 of Ohio’s 611 school districts were at the 20-mill floor, according to Fleeter, the Columbus economist who studies school funding. 

That’s double the number from five years ago, and it’s likely to continue going up.

Fleeter said there’s one major reason for the increase: The ongoing process in which county auditors are updating property tax values for the first time since the coronavirus pandemic sent home prices soaring. Ohio updates its tax values at the county level, with one-third of counties doing so each year. 

Updates done in 2023 are showing up on tax bills this year. Fleeter expects similarly large property value increases for the 2024 revaluation, which will include Cuyahoga, Lake, Lorain and Stark counties and will take effect in 2025.

Fleeter said counties that updated property values in 2023 saw an average increase of nearly 35%. The reduction factor kicked in and lowered property tax rates in many communities, sending their rates to the 20-mill floor. But by hitting the floor, the safety valve shut off. 

“There’s a problem in these districts where taxpayers are seeing large tax increases that House Bill 920 was supposed to prevent,” Fleeter said.

In high-tax communities, the floor is never hit

In areas where voters have approved high property taxes, like Cuyahoga County, tax rates are high enough that they’re unlikely to ever approach the 20-mill floor. 

But it’s more likely to be an issue for communities where voters have approved fewer property taxes in general. These are usually found in rural and exurban areas.

There are some exceptions. 

For example, the Cincinnati City School District, the state’s second-largest public school system, is at the 20-mill floor, according to state tax data. This is because the district gets a significant portion of its funding from an emergency levy. State law exempts emergency levies from counting against the 20-mill floor, which means the increased property values have a larger tax effect for homeowners there.

Other school districts with large emergency levies at the 20-mill floor include Willoughby-Eastlake combined schools in Lake County, Perrysville village schools in Wood County and Mansfield City Schools in Richland County.

In the other 202 school districts with the 20-mill floor, the reduction factor should still help prevent huge tax increases. These generally are in suburban and urban areas that pay higher taxes to begin with.

The particulars will vary by property owner, since the state’s property tax formula also factors in how someone’s property value changed compared to the average change in their community.

“This is a real question in many rural districts in a way it’s not in the same way in urban districts,” said Zach Schiller, a researcher with Policy Matters Ohio, a liberal think tank. “… It does still mean we have significant numbers of people who are in fact seeing a squeeze because their property taxes are going up. And that’s a problem that needs to be addressed.


Andrew Tobias wrote this article for Signal Cleveland. This story was produced in association with Media in the Public Interest and funded in part by the George Gund Foundation.


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