Property Tax Rollback Info

Eklund, John <JEklund@calfee.com> Wed, Jun 18, 2014 at 5:15 PM

To: Simon Husted <shusted@news-herald.com>
Simon -
Ive had a chance to briefly review the summary of the ETPI study and offer the following:
1. Plainly, at least some portion of the changes in sources of property taxes in Ohio over time has
been the relatively modest increases in business real property values (compared to residential real
property values). I suspect this is, as much as anything, a reflection of what a crummy business
climate Ohio had created for itself over the years.
2. No doubt the elimination of the Tangible Personal Property Tax (TPP), has also impacted the
changes in sources of property taxes, but bear the following in mind:
a. The decision to phase out the TPP (and the schedule on which to do it) was made in the
126th General Assembly (2005). School Districts have had that long to plan and prepare for the
eventuality. And, the law provided that districts would be held harmless for any lost revenue from
the phase out for a period of time, and then the hold harmless would be phased out. The phase-out
of the hold harmless provision was supposed to start in 2011, but the 128th General Assembly
(2009-2010) postponed that for another two years (on its way to digging Ohio a structural budget
hole of about 8 BILLION dollars). In short, we are finally arriving (albeit late) where everyone has
known we were heading for the last 10 years or so.
b. Notwithstanding all this, State sources of school revenue for 2015 will exceed 2010
levels, including the almost .5 billion dollars in stimulus money that the prior administration threw
at education knowing it was only one-time money. For FY 2015, State General Revenue Fund and
Lottery Profit spending for primary and secondary education will exceed FY 2010 funding levels by
$1.3 billion, or 17.8 percent. Even including one time federal-stimulus funding, TPP/KwH
reimbursements, and property tax relief, FY 2015 funding levels will exceed FY 2010 funding levels
by $317.8 million, or 3.3 percent.
c. Remember, in the same HB 66 that set elimination of the TPP in motion, Ohio adopted the
Commercial Activity Tax - a tax on businesses. That money not only has been used for the Local
Government and School District property tax replacement funds, part of it also goes into the general
revenue fund and helps fuel the increases in State resources for K-12 education.
3. Business Real Estate, moreover, has seen average millage rates increase by 43.4% compared to
an average millage increase on residential realty of 19.47%.
My conclusion: Any shift in the property tax mix of funding for schools is old news and not that
important (except to the extent it is coming out of the pockets of Ohioans - which makes it
important to all of us). More importantly, to set up the shift as being away from business property
and on to residential property is misleading - while business personal property taxes may be less of a
share of school funding, other business taxes were designed to replace the TPP, and they have been
doing a swell job of it - by ignoring this important fact, the study presents less than half the picture.

Eklund