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Property Tax 101

The purpose of this narrative is to provide our readers with a better understanding of property tax basics, residential property tax liability distribution within a community, why school districts continue to levy taxes, and how to calculate residential school district property taxes. It will reference Ohio law and provide examples to illustrate the calculations, which support the narrative. The intent is to answer broad questions and educate the reader on how school district property taxes affect their individual real property tax liability.

PROPERTY TAXES BASICS

Local property taxes are taxes paid based upon land and building valuation located within the school district. Every owner of private and business property, including public utilities, must pay these taxes. County Auditors assess real estate taxes based upon 35% of the market value of a property. For example, an assessment of tax on property valued at $100,000 equates to $35,000 ($100,000 x .35 = $35,000).

The measurement or rate of local property tax is a mill. A mill is one thousandth of a dollar. According to the Ohio constitution, all local governments combined can levy only 10 mills without a vote of the people. Un-voted millage, or inside millage are inside the 10-mill limitation. Counties, school districts, municipalities, and/or townships of each taxing district divide the inside millage, of which Olentangy has 5 inside mills. Voters must approve all mills in excess of 10 mills. Millage in excess of the 10 mills, known as voted millage, or outside millage, cannot be collected without a majority vote from the voters in that specific district or community.

RESIDENTAL PROPERTY TAX LIABILITY DISTRIBUTION

House Bill 920, passed into law in 1976, limits the inflationary income of voted millage. County auditors reduce property tax millage correspondingly so that the real property tax of the average homeowner does not increase due to increased property valuation. This process creates a reduced tax rate or an effective millage rate that is less than the voted millage rate. The opposite occurs when property valuations decrease, the effective tax rate may increase to collect the original amount of tax passed by the voters.

The County auditor’s annual evaluation process has reduced the district’s voted millage rate. While Olentangy Local School District has a voted tax rate of 84.300 mills, residents only pay 53.73256 effective mills on their property for school district taxes.

WHY SCHOOL DISTRICTS CONTINUE TO LEVY TAXES

As previously stated, House Bill 920 restricts Ohio schools ability to collect inflationary increases on voted taxes. Voted mills are the major source of income for our district as it is in most school districts. House Bill 920 freezes a school district’s income on voted mills. As inflation increases property valuations and operating costs for schools, a school district’s revenue remains the same. Revenue increases will not occur for schools, except as a one-time increase for new construction and a small amount of revenue growth on inside mills. With income on voted mills frozen, schools continue to ask to the local taxpayers for additional operating funds.

CALCULATING RESIDENTIAL SCHOOL DISTRICT PROPERTY TAXES

Residential taxes are calculated by multiplying the market value of a homeowner’s property by the assessed valuations rate of 35 percent and then the effective millage rate of the school district of 53.7326 expressed in decimal form of .0537326. The state of Ohio applied homestead and rollback credits of 12.5% to voted millage tax rates prior to 2014. Voted millage in 2014 and after no longer receive that credit. The following table demonstrates the calculation of the cost of school district taxes for $100,000 of property valuation in the Olentangy Local School District for tax year 2018, collected in calendar year 2019.

Pre 2014 With Credits

2014 and Forward Without Credits

Fair Market Value

$100,000.00

$100,000.00

Assessed Valuation Rate

X 0.35

X 0.35

Taxable Value

= $35,000.00

= $35,000.00

Effective Millage Rate

X0.0474853*

X 0.0062473*

Sub Total Taxes

= $1,661.99

= $218.66

Less State Credits of 12.5%

-$207.75

-$0.00

Sub Total Taxes

$1,454.24

$218.66

TOTAL SCHOOL DISTRICT TAXES OWED

$1,672.90

*0.0474853 + 0.0062473 = .0537326 total effective rate in decimal form

This cost per $100,000 valuation equates to approximately $5,855 in school district tax liability for a property valued at $350,000 ($1,672.90 x 3.5 = $5,855.15).

Property taxes are an integral component of the revenue received by Olentangy Local School District. Understanding the basics of property taxes is vital as a member of the Olentangy community. The information provided above has addressed broad questions and provides the reader with a general reference material as to how school district property taxes affect their individual real property tax liability.

Reference Materials Used:
Delaware County Auditor
New Albany-Plain Local Schools
Ohio Department of Taxation