HB 187 could lower taxes and school revenues
- Published: October 25, 2023
Last week, Ohio legislators passed House Bill 187 — a bill that could ease the tax burden for property owners in the short term, but could also spell delays in tax funding for municipalities and reduced revenues for school districts.
The bill is currently being considered for passage by the Senate.
As the News reported last month, residential property values throughout the village are set to jump an average of 24% beginning next year, which will mean higher taxes for local residents. (The upcoming school facilities levy, if passed, won’t be affected by the property revaluation.) Similar hikes will take effect across the state, with some Ohio counties seeing average value upticks of 40%.
State lawmakers responded to the rise in property values — and expected rise in taxes — with HB 187, also known as the “Ohio Homeowners Relief Act.”
At present, the state tax commissioner recommends property value increases based on one year of home sales data. HB 187 would require the commissioner, in conjunction with county auditors, to use a three-year average of home sales data to reassess local property taxes until the next mandated property valuation in 2026.
The result of the bill would be that some homeowners could see lower increases in the appraised property values of their homes in 2024 for a three-year period. For that reason, HB 187’s sponsors are aiming to get the bill passed at the Senate level before tax bills are delivered to constituents next year.
In announcing the House passage of HB 187 on Oct. 11, Madison Township Republican Rep. Thomas Hall — who co-sponsored the bill with Clermont County Republican Rep. Adam Bird — said it will “protect vulnerable Ohioans and provide peace of mind to those who have concerns about paying for necessities, such as groceries, as a result of property tax increases.”
However, many Ohio county auditors have opposed the legislation — including Greene County’s own Auditor David Graham.
In speaking with the News this week, Graham said he and other members of the County Auditors’ Association of Ohio, or CAAO, have spoken out against the pending legislation for a variety of reasons.
“We oppose it because an appraisal is an opinion of value at a point in time that does not represent a period of time,” Graham said, adding that HB 187 would “change the law so that it meets a short-term benefit.”
In a communication sent to legislators while HB 187 was still being considered by the House Ways and Means Committee, the CAAO alerted lawmakers that the organization opposed the bill, stating: “Counties across the state have invested millions of dollars implementing the appraisal process as required by state law and in accordance with the standards established by the International Association of Assessing Officers. This work has taken years to complete. Changing this process near its completion will cost additional money and resources and it will likely cause a delay in both billing and collecting property taxes in 2024, impacting local government’s ability to provide services.”
“I’m usually for whatever benefits the taxpayers,” Graham said. “I realize that the system’s broken — but [the CAAO] didn’t like the way [legislators] were fixing it.”
Before the bill’s passage, the CAAO urged lawmakers to reconsider the bill and address the tax hike in other ways, either by dipping into the state’s “rainy day” ARPA funds to dole out tax credits to homeowners, or by implementing an income tax credit. Graham said both of these suggestions were “dead in the water” upon receipt by lawmakers.
“The state had no interest in using their dollars to assist with property taxes,” he said.
A third suggestion — and the one the CAAO felt would be most effective — was that lawmakers put a cap on how much revenue school districts can receive based on rising property values.
Many school district levies are designed to collect specific annual revenue; as property values rise, tax rates associated with those levies are lowered to maintain the specified amount of revenue. However, Ohio law currently protects school district tax rates from dropping below a combined 20 mills — excluding emergency levies and bond issues — allowing for some revenue growth for school districts as property values rise.
The CAAO proposed that, rather than rework how property values are assessed, legislators should instead put a cap on how much increased tax revenue school districts at the 20-mill floor can collect when property values increase, limiting revenue growth, and thus local tax burden, to the inflation rate of about 7.6%.
“That proposal actually seemed to be well-received [by legislators] — except nobody is willing to carry it,” Graham said, noting that he believes it’s unlikely the 20-mill floor proposal will be adopted now that HB 187 has made its way to the Senate.
As county auditors across the state wait to find out whether HB 187 will clear the Senate and be enacted by the governor, Graham said he’s already working ahead to reassess local property values in accordance with the proposed bill’s required three-year average sales data. He said he aims to head off any potential delay in municipalities receiving tax revenue, just in case.
“I’m not committing to [the adjusted values] yet, because the bill hasn’t passed, but I have to be prepared if it does,” he said. “I want to be able to implement our new numbers based on 187 — as it stands right now — as quickly as possible.”
Though the reduction in expected property taxes wrought by HB 187 if it passes may offer a temporary boon to taxpayers, the bill might also mean a hefty reduction in expected revenue for local school districts.
Most Ohio school districts, which receive only a fraction of their funding from the state, rely on local property tax revenue for the majority of their operations costs. And as previously noted, school districts with tax rates at the 20-mill floor — like Yellow Springs’ own school district — also rely on increases in property value for increased funding as operations costs rise.
According to an impact study by the Ohio Legislative Service Commission, HB 187 would “reduce the projected increase in tax collections to school districts and local governments by an estimated $539 million over the three-year period affected by the bill.”
Though the effect of HB 187 as it’s currently written is perhaps not as pronounced as it would be if legislators were to adopt the CAAO’s proposed 20-mill floor cap, school districts across the state still oppose the bill.
Here in Yellow Springs, at the most recent meeting of the school board on Oct. 12, Board President Dorothée Bouquet noted that state education agencies — including the Ohio School Boards Association, the Buckeye Association of School Administrators and the Ohio Association of School Business Officials — had “sounded the alarm” about the developing legislation.
“[The legislation] is in reaction to the property taxes rising and they’re doing this instead of fixing the way that they fund public education in Ohio,” Bouquet said.
“It is an extraordinary time as far as property value growth. … I’ve never seen increases like we’re seeing now,” District Treasurer Jacob McGrath added. “But these rules were put in place to help school districts stay funded and stay off the ballot — so now they’re solving a temporary crisis with bigger impacts.”
Though it’s unclear right now what the total impact of HB 187 could be for Yellow Springs Schools, it’s likely to make budgeting difficult. The district receives its annual tax revenue in two disbursals, in February and August. If HB 187 passes, it will take 90 days to go into effect, meaning the district’s February disbursal will be calculated according to the recently completed revaluation based on one-year sales data. The second disbursal, however, would be calculated according to HB 187’s three-year average data, minus the relative overpayment from February.
At meeting’s end, Bouquet urged board members and community members to “keep an eye on the climate” and reach out to legislators to talk about how the legislation could affect local schools.
“It could be highly disruptive [to school districts],” Bouquet said. “To me, this is a way for [legislators] to say, ‘We did something.’”
The News will update readers on HB 187 if it passes at the Senate.