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Schools, governments lose millions after housing crisis

Current levy revenues won’t recover even if home prices rebound.

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By Jeremy P. Kelley, Staff Writer Updated 12:56 AM Sunday, January 15, 2012

A little-known piece of Ohio law, paired with falling property values, will eliminate millions in tax revenue local school and government leaders expected to receive for years into the future.

The impact is immediate — this year it will cost Dayton Public Schools $2.57 million, Montgomery County Human Services $8.75 million, and 20 other agencies at least $145,000 each.

Many officials expected falling property values to take a toll on their budgets, but not many knew that much of that damage is permanent. That’s because Ohio law has a provision to protect taxpayers when property values go up, which historically they have done, but no lever to compensate taxing districts when values go down, which has happened during the past three years.

Thanks to that provision, dozens of levies that voters recently agreed to pay for will now collect at a lower dollar amount for as long as the levy exists.

Northmont Schools Treasurer Sandra Harris said her district expected to stay in the black until 2014-15, but the new data — starting with a loss of $747,000 this year — now has Northmont projecting a deficit in 2013-14.

“It was not something we were expecting.”

How it works

Ohio House Bill 920, passed in 1976, created a system where each voter-approved levy would raise a predetermined amount every year. For example, Dayton Metro Library officials were confident their 1.75-mill permanent levy passed in November 2009 would always raise $13.6 million in taxes per year, based on estimates from the Montgomery County auditor.

The purpose of the law was to protect the taxpayer. It prevented schools, libraries and governments from automatically collecting more taxes on each levy when an individual’s property value rose.

At the time the law was written, and in the 30 years since, most cities and townships were growing, and property values were rising, so there was an always-increasing tax base to pay the amount each levy required.

But Montgomery County Auditor Karl Keith says lawmakers didn’t anticipate a scenario like the past three years, when existing home values dropped, and there was little new construction to make up the difference. Today, most local communities have a smaller property value base than they did in 2009.

In the library’s case, the 2009 levy’s tax rate legally can’t go above 1.75 mills. But the county tax base has fallen enough — from $28 billion to $26 billion — that 1.75 mills of tax can’t produce $13.6 million anymore. The levy only raises $12.5 million.

That’s painful enough for library officials, but Keith said HB920 also mandates that $12.5 million is the new annual maximum that the levy can ever collect, whether property values bounce back or not.

“The thing that surprised us is how the language is written so you can’t collect more in future years,” library Director Tim Kambitsch said. “That’s something we weren’t expecting.”

Who is affected?

Because of tax reduction factors in Ohio law, most levies approved in 2004 or earlier aren’t impacted by this issue. Their tax rate, or percentage, has been reduced over the years, and can be adjusted back up, still staying under the millage that voters approved.

But in Montgomery County alone, there are 74 different levies passed since 2001 that will lose money, both in 2012 and for the life of the levy, because of the drop in property values and HB 920.

The issue came up in Montgomery and Greene counties, which were the only local counties to do property revaluations in 2011. Both counties will see lower property tax revenues on levies passed since 2005, but values dropped more severely in Montgomery County.

Twelve of Montgomery County’s 17 school districts are hit, from Oakwood, where three “capped” levies will lose money, to Dayton and Centerville with one capped levy, to Trotwood with five.

Eight of the nine townships lose money. Washington Twp. faces five capped levies and Miami Twp. has six on the books, all passed since 2007. Cities including Clayton, Miamisburg, Riverside and Trotwood have police, fire and street levies that will be limited.

And four major countywide bodies — Five Rivers MetroParks, Sinclair Community College, the Human Services group and Dayton Metro Library — have passed levies since 2008, all of which are now capped at lower dollar amounts.

Former Montgomery County Administrator Don Vermillion, who now teaches at the University of Dayton and directs public projects for UD’s Fitz Center, said the intent of the law was to protect residents from hidden tax increases.

“I don’t think they were looking for this reduction in property values,” Vermillion said. “I have a feeling that township and county governments will be talking with their state legislators.”

What to do next?

State Sen. Peggy Lehner, R-Kettering, was surprised to hear of the “capped levy” impact Friday.

“Obviously, it’s a very serious unintended consequence of legislation written years ago that has never been tested in this fiscal environment. I think the legislature needs to take a close look at this,” Lehner said.

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Montgomery County agencies affected by 'capped’ levies:

Countywide
	Capped levies	Loss per year
MetroParks	1	$1,189,829
Human services	2	$8,751,686
Sinclair	1	$2,115,179
Metro Library	1	$1,063,003
Countywide total	5	$13,119,697
Schools
	Capped levies	Loss per year*
Brookville	1	$52,331
Centerville	1	$249,384
Dayton	1	$2,566,752
Huber Heights	2	$313,974
Kettering	3	$1,123,735
Northmont	3	$747,177
Northridge	2	$140,884
Oakwood	3	$148,797
Trotwood	5	481,161
Vandalia-Butler	1	$460,263
West Carrollton	1	$274,901
Miami Valley CTC	1	$0#
Schools total	24	$6,559,359
Townships
	Capped levies	Loss per year*
Butler	3	$83,342
Clay	2	$22,663
German	1	$15,329
Harrison	3	$1,033,753
Jackson	5	$26,424
Jefferson	2	$68,101
Miami	6	$347,022
Washington	5	$396,991
Townships total	27	$1,993,625
Cities/other
	Capped levies	Loss per year*
Clayton	2	$193,063
Farmersville	2	$8,825
Miamisburg	1	$147,606
New Lebanon	1	$18,306
Phillipsburg	1	$5,169
Riverside	1	$96,042
Trotwood	7	$433,034
Wright Library	2	$7,778
Cent-Wash Parks	1	$55,408
City/other total	18	$965,231
All levies total	74	$22,637,912*