Ohio lawmakers discuss overhauling property tax system in light of massive value hike

Credit: Nick Graham

Credit: Nick Graham

Local government officials last week told state lawmakers that restoring slashed state funding and reining in tax abatements would go a long way in addressing concerns about tax increases fueled by historic property value increases.

Those comments came in a hearing of a joint legislative committee formed this year after state mandated assessments sent property values skyrocketing, causing huge tax increases for some communities. Property values are increasing an average 37% in Butler County, 34% in Montgomery County and 30% in Greene County.

Comprehensive property tax reform will take time, but several short-term fixes to huge tax bills are being vetted by the committee, which in its latest meeting heard testimony from governmental entities that rely on taxes to provide essential services, namely cities, counties and townships.

While the schools get the lion’s share of property taxes, townships rely almost exclusively on that revenue stream to function. Ohio Township Association Executive Director Heidi Fought warned the committee members they must tread carefully or risk jeopardizing the wellbeing of residents in the state’s 1,308 townships.

“There’s a whole bunch of things to think about, the concern is real,” Fought said. “And if options aren’t available or if the property tax system gets drastically altered, given that these townships are extremely reliant on property tax for that purpose and no other funds, those services will go away or have to be cut.”

Townships are required to provide road service and cemetery maintenance, brush and weed control. Many townships also provide fire and EMS, police protection, parks and other services.

When the biennial budget passed last summer, it included the creation of a Joint Committee on Property Tax Review and Reform. Senate Ways and Means Committee Chairman Bill Blessing, R-Colerain Twp. and House Ways and Means Committee Chair Bill Roemer, R-Richfield are co-chairs and there are two other Republicans and two Democrats from each chamber. They have until Dec. 31 to come up with recommendations.

In addition to the township association the reform committee also heard from the county commissioners association, municipal league and the Ohio Mayors Alliance.

Tax abatements debated

A recurring theme was the growing use of tax incentives, specifically tax increment financing districts, that dilute the property tax base and can prompt additional tax levies.

TIF districts are an economic development tool that many local governments use to encourage new investment in an area. A district typically surrounds a parcel or group of parcels and enables the taxpayers within it to make payments into a special fund in an amount equal to their property tax liability for the life of the TIF. These payments in lieu of taxes are used by the local governments to retire debt incurred for infrastructure improvements within the TIF area.

Jon Honeck, senior policy analyst for the County Commissioners Association of Ohio, noted in 2014 local governments granted tax exemptions totaling $9.8 billion, that number skyrocketed to $19.3 billion in 2022.

Union County Commissioner David Burke said TIF laws need to be reined in.

“Candidly, if a developer claimed covering the cost of roofing was requirement for a project to occur, it would likely be an acceptable use of TIF revenue under current law,” he said.

And they are routinely being extended.

“TIF rollover, extended life beyond debt payment and expansion beyond original intent are seeming to have a negative impact on voters who pass levies for specific purposes but are repeatedly subverted by these tools,” he said. “In some cases, voters are forced to consider additional or new levies to offset the lost revenue that TIFs have removed.”

The governments that install the incentives are not required to give voters a say but co-chair Blessing said maybe they should.

“Should we have some sort of Democratic control over this, in other words where voters have some input on this?” Blessing said. “Not just hey congratulations here’s 30 years and its immutable, you have to come back regularly.”

‘Morally wrong’ or useful tool?

State Rep. Tom Young, R-Washington Twp., agreed with Blessing saying the burden needs to shift.

“We are in essence taxing our citizens on the front end when we should be incentivizing the company or the entity,” Young said. “Would it make sense to not do the TIF at all until we have something proven, in the ground, generating revenue and then incentivize them to say okay now you are eligible, we’re going to step in and help you.”

Rep. Dan Troy, a Democrat from Willowick, said it is “morally wrong” that a portion of funds taxpayers approve for things like Children Services, Boards of Developmental Disabilities and the elderly are being diverted, “we’ve basically said economic development trumps morality… I think we really do need to rein these things in.”

On the flip side, Fought noted tax incentives do serve a purpose.

“West Chester Twp. in Butler County has used TIFs and other abatements to create $3 billion in new valuation encompassing residential and commercial properties, a new library, and numerous hotels, to name a few,” she said. “These tools allow townships to develop difficult pieces of land that otherwise would sit vacant or dilapidated.”

Local government funding cuts

Part of the reason the local governments say they are forced to rely more heavily on property taxes is because the state halved their Local Government Fund revenues back in 2011 and made other detrimental changes.

Keary McCarthy, executive director of the Ohio Mayors Alliance, told the committee as an illustration he believes Cincinnati received $40 million from the state in 2011 and only $15.7 million in 2022.

“The reduction in the Local Government Fund and other tax policy changes have had an impact not just on cities but on local governments overall,” McCarthy said. “(This) caused us all to rely more exclusively on local revenue sources.”

Troy told this news outlet more state dollars are critical to meaningful property tax relief.

“State spending is really tied into property tax relief because the more we’re able to help out, the less they’re going to have to lean on local taxpayers,” Troy said.

The committee has now held six hearings on the topic with school officials, county auditors, the Ohio Chamber of Commerce, Department of Taxation, the Farm Bureau and a host of others since the start of the year.

Other efforts

Aside from the committee’s efforts, individual legislators have introduced stand-alone legislation to tackle the issue. Last year Butler County officials attempted to apply a temporary fix that would have reduced the value increase from 37% to around 25% by using a three-year average.

House Bill 187 passed the House last fall, was revised by the Senate Ways & Means committee and died on the vine when the House wouldn’t vote to concur with the changes.

Rep. Thomas Hall, a Republican from Madison Twp. co-authored HB 187 and successfully passed another tax proposal out of the House Ways & Means Committee last week.

He and State Rep. Adam Mathews, R-Lebanon, say House Bill 344 will eliminate replacement property tax levies — which often result in tax increases — but preserve renewals and new levies. The bill also prohibits local governments from filing certain property valuation complaints that would increases property taxes.

Blessing told this news outlet he envisions holding a couple more meetings, but he doesn’t envision providing a single recommendation from the committee, rather a synopsis of testimony they heard and individual opinions from the members.

He said some members favor a “broad-based property tax reduction” like HB 187 but others want to provide targeted help for those who need it most, like the elderly, so consensus “would be very narrow.”

Blessing said the true solution will take longer.

“These are all short-term issues because if we don’t get a handle on housing in Ohio it’s kind of a moot point, we’re just throwing good money after bad,” Blessing said. “Whereas if we spend a ton of money on building and adding supply and things like that, the supply side shock brings down real estate prices which in turn would bring down valuations and bring down property taxes.”

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