The Allen County Auditor’s Office

1. The Allen County Auditor’s Office Ben E. Diepenbrock, CPA Allen County Auditor

2. Agenda • Local Funding for Public Schools • How are funds raised locally? • What is the real property tax? • Appraisal and Assessed Values • Tax Abatements • Tangible Property Tax • What are inside, voted and effective mills? • Why does one mill raise more? • Levies (Types of levies) • What is the school income tax option?

3. Agenda • State Funding for Public Schools. • What is the school foundation program? • State aid on the SF-12 Form. SF-3? • Distribution of funds to schools • Formulas • Lottery Profit Fund • Education Improvement Fund • Financing schools in Ohio- is it equitable?

4. How Are Funds Raised Locally? • Funds are raised locally by assessing taxes on real property and tangible property (business) taxes. • But not without my approval, right? • Amount of tax raised is based upon the value of the property and the mills charged against that property.

5. What is the Real Property Tax? • The real property tax is a tax on all real estate parcels and improvements made to a parcel. We track 53,000 parcels. • The total tax rate includes all levies enacted by a legislative authority or approved by the voters for all taxing jurisdictions in which the property is located.

6. How is Property Appraised? • We use a group of highly qualified appraisers to determine the value of each parcel in Allen County. • It takes two years to do a full reappraisal. • Willing buyer and seller concept.

7. How is the “Assessed” Value Determined? • The real property tax base is the taxable (assessed) value of land and improvements. • The taxable (assessed) value is 35% of the true (market) value, except for certain land devoted exclusively to agricultural use. Real property tax rates vary with the taxing jurisdiction.

8. How Does Tax Abatements Affect School Funding? • When taxes are abated, they are forgiven for a certain period of time based upon an agreement between business and government. Time can be significant. • Incentive to bring in a business to provide jobs and other benefits. • Period of time varies before a tax is paid by the business.

9. What is the Tangible Property Tax? Does it Work the Same as Real? • It is a tax on businesses with a value over $10,000.00 in machinery, equipment, furniture, fixtures, supplies, and inventories. • It does not work the same as the real property tax. In fact, due to recent changes of the law, the tangible property tax will be phased out over the next four years. • PPT is almost 23% of the total value of all property in Allen County.

10. What is the effect of the phase out? • The phase out will reduce the total assessed valuation of Allen County by 23% and schools by a significant amount. Thus, it will take more mills to collect the same amount of tax and the only mills left are on real estate. OR • It will take another revenue source to offset the loss of personal property (How about the CAT?) THUS • Funding will be lost or passed on to real property owners.

11. What are Inside Mills? • They are unvoted mills. • No approval is needed from voters. • But the total unvoted mills can not exceed 10 mills. • The district authority put them on long ago. • These mills are used for operating expenses or retirement of debt.

12. What are Voted Mills • These are mills that are voted on by the taxpayers. Before a levy passes, the majority must say yes. All mills above the 10 mill limit are voted mills. • Voting additional mills will increase the taxes you pay.

13. What are Effective Mills? • These are the number of mills necessary to raise the amount of money the taxpayers originally authorized. • 35,000,000 assessed value x .001= $35,000 • 38,889,000 new assessed value x .0009= $35,000 • For example, because of inflation and revaluation of real estate, it may take only .9 mills to raise the amount that originally took 1 mill to raise. • Abstracts are sent from the county to the state. The state then sends the county the effective mills based on the new construction and changes in the evaluations.

14. Why Does 1 Mill Raise More Revenue in One School District Than Another? • The reason this happens is because the valuations in each district are different. • Examples of Allen East, Bath, Elida, and Shawnee school district’s millage and estimated revenue are in the next four slides represent this. One mill at the full rate brings in the following: • Allen East $ 90,608,748 x .001=$ 90,608 • Bath 296,570,737 x .001= 296,570 • Elida 352,679,500 x .001= 352,679 • Shawnee 451,483,798 x .001= 451,483

19. How Does the Income Tax Option Work For Schools? • In lieu of a real estate tax levy, schools can request a certain percent of gross income tax based upon wages and other taxable items.If approved, it is withheld from the paycheck of working folks and considered on the income tax return of the retired or self-employed. Tax is on more than income though. • Federal AGI goes to state AGI which goes to SD AGI.

20. How will Personal Income Tax be Effected by HB66? • Main feature of tax reform is a 21% cut for all brackets. • Phased in over 5 years at 4.2% per year. • Also included a low-income tax credit that eliminates liability for taxpayers whose Ohio taxable income is at or below $10,000.00. • Note that some credits migrate to the new CAT (Commercial Activity Tax)

21. What do These Changes Mean? • 5.3 million Ohio taxpayers will see a personal income tax cut. • Savings to 5.3 million Ohio taxpayers. Will see a personal income tax cut. • Savings to taxpayers from the rate cuts and the new credit exceed $2 billion by FY2010.

22. What do These Changes Mean? • The average Ohio family of four will see their state personal income tax and sales tax burden reduced annually by $555. • 550,000 low-income Ohioans will have their income tax burden eliminated. • 300,000 flow-through businesses (S-corporations, LLC’s Partnerships, ect.) will see their tax rate cut.

23. General Types of Levies • Additional Levies are new levies. They result in an increase in tax. • Renewal Levies continue tax collection at the same rate that is already being paid. (No increase in tax.) • Replacement Leviessound like renewal levies, but provide additional revenue due to favorable treatment under reduction factor law.

24. Renewal Levy • Continues to collect revenue at the same level as in the previous year. • No increase in tax for voters. • Fixed-term levies are generally subject to renewal. • Bond levies are not subject to renewal (or replacement).

25. Replacement Levy • Replaces the effective rate with the full rate. • Replaces the old reduction factor with a new (current year) factor. • Collects revenue a a greater rate than in the previous year. • Results in a tax increase for voters.

26. Placing a Levy on the Ballot • Taxing authorities considering a tax issue must request a certification form the county auditor to establish a record of anticipated revenue. • The taxing authority passes a resolution or ordinance containing information necessary to provide the estimate: • Purpose of the tax • Additional, renewal or replacement of the tax. • Revised Code Section authorizing the tax.

27. Placing a Levy on the Ballot • County Auditor calculates the rate of the levy needed to produce the needed revenue, or the revenue that will be produced by a specific tax rate.

28. The Auditor’s Role • RC 5705.03(B) requires the auditor to issue the certification within ten days after the taxing authority request it. • This requirement is mandatory.

29. The Auditor’s Role • As the local authority on property tax issues, the auditor should assist taxing authorities placing issues on the ballot by: • Helping authorities understand proper timing for renewal or replacement. • Completing certifications timely and accurately. • Ensuring the rate is correct.

30. The Auditor’s Role • With support from local officials, taxing authorities will hopefully avoid irregularities that open their elections to challenges or injunctions against the collection of a tax.

31. What’s the Difference Between an Operating and Permanent Improvement Levy? • An operating levy raises funds for the operating expenses of the school such as salaries and utilities. • It cannot be used for permanent improvements. • A permanent improvement levy raises funds for the improvement of the schools such as buildings and grounds and busses. • It cannot be used for any operating expenses.

32. What is the School Foundation Program? • The School Foundation program is the state’s answer to funding schools. • The funding of K-12 public schools in Ohio is a joint effort with about 7.4 % coming from the federal government, 47% coming from local sources and 45.6 % coming from the state, based on FY04 revenue (the latest data available). Of the approximately $6.8 billion in state aid, about 80% is distributed through the Ohio School Foundation Program to 613 city, exempted village and local school districts. In addition, another $300 million is funneled through the foundation program to Ohio charter schools by deducting this funding from the regular school district’s payments where the charter school pupil resides.

33. The School Foundation Program-The Formula • The formula for the school foundation program is very complicated. It does vary by school district. • The “foundation” amount each district receives per regular student is approximately $5283. • The categories listed below receive more funding than just for a regular student. • Special Ed Student • Vocational Ed Student • “Gifted” Student • Poverty Based Assistance (PBA) • Transportation

34. The School Foundation Program-The Formula • The following is an example of the foundation funding for the 2005-2006 school year: Foundation Level ($5283) * Number of Students = Gross Funding (a) District Assessed Value * 23 mills = Local Share (b) Total of (a) – (b) = State Share Example: A school has 5,077 students x $5,283 per student = $26,821,791 Gross Assessed value is $311,757,657 x .023 mills = $7,170,426 local share Difference between the two is the state share of funding of school.

35. Whatis a Guarantee? • The guarantee is that the state aid will not be less than the last year.

36. How are State Funds Distributed to the Schools? • The Ohio Department of Education is in charge of distributing state funds to the different school districts.

37. Does the Basic Aid Formula Consider the Effect of the Reduction Factor? • No, per an official from the Dept of Education. It does not consider the effect of the reduction factor. • The formula assumes that the district has more revenue but the law has caused the revenue to remain constant due to the application of reduction factors. The state aid is reduced while the local aid remains constant. This concept is called Phantom Revenue. • For this reason, the basic aid formula is considered unconstitutional by the Ohio Supreme Court.

38. Should the Foundation Formula be Changed? • This remains an issue in the Department of Education. • The issue has come to the attention of many people. Groups are forming throughout the State to put to a vote a reform of the current funding Formula. Some who support it are: • Ohio Fair Schools Initiative • Ohio School Boards Assoc. (basically all school associations are involved) • “Big 8 City Mayors”

39. What is the Lottery Profit Fund? • The Ohio Constitution established the lottery profits education fund, which may be used only for the support of elementary, secondary, vocational, and special education programs.  In fiscal year 2004, the appropriation to the fund was $637.9 million. Of that amount, $606.1 million was designated to support line item 200-501 (Base Cost Funding), which supports basic aid, special education weighted funding, vocational education weighted funding, and educational service centers. The balance of the appropriation was designated for the retirement of bonds used to support school construction.

40. Is the State System for Financing Schools in Ohio Considered Equitable?

41. TAX CALCULATOR • In an attempt to provide more information on tax levies, the Auditor has put a Property Tax Calculator on the web. It helps taxpayer make a decision with their head as well as their heart. • Find the website at www.allencountyohio.com • Click on Auditor and then the calculator, description of levies and types of levies is there for your use.