ETPI
Education Tax Policy Institute
8050 North High Street, Suite 100
Columbus, OH 43235
614-540-4000

For Release Tuesday, April 9, 2002

          COLUMBUS, April 9—The property tax system in Ohio in the last decade became more dependent on homeowner property valuation, according to a research report issued by the Education Tax Policy Institute (ETPI).

          "Ohio’s tax base has become increasingly reliant upon the residential and agricultural components of taxable property," the ETPI study concluded. Residential property accounts for the vast majority of the total residential and agricultural taxable valuation.

          In a report entitled "School Property Taxes in Ohio: A Ten-Year Study," the 22-page analysis found that from 1990 to 2000 residential and agricultural real property grew from 53% to 61% of total taxable valuation in the state. The taxable percentages for other property categories declined in the ten-year period. For example, general tangible personal property valuation (machinery, equipment, fixtures, and inventory) shrank from 15% to 12%.

          Formed in 1997, ETPI has issued more than 40 research reports and briefing memos that analyzed legislative proposals and tax policy issues affecting public sector services in Ohio.

          ETPI’s membership includes more than 100 Ohio school districts and 12 state-level organizations.

          Authors of the property tax report are William Driscoll and Dr. Howard Fleeter of Levin & Driscoll, a tax consultant firm in Columbus.

          The study noted that "while the statewide average effective tax rate on personal property increased by over seven mills in ten years, the effective tax rate on residential and agricultural property declined by 0.4 mills over the same period." This can be traced to the effect of House Bill 920, enacted in 1976, which applies a reduction factor to prevent taxes from increasing when reappraisals change real property values.

          "Although the average effective tax rate charged against residential and agricultural real property decreased, the amount of taxes collected did increase," the study found. Taxes on residential and agricultural property increased by about $1.7 billion from 1990 to 2000. Taxes on all other types of property increased by another $1.1 billion. As a result, per pupil taxes increased by about $116 per year.

          The research study also concluded that:

• "Ohio’s property tax structure reduces effective tax rates on real (residential and rural) property and forces regular increases in voted mills to offset those reductions. As a result, the system piles more and more tax mills on personal property, a shrinking portion of the tax base.
• Nearly two-thirds of all Ohio school districts failed to raise sufficient additional property taxes necessary to match the increases in the local contribution assigned to them by the school funding statutes.
• Improvements in the equity of the distribution of Ohio’s property tax base are modest, and are not distributed evenly across district types or among relatively poor and wealthy school districts.
• The property wealth gulf between large, high poverty urban districts and others in the state has widened over the ten-year period of the study."

          In a look at property wealth changes among school districts, the study found that "rural and small town districts have made the greatest strides in terms of percentage of increases, but still lost ground in absolute terms."

          "Large, high proverty urban districts fared the worst over the ten-year time frame," the research report noted. "Average increases in property wealth for these districts were lowest in terms of both dollars per pupil and percentage rate, suggesting the gulf between these districts and others in the state has only widened."

          The report said that "the rate of relative increase in equity among the least wealthy districts is slow enough that it will be many many years before the gap is narrowed in absolute terms in any meaningful sense."

          In 400 school districts, ETPI said, "the demand from school funding formulas exceeded property tax growth by $395 million. This amount represents a measure of phantom revenue."

          Property taxes in 211 school districts increased faster than the demands for a local contribution imposed by school funding formulas between 1990 and 2000. The amount of the excess equaled $527 million, according to ETPI calculations.

          The distribution of the taxable value of the different classes of property from 1990 to 2000:

          For more information contact: Warren Russell, president, Education Tax Policy Institute, at 614-540-4000, Dr. Howard Fleeter, Levin & Driscoll, at 614-447-1120, or William Driscoll, Levin & Driscoll, at 218-751-0495 (Minnesota number).