MOUNT VERNON — Due to the 2008 reappraisal of property values, property taxes in Knox County will probably increase. Does that mean the schools will be getting more money? No.
Because of the way school funding works in Ohio, the increase in property taxes does not go to the school districts. The homeowner pays more taxes, but the schools don’t receive more money. By law, as residential and agricultural property taxes go up, the millage for schools is adjusted downward so that schools get no more money than the dollar amount specified when the particular school levy was first passed by voters.
That tax reduction factor law means the local districts will receive the same amount of local property tax money even though property values are higher. The county auditor sets the value of the property, the school district voters have specified the dollar amount to go to the schools and the county treasurer collects the tax.
In Danville, for example, the 41 mills (of combined operating levies and bond issues) approved by the voters over the years has been reduced by law, and is actually being collected at 20 mills. The Danville school district does not derive a net benefit from an increase in property values.
To add insult to injury, so to speak, the increased valuation means the state thinks the district is wealthier than it is and therefore decreases the amount of state aid to the schools.
“As our property values go up,” said Danville Treasurer Mary Payne, “we get less state money. That really hurts us because over half of our funding comes from the state. So as our property values go up, or somebody builds a new house in the district, we (the schools) actually lose money. One year that amounted to $77,000.”
In other words, with reappraisals, the district shows an appearance of increasing wealth through growth in its tax base, which is often referred to as phantom revenue. Although the growth in school tax revenues does not truly match the growth in the tax base, basic state aid is reduced proportionately to the phantom revenue growth.
“The state,” Payne said, “assumes we are collecting 23 mills and we are only collecting 20 mills. That means we actually lose money.”
Another thing regarding property taxes and schools, Payne said, is the shift from agricultural use to residential use.
“For instance, if you have a 60-acre farm that is partially divided into residential lots, the net value of that property for residential classification is, a lot of times, higher. But, the county treasurer is only going to collect X number of dollars for that 60 acres. They will downward adjust the rates on that property to come up with the same number of dollars for schools they did before.”
School districts themselves in some cases have to pay property taxes on new district property. Payne said the schools are charged property taxes on new buildings or, in Danville’s case, on the ball field donated by Cuddy Farms, until a tax-exemption status is approved. Therefore, the recent property reappraisal has also impacted Danville’s property tax bill. Regarding the Cuddy Farm property, Payne said, the previous market value was $40,400 and the current value is $57,780.
The school is supposed to receive a refund of the property taxes it pays on that property when the tax-exemption is approved, but Knox County Auditor Margaret Ann Ruhl said the process could take a year or longer. She also said auditors around the state unsuccessfully tried to get a law passed that would permit them to automatically grant property tax exemptions to schools.
