SALEM, Ohio — A series of property tax reform bills signed by Ohio Gov. Mike DeWine just before Christmas could collectively save rural taxpayers hundreds of millions of dollars in the next several years.
But the bills amount to a Faustian bargain for small towns and rural communities, according to tax experts and critics of the laws. School districts, fire departments and police departments outside of the state’s largest cities receive a significant portion of their revenue from taxes assessed on property owners, and the laws could rob them of money needed to pay bills and stave off staff reductions.
The changes in the laws signed by the governor are complex, but here are the basics: a 50-year-old state law limits increases in property tax levies over 20 mills, or 2% of a property’s taxable value.
Levies above that threshold are revised downward when property values increase, which is why school districts and emergency services must ask voters for new levies when inflation pushes up their expenses.
The law was designed to shield Ohioans from runaway increases in home values, but the 20-mill floor was included to ensure that poorer districts would continue to have the funding they need. The recent changes approved by the legislature and the governor now mean that levies under 20 mills will also be revised downward.
Most of those levies are in rural communities, according to experts.
“About 381 school districts across the state of Ohio fall under the 20-mill floor, and the majority are in rural areas,” said Ohio Education Association Vice President Dan Greenberg.
The tax changes also eliminate so-called “inside millage” that amounts to about 1% of a property’s taxable value and can be levied by local governments without voter approval, further straining rural budgets.
School districts and first responders won’t lose money, tax experts stress, but they will see funding remain flat at a time when inflation is driving up costs.
“Over the past few years, inflationary residential valuation increases have been a windfall for schools,” said Butler County Auditor Nancy Nix.
Ohioans will pay roughly $1 billion less in property taxes over the next three years thanks to the changes, according to Zach Schiller, research director for Policy Matters Ohio, citing estimates from the state legislature.
“This is a major hit to the revenue available to schools as the state has become less and less willing to provide the necessary support to districts,” he said.
While there isn’t a breakdown of how much rural communities will lose compared to their urban and suburban counterparts, experts generally agree that smaller counties and municipalities will be harder hit because more rural levees fall under the 20-mill floor.
The tax changes are “putting the squeeze on local government budgets and especially school budgets,” said Gabriel Lade, the Swank Chair in rural and urban policy at the Ohio State University. “This was an area where these schools in rural areas had automatic funding increases over time. As long as property values were growing, they were seeing growth.”
The Ohio General Assembly budgeted money to offset some of the property tax losses, but critics note that there’s no guarantee that lawmakers will continue to provide that funding.
Some who own expensive properties support the changes. Farmers in particular say property taxes make up a significant portion of their costs.
“It’s a tough time right now,” said Robert Benroth, a farmer who grows corn and soybeans on a 1,600-acre farm near Glandorf, Ohio, noting that input costs have spiked in recent years as the market value of crops has stagnated.
Ohio law partially shields farmers from taxes on properties with acreages measured in the thousands, but “if you’re talking about real estate taxes, any increase is that much more devastating,” said Benroth, who is also Putnam County’s auditor.
Several state lawmakers who pushed for property tax changes did not respond to requests for comment.
Opponents of property tax reform include school officials who stand to see their revenue plateau at a time when they need to increase salaries to keep up with inflation.
Those officials are also seeing increases in costs that can’t be easily offset such as transportation and utility bills that are more onerous for small and rural districts.
Tightly packed urban and suburban districts, for example, don’t have to bus as many students and can more easily redraw bus routes to save money on gas, Greenberg said.
“The districts can cover a large amount of land,” Greenberg said. “And as [transportation] costs go up, that becomes a big issue.”
Parents who live far outside of big cities likely won’t notice any changes right away, but their children will eventually sit in larger classes and experience longer bus rides, he said.
Proponents of tax reform note that property values in Ohio are rising faster than inflation. The median price of a Buckeye State home rose 4% in September compared to a year ago, according to Ohio Realtors.
“People are getting taxed out of their homes, and we need to find a way to flip the narrative and make it so it’s affordable while still providing the services that everyone needs,” said Belmont County Treasurer Katherine Kelich.
But critics like Schiller argue for more targeted reform, noting that even some wealthy school districts have levies below the 20-mill floor.
“This doesn’t provide relief to some of the people who most need it,” he said.
