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

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

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

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

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 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. 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.

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

How is the “Assessed” Value Determined? The real property tax base is the taxable (assessed) value of land and improvements. 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. 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.

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. 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. Incentive to bring in a business to provide jobs and other benefits. Period of time varies before a tax is paid by the business. Period of time varies before a tax is paid by the business.

What is the Tangible Property Tax? Does it Work the Same as Real? It is a tax on businesses with a value over $10, in machinery, equipment, furniture, fixtures, supplies, and inventories. It is a tax on businesses with a value over $10, 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. 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. PPT is almost 23% of the total value of all property in Allen County.

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 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 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. Funding will be lost or passed on to real property owners.

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

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. 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. Voting additional mills will increase the taxes you pay.

What are Effective Mills? These are the number of mills necessary to raise the amount of money the taxpayers originally authorized. 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 35,000,000 assessed value x.001= $35,000 38,889,000 new assessed value x.0009= $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. 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. 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.

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. 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: 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 Allen East $ 90,608,748 x.001=$ 90,608 Bath 296,570,737 x.001= 296,570 Bath 296,570,737 x.001= 296,570 Elida 352,679,500 x.001= 352,679 Elida 352,679,500 x.001= 352,679 Shawnee 451,483,798 x.001= 451,483 Shawnee 451,483,798 x.001= 451,483

ALLEN EAST LSD 2004 Total Valuation is 90,608,748 TAX RATES2005 PERS PROPAGR & RESCOM & IND EST REVENUE INSIDE5.05 $457,500 OUTSIDE $1,390,700 SUB TOTAL $1,848,200 EMERGENCY 330, $335,200 TOTAL GF $2,183,400 BOND4.37 $395,900 SCHOOL IMPR BOND1.55 $140,400 CLASSROOM FACILITIES0.50 $45,300 PERM IMPR $155,600 TOTAL TAX RATE $2,339,000

BATH LSD 2004 Total valuation is $296,570,737 TAX RATES:PERSAG &IND &2005 PROPRESCOMEST REV INSIDE6.15 1,823,900 OUTSIDE ,810,900 SUB TOTAL ,634,844 EMERGENCY 02 1,391, ,393,800 EMERGENCY 04 2,333, ,342,900 TOTAL GF ,371,544 PERM IMPR ,700 PERM IMPR ,800 TOTAL TAX RATE ,195,044

ELIDA SCHOOL 2004 Valuation is $352,679, TAX RATESPERS PROPAGR & RESCOM & INDEST REVENE INSIDE5.40 1,904,400 OUTSIDE ,241,700 SUB TOTAL ,146,100 EMERGENCY 00 1,708, ,763,300 TOTAL RATE ,909,400

SHAWNEE LSD 2004 Valuation is $451,483,798 TAX RATESPERAGR &COM &2005 PROPRESINDEST REVEN INSIDE5.80 2,623,200 OUTSIDE ,962,800 TOTAL ,586,000 EMERGENCY 04 2,150, ,161,900 EMERGENCY 02 2,880, ,920,200 PERM IMP ,500 TOTAL GF ,386,600

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.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.Federal AGI goes to state AGI which goes to SD AGI.

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

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

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

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

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

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

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. 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: The taxing authority passes a resolution or ordinance containing information necessary to provide the estimate: Purpose of the tax Purpose of the tax Additional, renewal or replacement of the tax. Additional, renewal or replacement of the tax. Revised Code Section authorizing the tax. Revised Code Section authorizing the tax.

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. 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. Placing a Levy on the Ballot

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

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

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. 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.

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. An operating levy raises funds for the operating expenses of the school such as salaries and utilities. It cannot be used for permanent improvements. 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. 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. It cannot be used for any operating expenses.

What is the School Foundation Program? The School Foundation program is the state’s answer to funding schools. 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. 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.

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

The School Foundation Program- The Formula The following is an example of the foundation funding for the school year: The following is an example of the foundation funding for the 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.

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

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. The Ohio Department of Education is in charge of distributing state funds to the different school districts.

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. 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. 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. For this reason, the basic aid formula is considered unconstitutional by the Ohio Supreme Court.

Should the Foundation Formula be Changed? This remains an issue in the Department of Education. 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: 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 Fair Schools Initiative Ohio School Boards Assoc. (basically all school associations are involved) Ohio School Boards Assoc. (basically all school associations are involved) “Big 8 City Mayors” “Big 8 City Mayors”

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 (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. 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 (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.

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

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. 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 Find the website at Click on Auditor and then the calculator, description of levies and types of levies is there for your use. Click on Auditor and then the calculator, description of levies and types of levies is there for your use.