By Ernie Strawser and MegeLearninghan Homsher, Frontline, Senior Advisors, Ohio Analytics
Key Learning from H.B. 186:
· Continues current law in the calculation of taxpayer property tax bills.
· Uses a growth cap, approximately 13% currently, to reduce the taxpayer’s taxes owed.
· Reduces/caps 20-Mill Floor district revenue growth.
· Does not provide reimbursement to the district for the taxpayer credit.
Capping Taxpayer Property Bill Increases
House Bill 186 utilizes an established credit method to reduce a taxpayer’s amount owed. Currently, credits like the Homestead and Rollback credits reduce the taxpayer’s payment, with the state directly reimbursing the district for these amounts. However, with the Growth Cap Credit, although the taxpayer's bill is reduced, the state does not provide direct reimbursement.
In the example shown, the taxpayer pays $384 less than the calculated taxes, reducing the district’s total revenue since the credit is not reimbursed by the state.
Without the Growth Credit, the district’s property tax revenue from this property would have increased by $1,000 from 2024 to 2025. Instead, with H.B. 186, growth is limited to $616 – still an increase, but lower than it would have been.
What Drives the Growth Cap?
At the cornerstone to calculating the cap on growth is the use of the Gross Domestic Product Price Deflator (GDP-PD), which adjusts GDP quarterly for inflation. The credit is based on the cumulative change over the past three years. Essentially, from the example, it limits growth from the 25% reappraisal to 13%. However, the credit only applies if the increase due to reappraisal or update exceeds the change in GDP-PD.
The cap is only applied to the district’s fixed rate outside operating millage. Growth on inside millage would continue at the full reappraisal.
Tax Year YOY Change
2022 7.0%
2023 3.6%
2024 2.4%
|
Three-Year Total
|
13.0%
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The Math Behind the Credit
Under H.B. 186, tax calculations remain unchanged – reduction factors to tax rates still apply where relevant, and the 20-Mill Floor remains unchanged. The 20-Mill Floor has driven the most revenue growth during recent era of inflation.The table below details school district revenue from our working example. Rollback and homestead adjustments are not reflected and may slightly alter credit amounts.