Thursday, September 6, 2012

Westerville Levy Repeal Effort

Another of the blogs I regularly scan is "10th Period," written by Stephen Dyer, currently the Education Policy Fellow at Innovation Ohio, a left-wing organization. He recently posted an article commenting on the ruling by the Franklin County Board of Elections to remove from the November ballot an issue to roll back some of the school property taxes in Westerville, filed with the assistance of the 1851 Center for Constitutional Law, a right-wing organization.

I'd like to give rebuttal to a couple of Mr. Dyer's assertions:
  • "HB920 effectively cuts the amount of revenue raised by millage over time."   Not true. The effect of HB920 is that the dollar amount a levy collects on a piece of property remains constant regardless of changes to the appraised value of that property over time. Consequently, a school board that wants more revenue needs to go before the voters and ask for it, which I think is a good thing. During the rise in property values that accompanied the housing bubble, most public education professionals lamented that their revenue didn't automatically rise too. Of course, when the real estate market tanked, HB920 kept the school property tax revenue from collapsing as well, unlike the case of the many municipal and state governments which are struggling through the steep decline of income tax based revenue.
  • " In a nutshell, HB 920 cuts levy rates when property values rise, effectively keeping the amount any levy raises at the same dollar figure, regardless of inflation...."  This is phrase which has been used by the public education community for years. It makes a false connection between inflation and property values. Inflation is a monetary event triggered when a central bank expands the money supply faster than the pace of the economy warrants. We haven't had much inflation for many years - certainly not enough to explain the rise of real estate prices during the housing bubble. That was a supply-and-demand event, and it was the collapse of demand that popped the bubble. 
  •  "...That means districts' property tax levies lose value as the community's property gains value."  Again, the property tax levies never lose value - the revenue they generate remains constant regardless of changes in property values (with a few exceptions).
  • " It is incumbent upon the General Assembly to severely restrict this antedeluvian section of the Ohio Revised Code that allows outside ideologues to potentially undo a vote of the people so easily."  I don't know that this tax repeal effort was initiated by "outside ideologues."  The and Taxpayers for Westerville Schools organizations are local entities that have been around for a while - the former for 3-4 years. But nonetheless, even if the 1851 Center did jump into the fray in support of their broader agenda, how is that different from having money and other resources come into Ohio from all over the country to help repeal Senate Bill 5 last year?
I suppose this is the way politics works in America these days. Each side seeks to create sound bites with just enough truth mixed into distortions and sometimes outright lies in order to hopefully sway ignorant and apathetic voters. The collective amount of money expended in the process has become astronomical.

And if they don't like how that strategy works out, they turn to the courts in hope of winning on a legal technicality, which I believe further erodes trust in the democratic process.

I have no problem with the legal battle going on right now in regard to this repeal issue. There is a valid argument as to the meaning of the language in the context of the legislative intent of the General Assembly when the repeal process was written into law. It's now up to the two sides to make their case to the Ohio Supreme Court, and the accept what the Court decides. From a layman's perspective, I predict that the Court upholds the decision of the Board of Elections.

If that happens, I hope Taxpayers for Westerville Schools makes another run at this, taking more care with the technicalities. They did after all manage to get nearly 5,000 signatures on the petition, meeting the standard for putting an issue before the people of their community.

I'm not saying that I hope they are successful in their repeal effort. This is a local matter to be settled by the people of the Westerville school district. I have no standing in their fight.

All I'm saying is that the game shouldn't end on a penalty. The Taxpayers for Westerville Schools folks owe it to the 5,000 signators to straighten things out and get the issue put before the voters, even if it means going out and getting 5,000 signatures on a new petition.

Mr. Dyer doesn't allow comments on his blog, but your respectful comments are welcome here.


  1. I am not so sure the Court will agree. The court has over the years (as you are aware) gone to great pains to maintain local funding of education. To now essentially cut off local voices at the knees would seem counterintuitive.

    That said, regardless, they will take another shot at this, and I'd wager good money there will be a lot more than 5000 signatures next time around.

    And HSCB take note; all of your levies were new levies... not a replacement levy in sight...

    Oh, and Mr Dyer is a typical leftist: it's OK for a school board to come back repeatedly after being told "no", but it's not OK for the voters to come back and challenge a "yes" vote? Is it any wonder we are in such a mess when people use that kind of logic to support changing the law. I honestly thought that We The People were still in charge (even if only just...)

    1. The question is muddled, as it was not a direct tax increase just a renewal, but on the other hand the revenue will increase due to values being different
      than when originally voted.

      I can understand the chagrin about it not making it on the ballot, but my feelings are is the court will rule on the basics and say it cannot be on

      What should have been done, and at this point I am betting on, is the Westerville group will target a different levy. I do have issues with outside groups stirring the pot in the district, its bad enough there is enough infighting

      Mark has a point I do agree with, its not ok to challenge a yes vote very easily, and the districts can come back, with use of taxpayer dollars by the way, time after time.

      IN PUBLIC BY THE BOARD.. WHY NOT The board and district and its employees certainly step up in public and blame the taxpayer for levies, not understanding, corralling students because of family comments etc, but we cant even get a agenda item on a development that potentially could fill a
      elementary school.
      Same stuff, different day, harass the students
      and their parents but dont stand up to the city
      publicly, except for one member.

      What happened to our newest board member and campaign rhetoric. Same stuff, different board member, same outcome, same old deflection

      And when are we going to have a serious discussion on our remedial rate that remains high for the standard awarded.

  2. What kind of advice are these overburdened taxpayers in Westerville getting?? Seriously, that 1851 guy couldn't figure out a technicality before getting wasted signatures?!? And why the heck didn't they go for more tax relief? I mean c'mon, that levy they're trying to repeal is for 11.4 - they got a lot of signuture and could have got more if there was a bigger cut. They were duped by someone who just wants to get political attention for himself. This is unbelieveable!!!

  3. Paul - you have some great info here, but I'm not sure that you have everything 100% correct.

    HB920, as you point out, does not directly cut revenue raised over time. Article XII, Section 2a(C)2 of the Ohio constitution states:

    "(2) With respect to each voted tax authorized to be levied by each taxing district, the amount of taxes imposed by such tax against all land and improvements thereon in each class shall be reduced in order that the amount charged for collection against all land and improvements in that class in the current year, exclusive of land and improvements not taxed by the district in both the preceding year and in the current year and those not taxed in that class in the preceding year, equals the amount charged for collection against such land and improvements in the preceding year. "

    There is no similar provision given to raise the millage should property values fall. I'm not sure the courts have ever stated this is the case. Clearly they would never be allowed to increase millage above the approved value, but I'm not sure that this even allows for millage to ever rise, as the constitution only talks about reductions. So you might get a case like this:

    School district with $100 million in property in its borders passes a 10 mil tax, thus raising $350,000 per year in taxes. The next appraisal, the property value increases to $110 million, so the millage is reduced to 9.09 mil, so that $350,000 is still collected. But what happens if property values drop to $100 million the next year? Is the millage increased to 10 mil? It doesn't appear to me that it is. If the property values drop to $90 million, it is clear that they can't increase the millage past 10 mil, so the tax collected certainly wouldn't be more than $315,000.

    It seems to me that the government made the same false conclusion that Wall Street did - that home values would never drop.

    When it comes to the comment about inflation, what I hear more broadly is not that the education community is drawing a connection between property values and inflation - but rather that the funding mechanism we have only allows them to compensate for inflation by asking for property tax increases - without additional levies, they can't match spending even with inflation. And that is completely true - they have no recourse to even keep inflation-adjusted spending flat apart from asking for levies again and again and again and again..... And while it hasn't been a problem in recent years, public wages in general do tend to outpace inflation over time... so if you matched that wage growth, you end up with even more frequent demands for property tax increases....

    1. It's been a while since I tried to do any in-depth research into HB920, but I do recall that it modified language across several sections of the Ohio Revised Code, so while the item you cited enters into the equations, it's not the complete picture.

      Remember that the voted millage never changes, it's the so-called Reduction Factor which changes. That was the technicality which tripped up the Westerville repeat effort: the levy in question didn't change the millage rate of the levy it replaced, even though over time the overall Reduction Factor had been lowered to reflect increasing assessed property values, which meant that the replacement levy, at even the same millage rate, would collect more in taxes because it would be based on current home values (ie without reduction) rather than the older home values associated with the preceding levy.

      You are correct, that the education community says that the problem is that property tax collections do not automatically rise with inflation. My point is that there is no connection between property values and inflation. They can, and often do, move in opposite directions.

      The other relationship in this discussion is the relationship between compensation/benefits costs and inflation, because it is comp/benefits costs which drive spending. Because of the structure of the compensation system in all Ohio school districts, there is no direct connection between comp/benefits and inflation.

      Salaries and benefits are determined by negotiation between the school board and the unions. The Ohio Revised Code does specify the minimum pay for public school teachers, but no school district in central Ohio is anywhere close to those minimums. Beyond that, teacher pay is simply a reflection of how hard the school board negotiates.

      Having lived through the insanity of the true inflationary period of the late 1970s, we have very little true inflation today. Certainly prices of some stuff is going up, but if the Fed keeps the money supply in circulation managed well, the rise of prices of some items will force consumers to either reduce their consumption of those items, or to reduce their consumption of other items. That reduced demand should lead to lower prices for those 'other items.' In time, consumers and producers move to a new equilibrium.

      I fear what we have today is stealth inflation, since the Fed is buying up all the debt the Treasury wants to issue as a way to keep interest rates near zero while simultaneously giving the government an credit card with no credit limit. I've not yet fully understood what happens if someone decides to unwind all that.

      To some degree, it doesn't matter to me what the causes are of the need to ask the public for more money every once in a while. That seems like a good thing to me. If the school district can't explain why they think they need more money, maybe they shouldn't get it.