Saturday, July 13, 2013

More Knobs, More Choices

The July 12, 2013 edition of the Columbus Dispatch ran a story about the 9.01 mill operating levy being recommended for Columbus City Schools. Included with the story was a chart comparing tax rates for most of the school districts in Central Ohio. The list is sorted by "Total Mills," in descending order.

We all love to see where we stack up on things, so I'm sure most of you have taken note that Hilliard City Schools is third from the top of this list - which is ordered in terms of "Tax Cost per $100,000 of Property Value" - right behind New Albany and Westerville.

Does that mean we're the third most expensive district in the area, in terms of taxes collected?

Not quite. You'll notice that this chart indicates that there are several districts which also levy a school income tax. Some districts charge the income tax against all income: Pickerington (1.00%), Canal Winchester (0.75%), Reynoldsburg (0.50%), and Bexley (0.75%); while others levy their income tax only against "earned income": Teays Valley (1.50%) and Jonathan Alder (0.75%).

Pickerington collects $14.4 million in local income taxes. Since 1 mill of property taxes raises $1.1 million/yr of revenue for Pickerington, their income tax collection is about the same as an additional 13 mills of property taxes, putting them at the equivalent of 60 mills. Similarly, the school income tax levied on Bexley residents raises them to 64 mills. Here's what that table looks like with income taxes included:
click to enlarge
When income taxes are included in this manner, Bexley rises to #1 on the list, and we fall to #6.

My method has one flaw - there is not a perfect correlation between property value and income. One generally relates to the other, but there are exceptions. For example, we've heard the story about how Warren Buffett still lives in a modest house he purchased decades ago, even though he has become one of the richest people in the world. For such a person, it's better to be taxed on property value than income.

Just the opposite might be true for someone who is retired and whose income has diminished substantially, yet still resides in a home which was bought and paid for during their working years. For such folks (like me!), the "earned income only" form of school tax is preferred over additional property taxes.

As I wrote a couple of weeks ago, the extra chunk of money our district received in the new state budget gives us some time to make some important decisions about the future of our school district, which is the same as saying the future of our community.

One of those decisions is how we might want to raise any additional local funding needed in the future, and income taxes need to be part of the discussion.

I hope you will engage in the dialog.


  1. Very interesting. Nice data analysis. I dislike the idea of an income tax addition since it only obscures what people are really paying. Seems the taxman loves obscurity because he can get more revenue when it's spread out over several sources.

    What really irritates me about Hilliard is how it seems like we should've learned from Dublin's example. When their property taxes went through the roof due to over residential development, it amazes me that Hilliard could be so blind as to do the same exact thing.

    1. Thanks. You and Marc are both right on the money in regard to the impact of residential development without corresponding commercial development. This has been a constant theme in this blog, and I'll update the data in my next post.

  2. The article should have mentioned the impact that commercial property has on school district economics. Obviously, if you have tons of commercial parcels paying into the system, the overall millage on homeowners will be lower. If you don't, the overall millage on homeowners will be higher. As a general rule, these types of articles try to take a complex subject and boil it down so that it's easy to understand, but without the nuance, the reader has no chance to figure out what is really going on.

    1. Indeed, although I still think the basic cash flows are pretty simple to understand:

      1. School districts spend almost all their money on compensation and benefits, which is driven by how many folks we employ and how much we pay them;

      2. Revenue comes from three primary sources: A) residents of the district; B) commercial entities in the district; C) and the State of Ohio. In general, the higher the value of A plus B, the less one gets of C.

      Everything else flows from these simple relationships.

  3. Perhaps of interest, T.S. Eliot in 1932. (Making me wish we hadn't built Bradley):

    American universities, ever since Charles William Eliot and his contemporary “educators,” have tried to make themselves as big as possible in a mad competition for numbers; it is very much easier to turn a little university into a big one than to reduce the size of one that has grown too big. And after Eliot had taught America that a university should be as big as possible … America grew very rich — that is to say, it produced a considerable number of millionaires, and the next generation set itself to an equally mad programme of building, erecting within a short time a great variety of imposing, though in some places rather hastily-built, halls and dormitories and even chapels. And when you have sunk so much money in plant and equipment, when you have a very large (though not always well-paid) staff of men who are mostly married and have a few children, when you are turning out from your graduate schools more and more men who have been trained to become teachers in other universities, and who will probably want to marry and have children too; when your whole national system of education is designed for an age of expansion, for a country which is going indefinitely to increase its population, grow rich, and build more universities — then you will find it very difficult to retract.

    “Modern Education and the Classics,” 1932.

  4. I'm sure you've seen the interesting article in the Dispatch today about how college education costs are out of control.

    I sent the following to the author of that article:

    The only thing I would've added is how this doesn't seem limited to college, but applies to all forms of education including elementary and secondary. Check out the statistics in this link:

    The crazy rise in college education costs is also happening in grade school and high school, and I don't know that grade school and high school can be blamed on an arms race of buildings and wifi and whatnot. I suspect it has more to do with teacher salaries and pension costs going up over the rate of inflation.

    1. Education at all levels is a professional services endeavor, and it's finances will always be driven by how many people are employed and what they get paid. The former is determined by what programs and services the voters demand, and the latter is determined via negotiations in which the voters are represented by the people they elect to the school board.

      Therefore the questions always are: what do the majority of the voters want, and are we hearing the voice of the majority, or just the loudest voices.

  5. Paul, with the extra state funding coming to the district I am somewhat puzzled why we dont make some slight spending adjustments to the salary and benefit costs and hold the line on a levy discussion period.

    We are talking some significant dollars in new budget that we will receive, so with a levy when the board and administration wants to cut busing, athlettics extra curriculars they can honestly bring forth a valid argument for a new levy.

    The courage has to be there and is now not evident by refusing to look at out of control spending on supplementals, where educators are gaining up to 5,000 per year on compensated extra curriculars and no one yet has convince me and others that you can properly DO YOUR JOB with up to 5 additional programs besides teaching.

    This is a reckless and poor accountability for paying for extras that in the private sector you just get it added on for zero dollars compensation.

    The process for how these supplementals are allocated,
    who gets access, why some are shut out of the process and you "have to know someone " to get in the loop on these supplemental contracts. I fear we have again negotiated this stuff into the contract when we could use outside resources at a much cheaper price. Somehow this is a sacred cow, and is constantly dimissed as not that big of an impact.

    Why for example would an outside coaching candidate with Division 1 background in competition and having high school credentials coaching be not even considered over a
    recent graduate when the outside person could cost less.

    Hopefully our new supt will have some courage to challenge some of the "well thats they way it is" philosophy so prevalent in the district and provide some leadership previously lacking in this area. After all he is all about communication with the district residents, parents et al.

    When you look at the charts, does it not mean that some will be forced out as the tax rate growth will be unsustainable for them to pay and they will lose money on their home as they have to leave.

    1,000 for Safety Patrol and 1200 for weight room supervision when it should be part of the coaches salary for the latter is tough for many seniors living on a very low fixed income or disabilty.

    It might be nice to havethese but should not be a
    absolute have to be.