Opposition is growing against a Republican state lawmaker’s bill that would cut property taxes by eliminating the 1% of property tax value that schools and local governments can levy without voter approval – known as inside millage.
House Bill 335, sponsored by Rep. David Thomas (R-Jefferson), would eliminate inside millage, which legislative researchers say would affect $3.5 billion in property taxes collected by local governments and schools. Thomas has said eliminating inside millage could return that money to homeowners who are seeing huge spikes in their property tax bills, and that local governments and schools can pass income or sales tax levies to make up for the lost revenue.
House Democrats raised alarms at a Tuesday press conference with the help of representatives from local governments, law enforcement and education.
Kent Scarrett with the Ohio Municipal League said inside millage comprises up to 15% of the general fund of communities in his organization. But he said 153 local governments rely solely on inside millage, and it’s especially important to small and mid-sized communities.
"Recently, we conducted a survey of our members regarding their use of inside millage," Scarrett said. “Local officials emphasized that losing this flexible, stable source of funding would likely lead to service cuts, layoffs of our public safety forces, deferred infrastructure maintenance, and the need to seek alternative voter approved tax increases.”
"Municipalities and township could face budget shortfalls in the tens of millions. We've seen this before. Our partners will have to explore options like hiring freezes, deferred equipment upgrades, station closures and fewer personnel per shift," said John Harvey, president of the Ohio Association of Professional Firefighters. “No family in Ohio should wait longer for an ambulance or watch their neighborhood fire station closed because of legislative missteps.”
An analysis by major school groups shows the loss of inside millage could add up to nearly 20,000 teaching positions cut – or nearly a fifth of the state’s teaching workforce.
A letter from five major law firms that represent political subdivisions sent to committee members and obtained by the Statehouse News Bureau has raised concerns about whether the bill is constitutional.
The law firms wrote that eliminating inside millage would "represent a breach of contract by the political subdivision" and that it would also eliminate the security for unvoted general obligation bonds, which "would immediately put those bonds in technical default." The letter also suggested that it could hurt the credit rating of communities. "A political subdivision’s full faith and credit pledge, which consists primarily of Inside Millage, is the foundation of its underlying credit rating from credit rating agencies."
The law firms also wrote that eliminating inside millage could also hit tax incentive agreements such as tax increment financing (TIF) and community reinvestment areas (CRA).
"Inevitably, the expected revenues supporting revenue bonds that fund Ohio’s critical infrastructure projects will fall short of expectations, as Inside Millage is typically an important part of the tax base," the law firms wrote. "Since many, if not most, of these transactions operate on very thin margins, bond defaults are likely, which will impact the sustainability of existing and future public infrastructure projects, and indirectly weaken Ohio tax incentives for economic development."
The letter concludes that most of the unintended consequences of suddenly eliminating inside millage “will have a severely negative impact on Ohio political subdivisions, and Ohio taxpayers.”
Republican leaders have said they want to provide immediate property tax relief, though there are more than two dozen bills to reform property taxes that have been introduced—many of them bipartisan. Thomas said in an interview for "The State of Ohio" that he's hopeful elements of his bill could be added to the two-year state budget currently in conference committee, so homeowners could see relief in their tax bills in January.
"I would like to see however we can do it, as fast as possible," Thomas said. "Should have been five years ago. It would have prevented everything that we've seen over the last five years. Second best time is now."
HB 335 has its first formal hearing on Wednesday. Around two dozen groups have been invited to testify.
