Kettering City Schools are asking voters to vote “Yes” on May 5 for a 6.9 mill renewal levy. The yard signs, around Kettering, say, “Vote YES, May 5, Kettering City Schools, ZERO Increase In Taxes.”
This advertisement, to me, says that there is an absolute guarantee that if this 6.9 mill renewal levee is passed, there will be a ZERO increase in a property’s “effective” tax rate. But, as I found out today, by talking with Marty Moore of the County Auditor’s Office, this claim is very likely not true. What actually is guaranteed is that the school district will continue to raise $8.2 million each year from this levy, regardless that property values in the school district might decline. But, in order to raise this guaranteed revenue, if total valuation of the district declines, then the “effective” tax rate, in fact, will go up in order to raise the $8.2 million.
Ms Moore says that, anymore, she frequently hears the question from property owners: “How is it that my property value went down, but my taxes went up?”
In Kettering, the total valuation of the District is declining and nobody, in the short term, believes that this slide in valuation will stop anytime soon. By approving this five year levy, it is a safe bet that voters are unwittingly approving an increase in taxes. This may be a small increase, but, it will be an increase, nevertheless. It is not ZERO, as the signs say. It seems to me, it is incumbent on school officials and the board of education members to correct the false claim that, by approving this 6.9 mill renewal levy, there is a guarantee of a ZERO tax rate increase.
The 6.9 mill Kettering School renewal levy, right now, raises $8.2 million by taxing at an “effective rate” of 6.162 mills. But, if property values decrease, this “effective rate” will need to increase in order to raise that same $8.2 million.
Kettering voters are being asked to agree to the proposition that, if needed, this current “effective rate” of 6.162 mills could increase to as much as 6.9 mills. If total Kettering property values diminish to the point that the 6.9 mills fails to raise the expected $8.2 million, then, since this is not designated as an “emergency levy,” additional increases in millage will not occur, and the school district’s revenue will decrease.
The ballot language Kettering voters are being asked to approve says, “A renewal of a tax for the benefit of the Kettering City School District FOR THE PURPOSE OF CURRENT EXPENSES at a rate not exceeding six and nine-tenths (6.90) mills for each one dollar ($1.00) of valuation … for a period of five years, commencing in 2009, first due in calendar year 2010.”
In order for the Kettering Board to make an authentic guarantee of ZERO increase in taxes, it would needed to have guaranteed that the current “effective rate” of 6.162 mills would never be increased. The board should have offered a replacement levy of 6.162 mills. The 6.9 mill renewal levy allows for a .738 mill increase — the gap between what the effective tax rate now is (6.162 mills) and what the effective tax rate could become (6.9 mills). Before the five years expire, it could well be, if total district valuation plunges, that approving this renewal levy, voters are agreeing, if needed, to allow taxes to rise .738 mills, a 12% increase, a long way from ZERO.
Someone told me, “It’s like, if I told my wife she could spend up to $1000 — I would have little hope that she would spend less.”
The 6.9 mill renewal levy can never exceed 6.9 mills — an increase of 12% of its current effective rate of 6.162 mills — but, still, a definite ceiling. But there is no limitation as to how much bond levies can increase. Kettering City Schools passed a bond levy in 2006 for 3.6 mills. It is now 4.5 mills. A bond levy guarantees a fixed payment amount each year. If tax revenues decrease because of decreased property value, the tax rate must increase so that revenue is sufficient to service the debt. Kettering voters in 2006 approved a school bond issue of 3.6 mills for the purpose of borrowing $102 million to pay for school facilities improvement. Ms. Moore says that, because of the decrease in total Kettering valuation, the 3.6 mills was not raising enough revenue to make the loan payments. The tax rate was increased by 25%, to 4.5 mills.
In 2007, according to Ms Moore, the total valuation in Kettering was $1,424,287,702; in 2008, the total valuation was $1,396,394,393; in 2009, the total valuation was $1,354,338,690. This is a 4.9% decline in three years. Lower valuation means tax rates must increase, and the tax increase is shown in the “effective tax rate.” The 6.9 mill tax, in 2006 had an effective rate of 6.14 mills; in 2007 it had an effective rate of 6.13 mills; in 2008, it had an effective rate of 6.16 mills.
In 2007, the owner of a home appraised at $100,000 would have paid tax on $35,000 at a rate of $6.13 per thousand for $214.55. In 2008, a taxpayer with a home appraised at $100,000 would have paid at the rate of $6.16 per thousand for $215.60, an increase of $1.05. By approving a renewal level, voters are agreeing to allow yearly incremental tax increases to continue.
Approving this levy, because of the trend of decreasing property values — Ms Moore emphasized the impact of GM leaving the Kettering District — it is a safe bet that taxes will continue to creep up. The maximum a $100,000 property could be taxed, if this renewal is approved, is $6.90 per thousand or $241.50, an increase of $26.95 per year over what a $100,000 property is taxed today.
I supposed that Kettering Schools would have an up to date web-site that would have a detailed explanation of the 6.9 mill renewal levy. There is not a peep. I supposed that the web-site would have PDF files of reports made at the last board of education meeting. Nothing. I called the Board Office and was connected to the Treasurer, Steve Clark. I had an long telephone conversation with Mr. Clark. He was very gracious. He said that I could come into the board office and pick up copies of reports. He said that according to state law, the school district is only required to keep a video copy of its meetings.
I said that I was surprised that a school district that prides itself on greatly exceeding state minimums in its overall school program would think it appropriate that state minimums should guide the policies and procedures it uses to inform and engage the public.
I did go into the board office today and met with Mr. Clark. I also met Ms Julie Gilmore a board member — who brought a paper copy of her report to the office, so I could have a copy. Ms Gilmore’s report tells how the money is spent. It has a lot of interesting statistics that originally I had intended on analyzing in this article, a topic I may return to at some later time.
The secretary said she would make a PDF and e-mail me. And she did. I had assumed that Ms Gilmore’s report would be on the internet so that any Kettering voter who might want to read it would have easy access. Instead, in order to get her report, I had to make a phone call, wait a day, get in my car, find the board building, find an office down a labyrinth of hallways, and make a second request to Mr Clark before Ms Gilmore was telephoned.
It shouldn’t be so hard for a citizen to get information. I expressed my frustrations to Ms. Gilmore and she was very gracious, saying, that yes, it would seem a good idea to put on the web-site Board reports given in board meetings, and that she would discuss the matter with other board members.
I met with Mr. Clark and Ms. Gilmore today, before I had my long telephone conversation with Marty Moore in the Auditor’s Office and discovered the facts I report in this article. So, we didn’t discuss the facts in this report. I intend on giving Mr. Clark and Ms Gilmore, and other Kettering school officials, a link to this article and ask for their response. In my view, Kettering school leaders are simply wrong to approve levy advertisement that promises that the 6.9 mill renewal levy will result in a ZERO increase in taxes. This is a tough realization for me, since I normally am a big supporter of schools. I need to consider seriously if this is one school levy I should vote against as a means to express my disapproval of misleading advertisement.
Thanks Mike, but isn’t that what Kettering Schools should be teaching? Obfuscation is a necessary talent to make something of yourself in Politics or Finance, since no one makes anything any more in America except rhetoric. I suspect that the retired teachers will be offered a choice come back to teaching and receive pay or bye by pension.
Greg, no, this is not what Kettering Schools should be teaching.
I guess the question is, “Does anyone care?” I telephoned Scott Elliott of the DDN — since his specialty is education — and he said that he was on his way out of town for several days, but that he would pass the article on to Ellen Belcher.
Scott said that, in his judgment, the likely defense that Kettering school leaders would give for approving advertisement that says the 6.9 mill renewal levy will result in ZERO increase in taxes, is the fact that the District will receive a ZERO increase in tax revenue. The District is guaranteed that, if the voters agree to renew this 6.9 levy, the school district will have zero increase in tax revenue, but will continue to receive the same $8.2 million per year for the next five years that this 6.9 mill levy has always generated.
But, I told Scott, if this is the message that the District was seeking to communicate, it failed miserably, because the signs say, “ZERO increase in taxes.” It doesn’t say “ZERO increase in tax revenue.” The common meaning of the word “taxes,” is money that is paid by taxpayers. A sign placed in a taxpayers yard that says, “ZERO increase in taxes,” is communicating to 99.99% of voters exactly what the words say. The signs in Kettering, supporting the 6.9 mill renewal, are communicating a message that is simply not true. Because the total property valuation in Kettering is decreasing, in order to collect the $8.2 million each year, the tax on every property owner must go up. On this levy, because there is a ceiling of 6.9 mills, the maximum this particular tax can be increased is 12%. That’s a lot. It is not ZERO. The advertisement for this levy is communicating a wrong message. I told Scott that the DDN has an obligation to be a watchdog and to report the truth.
Explain this please. If the total tax revenue for the system stays the same and the same people are paying the taxes, it shouldn’t matter what happens to the always volatile property values. The same amount of tax payments turn into the same amount of total tax revenue. Changes in overall evaluation may increase the rate needed to get the same amount of revenue but it won’t change the amount of revenue.
If everyones tax payments went up, there would be more money collected. If no more money is collected, how can everyones’ taxes go up. Some individual’s tax payments may change if their property value is higher or lower than the average change. Is that the problem? But the overall amount should stay the same. Why isn’t this right?
Stan, thanks for commenting. You write, “If everyone’s tax payments went up, there would be more money collected.”
Everyone’s tax payments are not going up. When GM closes a factory in Kettering, then GM’s tax payment to Kettering goes down. If GM liquidates all of its property in Kettering, its tax obligation to Kettering will be zero. Many people in Kettering are finding that, with the collapse of the housing bubble, their property is worth much less this year than it was previously. And so their property tax obligation has gone down, not up. The value of some properties may have increased and others may have stayed the same. What is important is the total tax base, the total valuation, and the established trend is that the total valuation of property in Kettering is decreasing. As I show in the article above, in 2007 the total valuation in Kettering was $1,424,287,702; in 2008, the total valuation was $1,396,394,393; in 2009, the total valuation was $1,354,338,690.
The key thing to look at is the “effective tax rate.” If the value of your property fluctuates, of course, the amount of your tax payment will change — either up or down — even if the “effective rate” stays constant.
The Kettering advertisement that approval of the 6.9 mill renewal levy will result in “ZERO increase in taxes,” is a promise that the “effective rate” will not increase, meaning, if there is zero increase in your assessed property value, the tax you pay to fund this 6.9 mill levy will not increase. But, as I say in the article, this promise that the effective rate will not increase cannot be true.
In 2004 when this 6.9 mill levy was originally approved, the “effective rate” was 6.9 mills, and, when applied to all the property in Kettering, this 6.9 mill levy raised the promised amount of revenue to the schools of $8.2 million. But in 2004, the total valuation of property in Kettering was increasing, and if the effective rate had stayed at 6.9 mills, the levy would have generated more revenue than $8.2 million, its ceiling amount. Years ago the Ohio General Assembly passed legislation saying that property tax levies could generate only a fixed amount. Schools were denied any benefit of increasing valuation, and were stuck with a fixed amount of income. The trouble is, the expense of operating schools is not fixed, but is constantly inflating.
Because in 2004, and a few years afterward, the trend in Kettering was an increase in total valuation, the “effective tax rate” for this 6.9 mill levy kept decreasing. The effective tax rate for this 6.9 mill levy is now 6.16 mills, because when 6.16 mills is applied to all of the property in Kettering, it generates the $8.2 million. But, if the auditor finds that, because of a decrease in total valuation, this 6.16 mills is not sufficient to collect the $8.2 million, then the effective tax rate will need to be increased so that the $8.2 million will be collected. As the article points out, in 2007, the “effective rate” was 6.13 mills. It is now 6.16 mills and because the total valuation of Kettering is falling, with no end in sight, before the five years of this renewal is completed, everyone who studies this is safely predicting that this effective rate will continue to go up.
The ceiling for this 6.9 mill renewal levy is 6.9 mills. Since the effective rate is now 6.16 mills, this effective rate can grow by as much as 12%.
By approving this 6.9 mill renewal levy, voters are agreeing that, if needed, in order to raise $8.2 million in revenue for Kettering Schools, that the effective tax rate currently applied to determine their property tax (now, 6.16 mills) can be increased by as much as 12% (to 6.9 mills).
In a time of prosperity, when the trend is for total valuation to increase every year, then promising that approving this 6.9 mill renewal levy will result in ZERO increase in the effective tax rate, would be a safe promise. But school officials know that in today’s economy, there is a 100% certainty that the effective tax rate will, in fact, increase. There is a 100% certainty that the advertisement promising a ZERO increase in the effective tax rate is false.
Mike, one of your better and more thought out articles. I was involved as a school board member in my district in the late 90’s early 2000’s. What you explained is very accurate. I cannot remember all the rulings from the Ohio Supreme Court regarding the inequities for school funding, but it was a mess then as it is now and our bi-partisan legislature continues to ignore the 2000 lb. gorilla in the room. By the time they get around to implementing an equitable funding mechanism for public schools I fear it will be too late.
Mike, very good article.
Bravo! This is the kind of hard-hitting, informative and circumlocutory journalism that is conspicuously absent in rags like ‘The Dayton Biased News’. Keep all those mis-leaders, miscreants and liars squirming in their seats, Mike!
So because of housing price inflation although the mill levy stays the same, because the law doesn’t allow the total tax paid to go up when housing values go up so the “effective rate” goes down and payment amounts still stay the same. And when the values go down again, the effective rate goes up. And if say GM property is suddenly worthless, everyone else makes the difference.
However the renewal is at the same rate that was expiring, so it sounds like the same thing would have happened had the old rate been the same and continued. If home values go down you lose the tax rate discount caused by the former inflation of values and the unwillingness to raise the total tax revenue to fund schools. So the “effective rate” goes back up limited to the 6.9% people voted for the last time. The amount that people actually pay in taxes stays the same and the effective rate goes up.
That really doesn’t sound like liars and miscreants to me. Certainly not something to get bent out of shape about. Might be worth an explanatory letter to the editor or something similar.
Stan, you write, “The amount that people actually pay in taxes stays the same and the effective rate goes up.”
The effective rate now is 6.162 mills and, within five years, the effective rate will probably be the maximum 6.9 mills. A property now taxed at $300 per year to pay this levy, within five years could easily pay 12% more than now — or $36 more. This is not a huge amount, but it is not ZERO. Voters who want to support schools should understand what they are voting for, when they vote, “Yes.” I think it is a safe bet that the vast majority of school supporters with signs in their lawns declaring that support for the renewal levy means, “ZERO Increase In Taxes,” have no idea that, if this levy is passed, their tax will, in fact, increase. I think it is very unwise of Kettering school leaders to misinform taxpayers who are faithful supporters of Kettering Schools.
their tax will, in fact, increase
False. Go directly to jail.