I’ve objected to advertisement concerning Kettering 6.9 mill renewal levy that promised that this levy would result in a “ZERO increase in tax.” Someone who signed themselves as Bubba objects to my objection and in response to my previous post accuses me of “intentionally” wanting to confuse people. Please. Bubba gives no basis or explanation that could justify his making such an accusation. But, anyway, here is another try.
Bubba, you write, “Reappraisal changes the effective millage.” This statement is not true, when applied to a specific property. Regardless that the value of a particular property increases or decreases, the effective millage stays the same. The amount of tax owed on the property goes up or down, but the effective millage stays the same. It just like sales tax. Sales tax has a rate of 6% and regardless if you buy something costing a lot of money or if you buy something costing very little money, the rate stays the same. The amount of tax, however, changes.
In 2004 when the 6.9 mill five year levy was originally approved, 6.9 mills was the effective millage. According to the law, the effective millage rate of this type of levy can never be greater than the millage originally approved, so this 6.9 mill levy could never morph into a millage greater than 6.9 mills. But the effective millage rate of this levy, each year for several years decreased, becoming ever less than its starting point of 6.9 mills.
Each year the effective millage rate is changed by the county auditor. Here’s why: In 2004 an effective rate of 6.9 mills, when applied to all property in the Kettering School District, the total tax base, generated $8.2 million in revenue for Kettering Schools. According to law, this levy could never generate more than $8.2 million. After 2004, property values in Kettering were increasing and the total tax base for a few years increased each year. So each year the county auditor made sure that the effective tax rate was adjusted so that it would collect $8.2 million, but not any more. Each year, for a few years, in order to avoid collecting more than $8.2 million the effective tax rate for this levy was decreased. This meant that regardless that a property’s value stayed constant, the tax on that property every year became less — until this year.
One year ago, the effective tax rate was 6.13 mills, meaning that when 6.13 mills was applied to the total tax base, $8.2 million was generated. The collapse of the housing bubble, the shutting of GM, the general recession, means that the value of the total tax base in Kettering is less this year than it was last year. This year, when the county auditor calculated the amount of effective millage needed to raise $8.2 million, she found that 6.13 mills was not enough. She calculated that the effective tax rate should be 6.162 mills in order to raise the $8.2 million. This means that a property’s tax increased 3.2 cents for every $1000 of taxable value. So, Kettering property owners saw their tax for just this levy go up, on average, about $2 or so more this year than last year. Not a lot of money, but definitely a tax increase.
It would be like if you had always bought an item for $1 and had always paid a sales tax of 6 cents and one day you bought the same $1 item and were changed a sales tax of 7 cents. You would say that taxes had increased.
So if the value of the total tax base decreases the effective tax rate must increase in order to each year generate the same revenue, in this case, $8.2 million. Last year the average increase to each Kettering property owner was $2 or so to pay for this levy, and, because the value of the total tax base in Kettering is continuing to decrease, next year the average increase to each Kettering property owner will probably be even greater. The ceiling on this levy is 6.9 mills, so the tax rate needed to raise this $8.2 million could raise as much as 12% from this year’s tax rate amount.
Bubba, your statement — “Reappraisal changes the effective millage” — is not true when applied to a specific property, it is true when applied to the total tax base. The statement is correct and more clear in its meaning, when said this way, “Reappraisal as applied to the value of the total tax base changes the effective millage.”
Bubba, you also write, “Renewing a levy does not raise one more dollar than the day it was passed. And that is a fact.”
This is a true statement, again, as applied to the total school district. This renewal levy will continue to raise $8.2 million and by law it is not allowed to raise more than $8.2 million. But, as explained above, because the value of Kettering’s total tax base is decreasing, in order to raise this $8.2 million, the effective tax rate must increase. An increase in an effective tax rate is what is called an increase in taxes. As explained above, the average Kettering property owner had to chip in a couple extra dollars this year in order to raise the $8.2 million amount.
Again, if the sales tax rate went from 6% to 7%, everyone would say there was a tax increase. Last year the effective tax rate for this levy was 6.13 mills, this year it is 6.162 mills. Any reasonable person would call this an increase in the effective tax rate an increase in taxes. And by approving the renewal levy, voters approved increasing this rate to as much as 6.9 mills. If Kettering’s total tax base shrinks to where it was in 2004, this full 6.9 mills will be required to raise the $8.2 million amount.
If the school board had wanted to offer the voters a levy that guaranteed a “ZERO increase in Taxes,” they would have needed to offer a levy with the ceiling of the effective rate as it is now — 6.162 mills. The consequence of passing a 6.162 mill levy, rather than a renewal levy, is that, as Kettering’s tax base continues to shrink, the school system would each year receive less money. Over a five year period, a levy capped at the current effective rate, 6.162 mills, easily could have resulted in a decrease in total revenue to the school of $1 million or more.
It’s an interesting question: If the supposition is that the tax base, within five years, will shrink to the point that it returns to the 2004 level, and if the levy was capped at its current effective rate, it would be interesting to attempt to calculate what the total loss to the school district would be. Regardless, if the board had determined to guarantee a Zero increase in taxes, as the total tax base decreased, the income to the school would also have decreased. As it is, because the 6.9 mill levy was renewed, revenue to the school will stay constant and taxes to property owners will increase.
The renewal option is obviously the more attractive option from a school management point of view. It assures a constant revenue of $8.2 million each year. But, if constant revenue was seen as vital to maintaining a quality school program, then, if the board takes the notion of “local control” seriously, the board should have been forthright in making its case to the public and should have educated the public as to what they were being asked to support. Kettering voters historically have supported schools and I believe an educated public, democratically engaged, would have supported a renewal levy.
I seem stuck on this one topic. I am not objecting to paying a few more dollars in taxes to support my local schools. I do object to our school board using antidemocratic practices as a strategy for funding the school system.
