House Bill 920 Property Tax Information
The following information will help you to understand the basics of the current school funding in Ohio.
Most districts in the state of Ohio rely on a property tax as their source of local income. The local property tax is levied in mills. A mill is one thousandth of a dollar, or equal to $1 of tax per $1,000 of assessed property value. The Ohio constitution allows all local governments – the county, city, school system, library and metro parks – to jointly tax up to 10 mills without a vote of the people. These are called inside mills because they are inside the 10-mill limitation.
All mills in excess of 10 have to be approved by voters; these are called voted mills. These voted mills are the source of income for most school districts.
In 1976, Ohio approved House Bill 920 (H.B. 920). The purpose of H.B. 920 was to protect the voters from inflation increasing voted taxes. H.B. 920 takes effect when property values increase due to inflation, such as the update every three years or the reappraisal performed every six years by the Montgomery County Auditor's Office. H.B. 920 freezes a school district’s income on voted mills. This means that even when home values increase, a school district’s revenue remains the same. Other than a one-time increase for new construction and a small amount of revenue growth on inside mills, no revenue increase is permitted for schools.
While this protects the taxpayers from inflation, school districts continue to have rising costs. In order to compensate for the freeze on the current taxes collected, school districts must again ask the voters to approve an additional levy in order to generate the necessary income.
Example – A school district received voter approval to raise $5 million through a 5-mill levy in 1985. Today, a reappraisal takes place, increasing property values. Due to H.B. 920, the millage amount will be reduced so that the school district would continue to only receive $5 million from the levy. Each taxpayer will pay a lower “effective” tax rate. In short, the district can never realize the gain on property value due to the reduction factor of H.B 920. Note that currently MCS is at the 20 mill floor, meaning that increases due to property values would affect the district's property tax revenue up to the minimum funding level.
Below is an example of HB920 reduction factor that occurs when a home value increases:
