An increase is an increase; except when it isn’t

“Every­one should be able to know for the fore­see­able future what the tax rate is going to be.”

— Ron O’Brien, Franklin County Prosecutor

“We con­clude that the phrase “rate of levy” in this con­text refers to the amount of mill­age approved by the vot­ers regard­less of whether the effec­tive or actual amount of taxes col­lected or paid has been reduced by other provisions.”

— Chief Jus­tice Mau­reen O’Connor, Supreme Court of Ohio

It’s elec­tion sea­son, and elec­tion sea­son inevitably brings its share of law­suits as par­ties, can­di­dates and com­mit­tees chal­lenge the way we con­duct our elec­tions. This elec­tion sea­son has been no dif­fer­ent and while the big election-related legal news of the week was the U.S. Supreme Court’s refusal to hear an appeal over Ohio’s early vot­ing hours, a major election-related legal story from last month got very lit­tle press time.

It involved a law­suit brought by a group called Tax­pay­ers for West­er­ville Schools which sought to have an issue approved to next month’s bal­lot that would have asked vot­ers in West­er­ville to roll back a levy that they approved in 2009. The issue before the court was when an increase is an increase even though there’s no increase. (And if that made sense to you, you too could be a suc­cess­ful law student.)

It is nec­es­sary to know three things in order for the law­suit, and the Ohio Supreme Court’s rul­ing in the case, to make sense. First, Ohio law only allows attempts to repeal levies like this one when there has been an “increased rate of levy.” But the statute doesn’t state exactly what “increased rate of levy” means and the pre­cise mean­ing became very impor­tant in this case.

Sec­ond, Ohio’s method of fund­ing schools, ruled uncon­sti­tu­tional in 1997, pro­vides in part, for local com­mu­ni­ties to deter­mine the amount of fund­ing to be pro­vided for edu­ca­tion through levies — taxes on prop­erty value that have to be approved by the vot­ers. The amount of those levies is set in ‘mills.’ In sim­plest terms, ‘mill’ is derived from the Latin for ‘thou­sandth’ and so a mill is a thou­sandth of the set value of prop­erty. The higher the mill­age of a levy, the more you will pay, but the amount you’ll pay varies depend­ing on the value of the prop­erty to be taxed.

Ohio tax law has another wrin­kle, though. Because tax levies usu­ally run for sev­eral years, Ohio law pro­vides that the amount col­lected by a tax levy can­not increase from the first year in which the levy is col­lected. For exam­ple, if you live in a home val­ued at $100,000 in 2012 and your com­mu­nity passes a 3.5-mill tax levy, then you might be assessed $350 in new taxes. If that levy runs for 10 years, you cer­tainly hope that the value of your home will increase dur­ing the term of the levy. By 2022, your home might be worth $125,000. But Ohio law dis­re­gards the new value of your home for the pur­poses of that levy.

In 2022, the 2012 tax levy will still col­lect $350 from you. The the­ory here is that vot­ers should have a def­i­nite sense of what the effect on their pocket book will be when they vote for levies. The neg­a­tive side is that infla­tion results in the school dis­trict col­lect­ing less and less value over time. Thus, if your com­mu­nity passed a 3.5-mill replace­ment levy to take effect 2022, the same exact levy (3.5 mills) would now col­lect $437.50 from you — $87.50 more than it col­lected under the pre­vi­ous levy.

Third, the levy West­er­ville passed in 2009 col­lected 11.4 mills. The two levies it replaced (passed in the 1970s) also col­lected 11.4 mills. Because of increases in prop­erty value, how­ever, the “effec­tive mill­age” — the num­ber of mills cur­rently col­lected in order to match the orig­i­nal value of the 1970s levies — had dropped to 3.42 mills. So the vot­ers in West­er­ville passed a levy that had no tax increase, but was actu­ally a fairly size­able tax increase.

As a result, the Ohio Supreme Court had to deter­mine whether the new levy, which kept the mill­age rate exactly the same but, because of more than 30 years of infla­tion actu­ally col­lected sig­nif­i­cantly more, was an “increased rate of levy.” The Court unan­i­mously con­cluded that the rate of the 1970s levies had never changed. In fact, the statute that allows for the reduc­tion in the amount col­lected specif­i­cally states, “No reduc­tion shall be made under this sec­tion in the rate at which any tax is levied.”

The deci­sion of the Supreme Court of Ohio upheld an action by the Franklin County Board of Elec­tions remov­ing the levy repeal from the bal­lot, although the rul­ing also removes it from the bal­lots of Delaware County vot­ers who live in the West­er­ville School Dis­trict. The case is State ex rel. Tax­pay­ers for West­er­ville Schools vs. Franklin County Board of Elec­tions and the full opin­ion can be found on the Court’s web­site at supremecourt.ohio.gov.

David Hej­manowski is a mag­is­trate and court admin­is­tra­tor of the Delaware County Juve­nile Court and a for­mer assis­tant pros­e­cut­ing attorney.

Posted by Dave Hejmanowski on Oct 18 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.