Understanding School Funding

Funds generated from school tax levies compose a significant part of financing for our schools. The Fairview Park City School District has had several types of levies on the ballot over the past several years: a permanent improvement/bond issue in 2016 and a renewal in 2018. The Board of Education will place a 7.9-mill new operating levy on the ballot  in November 2020. The last new operating levy was in 2006.

How are school districts financed?

School districts in Ohio are financed with a combination of federal, state and local funds. At the state level, school districts receive funding from the Ohio Department of Education’s (ODE) general revenue funds and Ohio Lottery profits. At the local level, school districts receive funding from locally levied property taxes. School districts also can receive funding from income taxes approved by voters.

What is a property tax levy?

A property tax levy is the collection of taxes charged on the value of property. Each district must follow a process described in Ohio law in order for taxes to be levied on property within the district. Boards of education propose additional local tax revenues by board resolution. School districts can place a levy on the ballot up to three times a year on specified election dates. If a majority of voters in an election approve the tax, county officials charge and collect the tax under the terms specified in the tax levy proposal. The collected funds are then disbursed to the district. When a levy is placed on the ballot, it must identify as its objective a legally defined school district purpose.

What is a mill?

The unit of value for expressing the rate of property taxes in Ohio is the “mill.” A mill is defined as one-tenth of a percent or one-tenth of a cent (0.1 cents) in cash terms. Millage is the factor applied to the assessed value of property to produce tax revenue.

What are the common types of school tax levies?

General levy — A property tax used for any school district purpose but primarily for either operating expenses or permanent improvement funding. General levies used to provide operating funds are commonly known as operating levies, while those used for permanent improvements can be known as permanent improvement or PI levies. Boards of education propose levies as a specific dollar amount of new revenue. That proposal is reviewed by the county auditor, who determines the actual millage necessary to produce the dollar amount. The levy, once approved by voters, is subject to the tax reduction factor.

Emergency levy — A property tax that serves as a limited operating levy (maximum of 10 years) proposed for a specific dollar amount. Because the dollar amount of taxes charged by the levy must stay constant, the millage rate increases or decreases as property values change. (Note: The millage of a general levy proposed for a specific dollar amount cannot be raised beyond the voted amount, while the millage of an emergency levy can.) Emergency levies may be renewed for the dollar amount originally requested.

Bond levy or bond issue — A property tax levy used to provide a school district with local revenue for construction purposes. The county auditor determines the rate of a bond levy needed each year to service the principal and interest owed on the amount of bonded debt approved by voters when they approved the bond levy. Bond levies remain in place until the debt (principal and interest) is fully paid, typically 20 or more years.

Renewal levy — Ohio law generally allows districts to ask voters to renew a limited levy when it expires. The levy must be for the same purpose and is renewed at the effective millage rate.

 

 

 

Taxpayers to see savings from school bond refinancing

The Fairview Park City School District recently refinanced district bonds that were originally issued in 2005 for the Gemini Project. In 2012 and 2013, a refunding was done on those bonds. Due to favorable market conditions and the opportunity to save money for the community, the district made the decision to refund the 2012 and 2013 bonds.

The total amount refunded was $12.45 million. By borrowing at lower costs today, the district is saving $1.325 million through 2033.

Since this is voted debt, the savings is seen by the taxpayers. This won’t bring in any extra money for the district, but will be a direct savings for taxpayers in the form of less millage paid over the next
13 years.

The refunding reduces the millage needed to pay the debt, which then leads to a decrease in property taxes.

The property tax amount is determined by Cuyahoga County and may vary year over year.