The Ohio Senate has approved a bill that would suspend property tax increases for commercial and industrial developments until a certificate of occupancy is granted. Any increase in the taxable value of properties that are being newly developed or redeveloped would not be subject to property taxes until the development is completed. Senate Bill (SB) 235 passed 22-11 on May 4.
Advocates of SB 235 say that it will encourage improvement of undeveloped property as developers would not face tax increases until a project is near completion. This measure would increase land development and job growth, and eventually increase property taxes when the development is completed.
However, the bill has faced debate and opposition, with many local governments expressing their concern while the bill was in the Senate Ways and Means Committee. The concern is that the bill would cause an unknown fiscal loss to local governments, although it would have no impact at the state level.
The Ways and Means Committee notes that it responded to the concerns by adding several amendments to the bill. One of those amendments is a ten-year reset, so that the taxable value of the property resets to the actual value at the eleventh year (and every ten years after that) for the tax suspension while the property is still in development.
As school districts are funded in large part by property taxes, SB 235 has implications to school districts. Many developments are years in the making, as noted by the ten-year reset amendment. This means that school districts would potentially lose out on many years of funding during the development of these commercial and industrial properties.
SB 235 has now been introduced in the Ohio House of Representatives for consideration. You are urged to contact your Ohio representative to provide input for the House committee that will be assigned to SB 235. Ennis Britton attorneys are available for counsel regarding how this bill may affect your school district.
On December 30th, 2015, the Ohio Supreme Court unanimously declared that real property owned by a public school district board of education is tax exempt regardless of whether it is currently used for school purposes. Ennis Britton Shareholder Gary Stedronsky represented the Talawanda City School District Board of Education at all levels of appeal, including before the Supreme Court.
The case involved a provision in Ohio law that generally exempts real property owned by a public school district from property taxes, which is codified in Ohio Revised Code section 3313.44. In this case, the Talawanda City School District Board of Education (the “Board”) purchased 154 acres of land to build a new high school. A portion of this land was not needed for the high school and was leased by the Board to a farmer.
In January of 2010, the Board filed an application to exempt all 154 acres from real property taxes. The Tax Commissioner approved the exemption application for all but the portion of the land that was leased to the farmer. The Tax Commissioner concluded that the pecuniary benefit realized by the farmer disqualified the land from tax exemption because the property was not being used for school purposes.
The Board appealed the Tax Commissioner’s decision to the Ohio Board of Tax Appeals (“BTA”), which affirmed the Tax Commissioner’s decision. The Board further appealed to the Ohio Supreme Court.
The Supreme Court was tasked with deciding whether the BTA decision was supported by the language in Ohio Revised Code section 3313.44. The applicable version of section 3313.44 simply states: “Real or personal property owned by or leased to any board of education for a lease term of at least fifty years shall be exempt from taxation.” The Board argued that this statute requires that a board of education merely own real property in order for it to qualify for tax exemption. In other words, there is no requirement in the statute that the property must be used for school purposes in order for the tax exemption to apply.
The Ohio Supreme Court agreed with the Board’s argument and concluded that the property that was leased to the farmer was exempt from taxation regardless of the specific use of the property. The Supreme Court acknowledged that past interpretations by the Tax Commissioner may have correctly interpreted an implied use restriction in the prior version of the statute. However, the Court recognized that the General Assembly chose not to include such a restriction when the statute was amended in 2010 even though it had authority to do so. Therefore, the Court held that the statute does not include an implied use restriction and the Board’s property is entitled to tax exemption even though it was leased to a farmer.
The Court also dismissed the Tax Commissioner’s argument that the Board’s request for tax exemption must be denied on grounds that the Board overstepped its legislative authority by leasing the land to a farmer for a commercial purpose. The Court held that a Board of Education’s property is entitled to tax exemption as long as it meets the conditions of the exemption statute in Ohio Revised Code section 3313.44, which merely requires ownership.
Ultimately, the Supreme Court decision clarifies that a board of education is entitled to a property tax exemption for all real property owned by the board of education regardless of how the property is currently being used. This decision is very favorable to school districts and will be used in the future to support applications for tax exemptions.
Talawanda City School District Board of Edu. v. Testa, Tax Commissioner (Ohio 2015), Slip Opinion No. 2015-Ohio-5450.
As with most other provisions of the budget bill (Am. Sub. HB 64) some significant provisions impacting Ohio school districts go into effect on September 29, 2015, including the following:
- The maximum amount of a scholarship awarded under the Autism or Jon Peterson scholarship programs increases to $27,000 (up from $20,000).
- School districts must offer real property it intends to sell first to a “high performing community school,” then to other community and college preparatory boarding schools located in the district.
- ODE, in conjunction with an Ohio educational service center association and an Ohio gifted children’s association, must complete and submit a feasibility study for establishment of sixteen regional community schools for gifted children.
- The State Board must develop rules waiving any additional coursework requirements for renewal of an educator license for teachers who are consistently high performing.
- The duration of a pupil activity permit for individuals holding a valid educator license is changed from three (3) years to the same number of years as the educator license.
- The State Board of Education will develop a standards based framework for the evaluation of school counselors. Furthermore, all school districts must adopt a counselor evaluation policy by September 30, 2016, that conforms to the framework and will be implemented beginning in the 2016-2017 school year (will include annual evaluations with ratings of accomplished, skilled, developing, and ineffective just like OTES).
- The alternative teacher evaluation framework is revised to decrease SGM to 35%, maintain the performance rating at 50%, and authorize school districts to determine the appropriate measure or combination of measures for the remaining 15%.
- Exemplary community schools may now operate a preschool program for general education students.
- School districts may enroll under interdistrict open enrollment policies an adjacent or other district student who is a preschool child with a disability. ODE will deduct $4,000 from the resident district and pay that same amount to the enrolling district.
- School districts cannot appropriate monies to purchase an assessment developed by PARCC for use as the state elementary or secondary achievement assessments. Additionally testing for the 2015-2016 school year is reduced.
- Safe harbor provisions in effect during the 2014-2015 school year for state report cards are extended by two years.
- School districts may now enter into a contract with a health care provider for the provision of health care services for students.
- The new requirements for issuance of diplomas to home school students and students from non-chartered nonpublic schools are now in effect.
STEM schools can now enroll out-of-state students.
- Schools may install security doors or barricades as part of an emergency management plan.
- The filing date for financial disclosure statements with the Ohio Ethics Commission is May 15 (instead of April 15).
With the Ohio economy rebounding, we are beginning to see more and more property tax incentives being offered to businesses by local governments. Ohio’s school districts play a crucial role in a local government’s ability to offer these incentives. Below is a quick reference guide to the most common types of property tax incentives. We’ve also specified when board of education approval is required prior to an incentive being awarded by a local government. Understanding this is very important because boards of education can request to be compensated for lost tax revenue in exchange for approving an incentive. In many cases, we are able to negotiate a deal with a local government or business where a board of education realizes no loss in revenue at all.
Tax Increment Financing (TIF)
- Local governments use this inventive to finance public infrastructure improvements that benefit private development
- Exemption Term – Up to 100% for 30 years
- BOE Approval Required – if more than 75% is exempted and more than 10 years
Enterprise Zone Agreement (EZA)
- Designated zones within a governmental jurisdiction where businesses receive tax exemptions on eligible new investments
- Exemption Term – Up to 100% for 30 years
- City Provided Incentive
- BOE Approval Required – if more than 75% is exempted and more than 10 Years
- County/Township Provided Incentive
- BOE Approval Required – if more than 60% is exempted and more than 10 years
Community Reinvestment Area (CRA)
- Allows property owners (primarily residential property) within certain areas where investment has been discouraged to receive tax exemptions for investing in real property improvements
- Exemption Term – Up to 100% for 10-15 Years depending on type of remodeling or construction
- CRA Created Before July 1, 1994
- BOE has no approval authority
- CRA Created After July 1, 1994
- Commercial & Industrial Property
- BOE Approval Required – if more than 50% is exempted
- Residential Property
- BOE has no approval authority
For more information, please contact Gary T. Stedronsky at 513-421-2540 or at email@example.com
On June 30th of this year, Ohio’s governor signed House Bill 59. Many of the non-financial provisions of HB 59 became effective on September 29th, which effectively signaled the beginning of major changes to how public schools operate in the state. A few of the more significant legislative mandates include expanded participation for extracurricular activities, changes to terms and eligibility for joint vocational school district board of education members, new reporting requirements for schools, and modification to the definition of minimum school year.
Chief amongst the changes that took effect this week include two new statues that expand student participation in extracurricular activities for home school and nonpublic school students. Pursuant to the new laws, a district of residence must now allow home school students to participate in extracurricular activities as long as the student 1) meets age and grade requirements as determined by the superintendent, 2) is able to comply with all nonacademic and financial requirements, and 3) can establish academic eligibility which is specifically delineated in the statute. A related law provides similar participation rights to nonpublic school students as well, with the addition that a student’s nonpublic school cannot offer the same activity. School districts will have the discretion to allow home school or nonpublic school students who do not reside in a district’s boundaries to participate as well, although that participation is subject to several additional restrictions. Both statutes prohibit school districts or any oversight organizations such as OHSAA from placing more stringent participation requirements on home school and nonpublic school students than are specified by law.
Significant changes were also made to JVSD board membership terms and eligibility. After the effective date of the bill, new members will serve a term of three years for up to two consecutive terms. Terms are considered consecutive unless separated by three or more years. Current members of a JVSD board may serve until the expiration of their current terms, after which future members will be appointed pursuant to the new rules. In addition, not less than three-fifths (3/5) of the members of the board shall reside in or be employed within the territory of the JVSD. The manner of appointment and total number of members appointed to a JVSD Board will be based on the terms of the most recent plan for the JVSD on file with ODE.
Board membership selection shall be based on diversity of employers from the geographical region of the state in which the territory of the JVSD is located. All members of the JVSD board must have experience as one of the following: a chief financial officer, a chief executive officer, a human resource manager, or another business, industry, or career counseling professional qualified to discuss the labor needs in respect to the regional economy. The appointing board must appoint individuals who represent employers in the region served by the JVSD who are qualified to consider the state’s workforce needs with an understanding of the skills, training, and education needed for current and future employment opportunities in the state. The appointing board may give preference to individuals who have served as members on a joint vocational school business advisory committee who also meet the qualifications listed above.
Drafters of the Budget Bill placed renewed focus on accountability as well. Financial reports are now required at both the district and building level (not either/or), and districts must now report information on total revenue and expenditures, per pupil revenue, and expenditures for both classroom and nonclassroom purposes both in aggregate and by targeted subgroups.
Targeted subgroups delineated by HB 59 include the following: students with disabilities, economically disadvantaged students, limited English proficient students, and gifted students. If a district does not meet ODE’s requirement of satisfactory achievement and progress for a subgroup, the district must submit an improvement plan to ODE, and ODE is permitted to require that the plan include partnering with another entity for services to that subgroup. The State Board of Education must establish measures of satisfactory achievement and progress no later than December 31, 2014. ODE must use the measures established by the State Board to determine if a district or school has made satisfactory achievement and progress for certain subgroups by September 1, 2015, and annually thereafter. ODE is also required to publish a list of schools, districts, and providers that have demonstrated an ability to serve each subgroup of students.
Finally, effective beginning in the 2014-2015 school year, calculation of the minimum school year will change from “days” to “hours.” At a minimum, schools must provide 455 hours of instruction for half day kindergarten, 910 hours of instruction for all day kindergarten, as well as for grades first through sixth, and 1,001 hours of instruction for seventh through twelfth grades. “Hours of operation” include time spent during scheduled classes, supervised activities, and approved education options, but exclude lunch and breakfast periods as well as extracurriculars. Hours may also include one or more of the following: 1) equivalent of two days per year for parent-teacher conferences; 2) equivalent of two days per year for professional development of teachers; and 3) morning and afternoon recess for grades K-6 not to exceed fifteen minutes in duration per period. In conjunction with changes to minimum school year, schools will no longer receive an allotted number of calamity days, and can no longer include late arrival or early release time towards the minimum hour count.
With regard to school calendars, a board must hold a public hearing no later than thirty (30) days prior to adoption of a calendar to address at a minimum the following: the total number of hours in the school year, the length of the school day, and the beginning and end dates of instruction. In addition, the board must formally adopt a resolution before it can reduce the number of hours of operation in any school year from that which was offered the previous school year. Further, the board cannot reduce the hours below statutory minimums. The board must also consider the compatibility of any change to hours with the needs of any joint vocational school district that serves the district’s high school students, as well as any community school to which the board is required to provide transportation. Finally, the board must consult with any chartered nonpublic school for which the board provides transportation as well.
To review the budget bill in its entirety, please click here. We encourage you to contact your district’s legal team if you have questions about how any provisions of the budget bill will impact you.