Richmond Heights School District plans to replace property tax funding with income tax specifically for schools

RICHMOND HEIGHTS, Ohio – The Richmond Heights School Board is considering a different funding method that would use income tax revenues to help pay for schools instead of the share of property taxes it currently receives for the funding.

The idea was pitched to the board at its last meeting by David Conley, president of Rockmill Financial Consulting, who has been working with the district since he applied for funding for his new high school / college building which has opened this year. Conley explained to the school board that there are now 208 school districts in Ohio that use it to fund a school district income tax, or SDIT.

According to the Ohio Department of Taxation, an SDIT “is an income tax separate from federal, state, and municipal income taxes that is specifically intended to support school districts.” The imposition of the tax must be approved by the voters by the residents of a school district.

In an email response to cleveland.com, Conley said: “The general concept is to eliminate some or all of the district property taxes used for district operations, and at the same time institute a new SDIT that would replace the income currently generated by property taxes. . “

Conley’s presentation to the school board comes after board members and Superintendent Renee Willis earlier this month opposed city council approval of a tax abatement for the Belle Oaks Marketplace project in the property. from the Richmond Town Square shopping center. The $ 260 million Belle Oaks mixed-use project will include residential and commercial uses. Only the northern portion of the mall property is in the Richmond Heights School District, while a larger portion is located in the South Euclid-Lyndhurst School District.

Most of the commercial development for the project will also be located in the SE-L School District, meaning schools in Richmond Heights will not receive these income taxes.

Almost 800 class A apartments are expected to be built as part of the development. Of these, 375 apartments in six buildings will be built in the Richmond Heights school district. School officials have expressed concern to city officials that new students will be moving to Richmond Heights to residences with reduced property taxes. So, suggests Conley, a shift to income tax funding could be beneficial for the school district and for resident homeowners.

Data shows that 39.1% of Richmond Heights residents are renters, a figure that will rise when Belle Oaks apartments are rented. At the same time, Conley said, the development will likely increase property values ​​in the city as Richmond Heights’ population continues to age, which means more people on fixed incomes are expected to pay higher property taxes.

“When you consider the number of future tenants who are likely to move into the neighborhood associated with the Belle Oaks development,” Conley wrote in his email response, “the number of residents who are tenants could exceed 50%. The fact that Belle Oaks largely benefits from a property tax cut means that new tenants who are residents of Belle Oaks may not be contributing towards the costs of running the school district.

“An SDIT could create a mechanism to receive financial support, for schools, from these future residents. It could also help reduce the tax cost of schools for current residents of the district.

“My proposal to the Richmond Heights Board of Education is in response to the creation of a ‘tax policy’ that will be designed to restructure the district’s tax model to better align it with developments. demographic, ”said Conley,“ as well as leverage the future makeup of the neighborhood community.

“Neighborhood residents are aging and many of them have or will soon have a fixed income. Property taxes will, over time, begin to have a negative impact on these residents, as property taxes will be determined by the value of their homes, which will continue to rise in value (especially as the community becomes more attractive. thanks to Belle Oaks). An income tax could be a fairer way to tax existing residents who receive social security, pensions and other forms of fixed income.

According to the 2019 American Community Survey (ACS) from the US Census Bureau, 31% of residents of Richmond Heights are 60 years of age or older.

The Ohio Department of Taxation says all residents living in the school district would be encouraged to file to prevent the taxpayer from receiving a delinquency notice from the department for non-reporting.

A change to the SDIT could result in residents not paying the portion of their property taxes that is now used to fund schools in Richmond Heights.

“For the 2021 tax collection year, the total property taxes used for school district operations (excluding interior mileage) is / was $ 47.70 million,” Conley said. “So, theoretically, residents can repeal the 47.70 million property taxes and replace them with an income tax. For reference, 47.70 mills equals $ 139.13 per month on a $ 100,000 home.

In DeRolph v Ohio in 1999, the Ohio Supreme Court ruled that the state’s method of funding schools was unconstitutional. Schools are funded in Ohio using a combination of public funds and local property taxes and, in some cases, federal funds. Despite the decision almost 22 years ago, no changes have been made to the system.

Conley is in the process of further researching the SDIT plan and will present the results of this study in 60 days to the school board for discussion.

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