Proposed Changes to TPP and SB3 Reimbursements

Mike Sobul

Ohio Department of Taxation

Overview

The Governor’s budget proposal plans significant changes to the reimbursement of TPP replacement dollars

It also proposes changes to SB3 (public utility) reimbursements

Overview

The concept of how the new phase-outs will work are the same for both TPP and SB3

For schools, there is not a defined date by which the phase-out will be complete (other than current law for emergency and inside debt levies)

The amount phased down in any given year is capped at two percent of total defined resources

Overview

Under current law, the direct TPP reimbursements for fixed-rate levies are phased down from FY 2014 through FY 2019

In FY14, reimbursements are 9/17ths of the prior year, declining by 2/17ths each year thereafter

70 percent of CAT revenue is earmarked for schools indefinitely, with dollars not needed for direct reimbursement to be allocated for currently undefined school purposes

Overview

Currently, voted bond levies that qualify for reimbursement are to be reimbursed for the life of the levy

Emergency levies are to be reimbursed in full through FY18 as long as the levies remain in place

Neither of these provision are proposed to be changed in the executive budget, nor is treatment of inside debt levies

Overview

Under current law, reimbursements of fixed-rate levies under SB3 are to continue through August 2017

To continue receiving reimbursements through 2017, the annual test that has been in place for school districts (the test does not apply to JVS) must continue to be met

Currently, all JVS and only 133 schools receive reimbursements for current expense levies (a hand full of schools also receive fixed-rate non-current expense reimbursements)

Overview

As with TPP, bond levies are reimbursed for the life of the levies and emergency levies through 2017 as long as the levies remain in place (this would not change under the current proposal)

Any money generated by the KWH or MCF tax in excess of what is needed for reimbursements is used to equalize 0.5 mill maintenance levies under the OSFC program. Additional revenue beyond that is currently transferred to the state GRF

Executive Budget Proposal

The budget proposal would change the phase out of both the TPP and SB3 fixed-rate reimbursements

In FY12, each program’s reimbursements for current expense fixed-rate levies would drop by the lesser of the total reimbursement or two percent of FY10 total resources (potentially, a maximum drop of four percent of total resources)

Executive Budget Proposal

Total resources are defined as follows:FY10 PASS payments (before transfers and adjustments) FY10 payments under “Funding for Joint Vocational SD”One-half of TY 2008 real and PU CE property taxesOne-half of TY 2009 real and PU CE property taxes2009 CE telephone property taxesFY10 CE income taxesFY10 TPP CE and emergency reimbursementsFY10 SB3 CE and emergency reimbursementsHomestead and rollbacks associated with levies above

Total resources do not include other locally generated dollars or federal restricted dollars

Executive Budget Proposal

Reimbursements for fixed-rate non-current expense levies (other than inside debt levies) have a straight phase-out not tied to resources

Those phase-out in 25% increments, beginning in FY12

The three payments per year are reduced to two, with the August (3/7ths) and October (3/7ths) payments combined into a single 6/7ths November payment

SB 3 Proposal

Only 14 districts have CE reimbursements greater than 2% of resources

Only 5 JVS have CE reimbursements greater than 2% of resources

TPP Example

I will do examples of three districts in Montgomery county, Huber Heights, Northridge, and Valley View

In addition to CE fixed-rate levies, Huber Heights and Valley View have non-CE fixed rate levies

TPP Example

District CE FY 11 Reimb. Total Resources Reliance Ratio

Huber Heights $1,850,884 $58,958,089 3.14%

Northridge $2,802,496 $17,552,904 15.97%

Valley View* $197,291 $16,032,406 1.23%

District 2% of Resources FY12 Payment FY13 Payment

Huber Heights $1,179,162 $671,722 0

Northridge $351,058 $2,451,438 $2,100,380

Valley View* $320,648 0 0

*Valley View’s reimbursement and resources are reduced by $69,753 for an expired/reduced levy

TPP Example--Northridge

CE FY 11 Reimb. FY12 Payment FY13 Payment

Northridge:

Current Law $2,802,496 $2,802,496 $2,802,496

Proposed Law $2,802,496 $2,451,438 $2,100,380

FY14 Payment FY15 Payment FY16 Payment

Northridge:

Current Law $1,483,674 $1,153,969 $824,264

Proposed Law $1,749,322 $1,398,264 $1,047,206

FY17 Payment FY18 Payment Total FY12 - 18

Northridge:

Current Law $494,558 $164,853 $9,726,310

Proposed Law $696,148 $345,090 $9,787,848

TPP Example—Non-CE

District Non-CE FY 11 FY 12 FY 13

Huber Heights $38,241 $28,681 $19,121

Valley View $26,244 $19,683 $13,122

District FY 14 FY 15

Huber Heights $9,560 0

Valley View $6,561 0

TPP Other Issues

Again, voted bond levies, emergency levies, and inside millage debt levies are treated the same as under current law

Remember, any levy must still be in place after 2010 for reimbursements to continue

Any of these calculations are appealable for 2 years, so check carefully what we did