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Good afternoon and welcome to the City Club of Cleveland, where we are devoted to creating conversations of consequence that help democracy thrive.

It's Friday, July 17th, and I'm Mark Ross, board president here at the City Club and retired managing partner of PwC.

Today we are pleased to partner with Ideastream Public Media and kick off their Ideastream explores property tax series, which aims to give you a powerful way to understand important issues facing Northeast Ohio.

It is an understatement to say that property taxes affect all of us.

With inflation rising along with property values, the tax burden is making it increasingly hard for many Ohioans to afford their homes.

In Ohio, property taxes have surged at a rate not seen here in decades.

Now, while millage rates vary by municipality, according to the nonpartisan nonprofit Tax Foundation, Ohio has the 9th highest median property tax rate in the nation.

And earlier this year, there was an effort to put on the ballot to— constitutional state— a constitutional state amendment to abolish property taxes.

That effort failed to gather the required signatures, but it certainly elevated this issue on the forefront of the electorate's mind.

It also spurred the state legislature to implement some reforms designed to provide some relief to homeowners and support to entities that rely on property tax revenue.

More locally, the situation is even more significant.

The property tax rates in Cuyahoga County are the highest of any county in Ohio.

And very few municipalities anywhere in the country report higher property taxes than we have here.

Today's conversation is sort of a record scratch moment, a pause to ask, how did we get to a point where property tax backlash got so energized it resulted in an organized abolition campaign Some argue the factors driving the property— the problem range from the state's lagging population growth, an overreliance on hyper-local government, and even a misunderstanding of the kind of value we are expected to receive from property taxes.

To help us walk through how we got here, we are joined by Dylan Armstrong, a public policy fellow at the Center for Community Solutions.

Dylan provides expertise on government budgeting and public policy, serves as an author on a variety of topics, and provides policy support for the Cuyahoga Human Service Chamber.

Howard Fleeter is the owner of Howard Fleeter and Associates.

Howard's an economist who specializes in state and local government finance and is a research consultant to the Ohio Education Policy Institute.

Tatyana Guzman is an associate professor in public finance and policy analysis at Cleveland State University.

Tatyana has over 18 years of teaching experience in public budgeting, research methods, economics, and public administration.

And Ron O'Leary, administrator for the Cuyahoga County Board of Revision, which among other things manages complaints and appeals regarding property values set by the appraisal department.

Moderating the conversation today is Stephanie Haney, host of Sound of Ideas on WKSU Ideastream Public Media.

Before we begin, a quick reminder for our livestream and radio audience.

If you have a question during the Q&A portion of the forum, you can text it to 330-541-5794, and the City Club staff will try to work it into the program.

Now, members and friends of the City Club of Cleveland, please join me in welcoming all of our speakers.

Stephanie, over to you.

Thank you for the introduction, Mark, and thank you everyone for being here with us for this conversation today.

Now, as Mark said, our goal here is to understand how we got to this point where property taxes are crucial for many programs and services, but people are feeling financial strain from paying them.

So Tatyana, can you give us background on the origin of property taxes?

Oh goodness.

Well, first of all, They are one of the most ancient forms of taxation that is known to the world, right?

Maybe the most interesting examples of property taxation— sorry, I'm taking you several centuries back— England, about 1917s.

Maybe you heard of their— they used to have hearth taxes.

taxes were the taxes on you know, any fireplaces inside the houses.

And we know how we do not like property assessors, right, in general.

Well, can you imagine a property assessor coming inside your house and trying to assess the value of the house by the number of fire pits that you have inside the house?

So they switched to so-called window tax when they counted the number of windows in their houses.

And, well, that didn't go well either because people, you know, the more windows, there were thresholds, and the more windows in the house you had, the higher the property tax you had to pay.

And on one side, it was the way to show your prosperity and your status in this society, but on the other side, people, most vulnerable people, they were just, you know, covering windows And can you imagine, this is 17th, 18th century, no air conditioners, no electricity.

So needless to say, it didn't go well.

But there are some very interesting studies of the tax distortions that these earlier examples of property taxes created.

And you've probably heard the story of Lady Godiva.

Running, you know, riding that horse naked while she was protesting property taxes that her husband imposed.

Yeah.

And, you know, maybe more recent examples of property taxes.

100 years ago, property tax was the tax on the entire property, real property, so land and structures as we have it today, but also on personal property.

So your furniture would be taxed.

You know, if somebody had a refrigerator at home, it would be taxed.

So again, property tax assessor had to come inside the house to evaluate the value of the property.

Again, people didn't like that.

It was really hard, you know, job to assess all that.

So in 1930s, 1940s, we switched to the property tax as we know it today and the sales tax was created and lots of states decided to shift to sales taxes.

Income taxes became widespread in the 1940s, 1950s.

So— and that brings us closer to where we are today.

That brings us closer to where we are now, yes.

So not a new idea by any stretch of the imagination.

Now, Dylan, when people think of what property taxes pay for, school funding is one of the first things that comes up, which we will get to here in just a moment.

But can you tell us about the whole range of things that property taxes are used to pay for?

Absolutely.

And what is funded through property taxes is so much wider than just the schools.

You have some of those basic levels of government that rely on property taxes, whether that be at the county level, the city level, or the township level.

But you also have really important services that our communities strongly believe in and support, whether that be services for our seniors, mental health services, boards of developmental disabilities, Our parks, our libraries.

There's a whole slew of services.

Yeah, a whole slew of services we really, really believe in rely on these important dollars.

Let's understand a little bit better about the school funding issue piece of it now, which is a significant chunk of what our property taxes are used to pay for.

So, Howard, help us understand that when it comes to school funding.

Tell us both about inside and outside millage, House Bill 920, which passed in 1976.

So we've had that around for several decades now.

How it used to work, how it's operating today, and why.

Ok.

You may have to remind me to call on questions.

I will.

I will get to it.

So before I start, one thing I will follow up on what Tatyana said.

One question I get all the time is, why do we use property taxes at the local level?

And there's actually an answer for that, which is that property taxes are historically very stable.

So property values tend to go up, usually not very much.

That's not been true the last several years.

But they tend not to go down.

That's highly unusual.

They did go down in the— recession in 2008 and 2009, but the fact that they are stable is very important to small units of government.

All the things that Dylan just talked about need a stable source of local revenue, and that's why they make sense to use property taxes.

So of that, schools are typically 60 to 65% of the property taxes that anybody pays, and the percentage of property taxes of any school district's funding varies greatly across the state.

Right?

So if people have heard of the DeRolph decision back in March of 1997, that was about inequities in school funding based on disparities in local property taxes.

We have some very wealthy school districts, we have some very poor school districts.

So all of them rely on property taxes, and that's, you know, piece number one of the puzzle, right?

The second major piece of the puzzle for schools is state aid through the state aid formula, and the state aid formula is designed so that the less wealthy places get more state aid and that the more wealthy places get less state aid.

And so the point of the school funding formula is to equalize the disparities and to also make sure that all school districts, regardless of their local property wealth, have an adequate level of funding.

So that discussion of adequacy, that's a whole other forum.

Okay, we won't go into that.

And then federal funding is 6 or 7% for everybody for specific categorical purposes.

But property taxes are the starting point.

And in Ohio, we are allowed to vote as often as, you know, as often as we like at the elections that we have for property tax renewals and new levies for schools and all the other services, you know, the human services, the libraries that we've heard about.

We vote a lot in this state.

And the reason that we vote a lot is because we have a unique and very restrictive form of property tax limitation, which we call House Bill 920.

It goes back to 1976.

The 1970s were the last time that we saw property values spike in the way they have the last 4 or 5 years.

And so Ohio, like every other state, did, you know, had to take action to try to help people be able to afford their taxes and stay in their homes.

And so California did Proposition 13, California, California did Proposition 13, Massachusetts did Proposition 2 and a half, we did House Bill 920.

They all work differently, but they all tried to limit property tax increases.

And the way 920 works is that for all the voted levies that are out there, and that is 85 to 90% of all the local millage, because there's 10 what we call inside mills that have been allocated in the 1930s when Tatyana said we had our, you know, current era of property tax, we split 10 mills across schools and counties and municipalities and a couple of other human services things.

Very quickly, Howard, what's a mill?

A mill is 1/10 of a percent.

Nobody understands this, right?

We're all thinking it.

That's the first place everybody goes off the rails with property taxes, is it's a mill.

So 10 mills is 1%.

And for real property in Ohio, the taxable value of your property is 35%.

So if your house is worth $200,000, the taxable value is $70,000.

Okay, that— and so that's— so the first thing most people do is multiply their taxes by 3 because they don't understand that, and then their tax bill shows up in mills, which they also don't understand.

So if you have 40 mills of taxes, that's 4% against the taxable value of your property.

Catch this on the replay, run the math, write it down so that you can actually grasp that information.

Yeah, just Google the tax department and they can explain all this stuff.

So back to House Bill 920.

We vote more often than any other state on local levies.

One, because we don't limit how often we can vote on things.

We don't have a maximum tax rate like some states do.

But also because House Bill 920 For every voted levy, whenever there is a reappraisal of your property, and that happens— a full reappraisal is every 6 years, and in the intervening 3 years we do a triennial update, which is a statistical update.

Every 3 years you get a letter from the auditor that you've got a new value on your house.

Okay, when that happens, all the millage rates on the voted levies get rolled back by the average increase in your taxing district.

So I was born in Cleveland Heights.

You know, if you— if the average increase there is 20%, all the voted levies will get rolled back by about 20% so that the school district and all the other entities that have a levy get the same amount of money after the reappraisal as before the reappraisal.

Okay, so what that means is it limits— if you're the average taxpayer, your taxes won't change.

If your house went up more than the average, you'll get a small increase, but not the full thing.

And then for everybody who's, you know, if there's a person whose house went up more than the average, there's got to be somebody whose house went up less than the average.

Those people actually get a decrease.

And I am convinced, after 35 years of studying this, these people think somebody made a mistake and don't say anything to anybody.

But that's how our law works.

So House Bill 920 limits the total amount of revenue from every single voted levy.

And I think, Dylan, you said there's 20— 24,000 voted levies in the state right now.

Every one of them will get the same amount of money after a reappraisal as they got before.

Any given taxpayer, whether you get an increase or decrease, depends on whether your house went up more or less than the average.

And the exception to this, and the reason it's taking so long to answer your question, is Inside millage, that 10 inside mills that we start with, House Bill 920 doesn't apply to that.

So, your taxes could go up from your inside millage, which is a relatively small share of your tax bill, if your house went up more than the average.

If you added, if you did a renovation that made your house more valuable, 920 doesn't apply to that.

And then, the last thing would be, and I'll explain this as quickly as I can, There's one exception to House Bill 920, which is for school districts.

There's something called the 20 mil floor, and your school tax rate for your inside millage plus your voted levies cannot go below 20 mils.

And the reason is because back in the day, there was something— the way the school funding formula worked is it assumed that every school district would put their local contribution would be 20 mills.

And there's also something called the qualifying millage, which means in order to get state aid, you have to have at least 20 mills in place.

So when we passed 920, we realized, uh-oh, if you get inflation over time, you could push districts below that 20-mill floor.

Then they wouldn't qualify for state aid.

They wouldn't be— the state formula wouldn't work properly.

So we have a 20-mill floor, and the number of districts varies over time.

The last several years, it's been 2/3 of the school districts in the state, which is as high as I've seen going back to the early 1990s.

So people who live in those districts, 920 will not protect them on their school taxes.

So that's 60 or 65% of their tax bill.

Their bill will go up by whatever percentage their house increased.

All the other levies are still protected.

The 20-mil floor doesn't apply to all those other levies.

But for schools it does.

And so the legislature has taken action to now try and limit those increases.

This law is currently being implemented, and it's showing up on people's tax bills that have just gone out recently, that now you will not see your taxes go up by more than inflation, even if you're in a 20-mill school district.

But that's been— for 45 years, this complicated thing that I just explained worked.

Pretty well, right?

And then it's kind of fallen apart the last several years because we've seen valuation increases that we haven't seen since the 1970s.

Which is something we're going to move the conversation towards right now.

I do want to note that Ohio's school funding system has been ruled unconstitutional in the past, and a Franklin County judge recently ruled that the state's expanded private school voucher system also to be unconstitutional, which is paid for with tax dollars.

Now, that is a conversation for an entirely other forum, but I did want to add that footnote to this conversation, as it is a big piece of the puzzle.

Now I want to turn to Ron and say that property valuations, as we have just established here, are at the root of all of this, determining what portion of a tax we all pay.

So can you tell us how property values are currently assessed and how long that's been in practice?

Sure.

So if you're looking at your tax bill, the 2 biggest factors for what determines how much— how many dollars you pay are your property value as determined by the county auditor, and Here in Cuyahoga County, it's the fiscal officer, but it's the value as determined by the auditor and any voter-approved levies, setting aside the inside millage, of course.

But basically, your tax bills are driven by those 2 factors: property value and approved voter levies.

What the county auditors across the state— and each county also has a board of revision— Their job is to determine value.

And when I answer the phone at my office, one of the first things that usually comes, you know, the caller says is, I can't afford my tax.

And, you know, the staff members that work with me and those in the auditor's office and myself, we are sympathetic to that.

But I do tell people that's not really the issue that our office deals with.

We deal with property value.

And as Howard said, every, you know, under state law, every auditor must revalue real property every 3 years.

There's one value that's called the sexennial, and that is looking at statistical data plus doing a physical observation of the exterior of every property.

So here in Cuyahoga County, when we did the sexennial 2 years ago, we had auditors who went out and they did a— it was more than a drive-by.

They weren't just driving by and kind of taking, you know, dictation as they go, but they certainly don't go inside everyone's houses.

There's just no way that they could possibly do that.

So they do look at the outside of the property, make sure that the number of structures is there or is correct.

You know, sometimes they go and they say, oh, there's a garage here that must have been built within the last few years.

So they'll add that.

They'll generally look at what the property condition is.

Is it in good shape?

Is it in fair shape?

Is it in poor shape?

So they take that information once every 6 years and they look at the value.

And then 3 years later, they don't do the, they don't do the, the actual physical look at the property, but it's just statistics based on recent sales.

And they do comparisons So that it's basically a, you know, you have a small, relatively small area, and they say, well, what do all of the colonials in this general area, you know, that are in fair condition, what are they generally selling for?

So that's the way that the auditors do it, and their objective always is to determine if this house were to actually sell, or a factory or a strip mall, whatever the property is, if it were to sell today, what do we think it would actually sell for on the open market?

And that's what the auditor's job is.

What my office's job is, and every other state board or county board of revision, we are the place that property owners can go to when they think that the auditor got it wrong.

So they may say, well, the house, the colonial 2 doors down from me did sell you know, for $250,000.

And I understand why the auditor thinks mine is worth $250,000, but I saw the pictures and they have a new kitchen and they have a new bathroom and they just redid the hardwood floors and they've got another, you know, half bath than we do.

So, and my house still has the original 1950s kitchen and bathroom and we've got one fewer bedroom than they have.

So my house isn't worth as much as that one that just old.

So my office, the Board of Revision, is there for people to file a valuation complaint.

In general, you can only file it once every 3-year period.

So the first year starts on that sexennial revalue, and then 3 years later it starts again with the triennial.

You generally can only file one time in a 3-year period.

But The filing period is between January 1st and March 31st of every year.

If any of you want to file, do not come in on April 1st.

I have had many people crying in my office because something happened and they couldn't make it.

I say, there's nothing I can do.

This is state law.

You've got to come back next January.

But then we schedule hearings.

We review the evidence that people submit to us, and we make a decision whether or not the person has presented evidence to support the change in value.

Sometimes we give them what they ask for.

Sometimes we do a reduction, but not as much as what they're requesting.

Probably more often than not, we keep the value the same because they did not present enough evidence to us to change.

Every so often, we actually increase it, even if somebody asks for a decrease.

We're not that mean.

It's usually— It's usually when there's been a recent sale and they bought it for more than what the value is.

I come as close as I can to the point of not giving them legal advice.

I always tell people, I'm a lawyer, but I'm not your lawyer.

That's very clear.

If it was me, I wouldn't file.

So, but yeah, the main point though is the auditors and the Board of Revision, our job is to determine value.

We understand the impact that the value has on tax, but it's value that we do.

Everything else is tax side.

So let's talk about those valuations and what we've seen lately.

So residential and agricultural property valuations, these are called Class 1 properties.

Those have increased over the past 6 years by close to 60% as a group, a little over $200 billion to almost $318 billion.

So Howard, why is that happening?

So, all right, that, that is probably the most complicated question you might ask this year.

Um, so thank you.

That's what I'm here for.

So, I mean, fundamentally, it's a supply and demand issue, right?

And so there are, um, you know, I think a lot of this started, um, in the aftermath and during the pandemic, right?

As people started working from home, um, people started, you know, people need more space in their houses, right?

The— and people decided, you know, at least where I live in Columbus, right, that the number of people looking for houses, not, you know, wanting a yard, right, when you couldn't go out when you were living in an apartment building— there's an increase in demand for houses, and the people who are in houses are doing things to make them bigger and more livable for themselves, and that's increasing values.

There's an interest rate component to this which I think is really very important, and we, in the aftermath of the recession, we had an extended period of time where interest rates were unusually low.

And so, you know, I bought my first house in 1989, and our interest— our mortgage rate was at 11% when we did that.

And so we were able to, you know, you refinance when you can and whatnot, but I read, you know, interest rates were, you know, below 5% and 4% for 6, 7, 8 years, and that was before the pandemic happened.

And so I saw a statistic a couple years ago, I don't know if it's still true, said more than half the mortgages in the country were at less than 4%, which, you know, if you're as old as I am, right, you can't— you couldn't have imagined back in the 1980s, you know, or '90s that that would be the case.

The pandemic then lowered interest rates even more.

So you have people that, you know, they have— I have people that I know that have, you know, 2.75% loans.

And now as we've emerged from the pandemic and interest rates have gone up, there's a term called interest rate lock, which dates back to the 1970s, which was the last time we had property values spike like this.

If you're in— if your interest mortgage rate is 3% and you want to move to a bigger house and your interest rate right now is going to be 5.5%, it might not make sense for you to sell your house.

And so that again means that people are going to stay in their houses and try to make them more livable, But it means that there's fewer houses that are on the market.

So again, in the neighborhood I live in in Columbus, which is a lot like the neighborhood I grew up in in Cleveland Heights with old houses from the 1920s and '30s, there are very few houses on the market now.

And when they are on the market, they are still selling in 1, 2, 3 days, right?

So the more people wanting houses has increased the demand.

Fewer houses on the market has decreased the supply.

You don't need to be an economist to know that that's going— both of those things are going to result in the price going up.

And I keep expecting that this will start to slow down, and when we see the reappraisals from 2026, we're going to have some more evidence on whether it has.

I saw an article yesterday from Montgomery County that their reappraisal increase was still higher than normal, but a lot less than it was in the preceding 3 years.

So I'm hoping that things are start created this unusual situation where, you know, I've gone and looked at the average reappraisal increase, you know, back 20, 25 years, and over a 3-year period, there were only a handful— before 2021, there were only 2 or 3 cases where it was in double digits.

And since then, it's been typical for it to be 20 or 30% in the counties that are going through reappraisal on average.

And that is not normal.

It's not sustainable.

But it's created a lot of difficulty for people with their taxes.

Ron, does an increase in property value always equate to an increase in property tax?

No, it doesn't.

It's— it goes back to what Howard said about the average.

And So, Cuyahoga County, when we had our sexennial 2 years ago, I believe the county average was a 34% increase.

But you really can't look at the county.

You have to look at the taxing district that you're in, which is usually the school district.

So, easiest one here, Cleveland.

Cleveland was at 49% increase from when we did the sexennial.

It was 49% from the triennial 3 years before.

For that.

So again, setting aside the inside millage, at 49%, if you were right around there, your tax is probably going to stay— if you were a 49% increase, your tax was probably going to stay stable.

If you were, say, at 35% increase, if it was just on the change in your property value, you would have actually seen your tax go down because the average is 49 and yours went up 35.

For anybody that was above the 49, yes, your tax was going to go up.

But I gave that caveat just a minute ago because my office and the fiscal office do a lot of community outreach meetings during my office's filing period in first quarter, and I had somebody say, mine went up 30%, and this is in the city of Cleveland.

I was on the far southeast side in Ward 1.

Why did mine go up so much?

Again, remember the 2 biggest factors: your value and voted-upon levies.

And that, that the prior election in 2024, I believe it was an $11.8 mil increase with the school district passed.

It was a combination of a levy and a bond.

And if I got the number wrong, I'm sorry, but it was, I remember it was around 11 to 12%.

So even if your percentage was under the 49% average for the school district, pretty much everybody in Cleveland saw their tax go up.

But if no new levies pass and the values change, if you're under the average, you'll probably see a decrease.

If you're over the average, you'll see an increase.

If you're at, you'll probably stay ballpark the same.

And that's because Cleveland is not one of the districts at the 20 mil floor.

That's correct.

There's 31 school districts in Cuyahoga County, and I think, if I remember correctly, only 2 of them are at the 20 mil floor.

So House Bill 920 is still protecting the average taxpayer in Cuyahoga County, right?

But again, if your value went up more, if you had a levy that would increase, Right, and the last thing I didn't say in my previous answers, those rapid increases in reappraisal values put a lot of school districts at the 20 mil floor because they rolled back the millage rates so fast and so quickly.

So it's not— it's a causal effect there of the supply and demand conditions then putting districts at the 20 mil floor, and then the people in those districts are not getting the 920 protection.

On almost 2/3 of their tax bill.

So it's— which is why the legislature struggled for several years to figure out what to do to try to stem that.

Tatyana, are other states experiencing this pain point when it comes to property taxes, or is Ohio unique right now?

Of course we're not unique.

Of course not.

But first, let me start with something that Howard said earlier a little bit earlier here.

Remember he said that property tax is the most stable source of revenue for local governments because you cannot just get rid of your house, right?

If your property tax rate goes up, you have to pay more.

And you're absolutely correct, that's what started the era of new property tax.

That's in the 1930s, right?

The Great Depression of 1930s.

That was the probably first example in the recent history that property tax revenues were not stable.

And that's why states had to switch to something else like sales taxes, income taxes later.

And then as Howard said, later it was Great Recession of 2007, 2008 when it was not less than a stable source of revenue, but it bounced back.

Well, other states Yes, there are similar movements here and there.

North Dakota a couple years ago had a very, very similar movement.

It didn't go anywhere either.

In Texas and Florida, if I'm not mistaken, they have— actually, you know, in North Dakota and here in Ohio, it goes from the bottom, right?

It comes from the public, that urge to change to eliminate property taxes.

In Florida and Texas, it comes from the governor who says that we have to get rid of property taxes, or there are some, you know, details only for school districts, you know, only for non-school districts, non-school taxing jurisdictions.

So it comes from the governors on their sides, and they say that they would replace property tax revenue with state funding.

They're kind of similar— similar moves start in Indiana.

They're not where we are yet, but you can see, you know, that— but yeah, there are lots of unhappy people, right, in other states as well.

Sure, sure.

One more question here from this panel for me before we open it up to the group for conversation.

Dylan, tell us about the local government fund and how that plays into funding resources and services at the local level.

Yeah, so all of the funding that we've been discussing so far for all these different services play— they're a slice of the pie.

They're a slice of the pie to provide funding for these services, and a historically much larger slice of that pie would come from the state through the local government fund and through everyone's favorite local service, the public library fund as well.

And when we look at funding over time and we adjust for inflation, back in state fiscal year 2001, the state provided about $2.5 billion to local communities.

In the state fiscal year that just ended, state fiscal year '26, that was $1 billion.

So that's a $1.5— and again, talking in 2026 dollars, a $1.5 billion worth of reduction.

That need has not gone away.

Those expenses have not gone away.

That funding has just been shifted to the local level.

And that's part of why we've been seeing— when we've been talking about needing to go out to the ballot so much, because those dollars need to be made up.

And there's a part of it is that shift from the more state to the more locality.

And you also have shifts to the Class 1 property, that residential property, that agricultural property.

Back in 2020, we had around $17 billion worth of property tax that was abated in the state, so no taxation, property taxes were being paid on it.

2025, I think we're up to $29 billion.

It's like a 72% increase.

That's $29 billion worth of property that is predominantly not Class 1 property that is not paying property taxes, which again works to shift the property burden not just to the local entities, but also to the homeowners.

Thank you for explaining that for us, Dylan.

We're about to begin the question and answer portion for us now.

And for those just tuning in via our livestream or radio audience, I'm Stephanie Haney.

I'm the host of The Sound of Ideas at IdeaStream Public Media and your moderator for today's conversation.

As we prepare to kick off a full week of our entire newsroom reporting on property taxes at Ideastream, today we're talking about how property taxes work and have worked for the last 100 years.

For years, and essentially how we got here to a point where some people are calling for them to be abolished.

I'm joined today by Dylan Armstrong, Public Policy Fellow at the Center for Community Solutions.

Also Howard Fleeter, economist, public policy consultant, and owner of Howard Fleeter and Associates.

Also with us, Tatyana Guzman, Associate Professor in Public Finance and Policy Analysis at Cleveland State University, and Ron O'Leary, Administrator for the Cuyahoga County Board of Revision the entity which looks at property tax valuations.

We do welcome questions from everyone, City Club members, guests, and those joining us via livestream at cityclub.org or live radio broadcast on 89.7 WKSU IdeaStream Public Media.

If you're not here in the room with us and you want to text a question for our speakers, you can text it to 330-541-5794.

Again, that number is 330-541-5794.

Send that in and City Club staff will try to work it into the program.

And now we're ready for our first question.

Thank you.

This is a great panel.

My question is for Mr.

Fleeter.

I heard you speak at the City Club about 3 years ago, and I thought it was the most informative speech I'd ever heard at the City Club.

So my question is, you've been doing this, studying this issue, involved with it for many, many years.

Has there ever been an effort to make property taxes simpler, more understandable to the general public?

Because I really think a lot of the anger that people have is because we don't understand what the heck we're paying for.

Thank you.

We— our property tax is extraordinarily complicated, right?

I mean, I said, like, people don't understand the 35% appraisal rate.

People don't understand what a mill is.

People don't understand why we vote all the time.

People don't understand why We vote for all the things that we vote for.

We fund and deliver more services at the local level than almost any other state.

It's just historically how we've evolved.

And so the point we heard earlier that we're 9th in property taxes, we're tilted towards a system where we're always— we're going to be higher ranked on local taxes than on state taxes because of the way we've chosen to deliver services.

Having said that, it would help a lot of people if we could make our property tax more transparent.

Nobody really understands House Bill 920, right?

We have a handful, we have a 10% rollback where the state pays 1/10 of people's property taxes.

That's now a little bit less because of a law change that was made 10 years ago.

We have a 2.5% owner-occupied rollback.

Which means you get another, so that plus the 10%.

The state's paying 1/8 of your taxes, right?

Most people don't understand that, right?

If you're a farmer, there's CAUV value, which is based on the use of your value in farming rather than the market value of it.

Farmers definitely understand that, but they're constantly complaining as it creeps up too high, right?

We have a lot of adjustments that we make to our property taxes that most people don't know about, most people don't understand.

All they do is, Ron knows this better than anybody in this room, right, that people understand what their bill is when they get it, and they don't necessarily understand why it's changed in the way it has.

And if we could, you know, we've had the current structure for over 50, you know, for 50 years now.

House Bill 920 was passed in 1976.

It's 2026.

At some point, can you think, okay, 50 years is a pretty good run, right?

Now can we make some changes?

That will make things simpler.We in order to do that, though, right?

And I think that that is— I see at least one legislator in the room right here.

He can tell you how difficult that might be.

What they've done has been to try to limit the increases for the cases that we've all tried to describe why people's taxes are going up and stop that from happening into the future.

But if anything, that's probably made our property tax more complicated, not less complicated.

So, but having said that, abolishing real property taxes, that is not a solution that anybody, especially the people who are proposing doing that, they will not want to live in that world because there are too many services that people depend on in this state that you will not be able to fund if that happens.

So let's make it simpler, but we can't You can't throw out the baby with the bathwater.

If I can add something here.

Thank you, please.

Our tax system in general, who understands income tax here?

Do you have a good understanding of what you're paying, why, how much?

Even if your tax return is, you know, you did it well.

I will say no, I don't.

And I bet I'm not alone in this room.

Even if your tax accountant does it for you, right?

So I mean, yes, no?

I feel like compared to Sales tax, maybe we don't deal with sales tax as much, but I can have a 3-hour discussion here, 4-hour discussion here, how complicated sales taxes are, believe it or not.

So property tax is actually a little bit less complicated, I think, at least compared to income taxes, right?

And as Howard said, it is absolutely essential, right?

And well, the county does the tax calculation job for us, so we just have to pay the bill, right?

With income taxes, it's on us, on the taxpayers, right?

And it's so hard to figure it out.

Our next question, please.

This is a text question.

We've covered a number of different angles to this topic today, but I don't believe anybody has addressed the reality that our local tax rates are some of the highest in the country.

Due at least in part to having 59 municipalities in our county.

If our demographics continue to decline as suggested by census estimates while normal inflation continues, the situation will become even more dire.

Do you believe this trend is sustainable or should we look at structural changes including consolidation of government entities?

Dylan, do you have any thoughts on that?

Such an easy question.

No.

I will say, I think when appropriate and when ensuring that quality of services do not fumble, I think there are going to need to be conversations going forward when we discuss consolidation.

Now, I think it's very important to discuss what we are consolidating.

I am not advocating for let's consolidate a bunch of cities.

That is not what I am saying.

But just a consolidation of services.

We can look at what is offered in each individual city or county by county and see areas where there could be an efficiency of combining services.

And we have some examples of consolidation that have worked quite well and people are quite happy.

I was going to say, locally, our Workforce Development Board is consolidated between the City of Cleveland and Cuyahoga County.

And that is doing— they do fantastic work and continue to do fantastic work.

So consolidation can be scary, but I think that has to be— will likely be a part of the conversation going forwards.

If I can add one little thing here about Cuyahoga County specifically, yes, we have some of the highest taxing jurisdictions here in Cuyahoga County.

I think the first place though goes to a city, a suburb of Dayton, I believe.

But Shaker Heights, Cleveland Heights, I mean, tax tax bills are unbearable.

And to me, number one factor why it is so is there is not a lot of commercial base in the cities.

They were built as residential neighborhoods.

So in other jurisdictions, a lot of the property tax is paid by industry, right?

Not in many neighborhoods around around here.

That's a really important point, right?

Like I said, I grew up in Cleveland Heights.

I know that there's not a lot of commercial property, so the burden in places like Cleveland Heights and Shaker Heights, as compared to Beachwood, which you've got the freeway exits and the office parks and the hotels— that's where my sister lived— there's much more commercial property there, which makes the burden on homeowners a lot less.

And so we have seen— I'm gonna have to look at my notes here to make sure I get them right.

One of the most important changes that we've seen over the last 50 years is that in 1975, the year prior to House Bill 920, for school property taxes, 46% were paid by farmers and homeowners.

That percentage right now is almost 70%.

And part of that is because residential property has appreciated more than business and commercial property.

But the largest part of that is state tax policy changes have lowered business taxes.

We completely eliminated the business tangible personal property tax starting in 2005, and with utility deregulation at the turn of the century, we lowered public utility personal property taxes by more than 2/3.

And so, you know, people are paying a much larger share of taxes now than they were 50 years ago, which is, you know, so if people are feeling a burden, I I understand the frustration that people have with property taxes, right?

And it's, you know, there were good reasons for making those state tax policy changes, but they did shift the burden over to homeowners and to farmers.

And let me add one more thing about how high in general, why such high tax rate?

How did we get there?

So to me, a big sort of contributing factor is we, the state localized a lot of services.

You know, the Office of Disability Services, in most— in many states, it is— there is state funding there.

Not here, so they have to impose a property tax, right?

Libraries, parks, the list just goes on.

A lot of them— community colleges— a lot of them in other states are supported.

A lot of these taxing jurisdictions are supported by the state.

So they don't have to ask for taxpayers for property tax dollars, right?

Here in Ohio, it is very decentralized, which is good in one perspective, but, you know, when you don't get any state funding or very little state funding, you have to live somehow, right?

You have to be able to provide essential services somehow.

So how do you do that?

Well, you impose your property taxes.

I mean, Dan's question, the question was about consolidation too, and for schools, we have, you know, when you include the 609 traditional school districts and then the 49 JVSs, we have over 650 school districts in Ohio, and that is, I think, the 5th most in the country.

We're also the 7th most populous state.

I figured it out per capita, we're 19th per capita, which isn't, which isn't as bad, right?

So, And when you look at, you know, we have a lot of small rural school districts, and when you look at the smallest school districts, they're also the most sparsely populated.

So it's hard.

Consolidation, maybe in a metropolitan area, might be feasible, but in large swaths of this state, it's really not feasible at all.

You can't— there's a limit to how long you can have a 2nd grader on a school bus, right?

And so, you know, and there's also ways, can you Rather than consolidating, and I think trying to consolidate school districts in most of the metropolitan areas in this state is going to be very politically difficult, but are there ways that you can share services and get benefits from these districts working together?

We do a lot of that already.

The joint vocational school districts do that.

We have education service centers which go back to 1911 when there were county boards of education.

They do a lot of work.

To help school districts with particularly special ed, with gifted programs, with particular things in the area where their school districts are.

There are ways that, you know, cities, townships, libraries, school districts, all these entities can work together more cooperatively and save money without having to go through what is a very painful process of actually trying to consolidate them.

Next question, please.

Good afternoon, everyone.

I'm Kyle from Community Solutions.

In our ongoing work, we've been tracking a lot of health and human services, social services appearing in counties in every election.

And one thing that's been of note is that a lot of them have not been passing as frequently on ballots.

And it's been identified by the panel that property taxes are a very substantive way to help support and finance various services that are in need and responsible for supporting Ohioans.

And so with these ongoing changes happening, there's clearly a frustration identified by Dayton Daily News as what could be called levy fatigue.

And so with this frustration, there's clearly a disconnect between what individuals feel like they are responsible for paying in terms of property taxes and the actual direct connection that property taxes have to supporting the immediate services that support other people in their communities, in the neighborhoods, etc.

And so my question for the panel is, what are ways to help voters understand that significance and to connect the significance of these health services to local communities to help identify and find better solutions to, if possible, finance these services, but also to increase more knowledge about what these levies are responsible for doing in supporting well-being?

Thank you.

Tatyana, do you have thoughts on that?

Well, I think that's what we're doing here, right?

We're trying to educate public about what property taxes are, how they work, and we don't have a lot of time to discuss this today, but their contribution, how important they are for the society, right?

Yeah, we had a little bit of essay today that's Can you imagine society without taxes?

It's probably complete anarchy.

And it is, yeah, they've been around for not even centuries, millennia.

And property tax is very local tax.

So to me, and I don't wanna get into conversations that you guys are about to have in the next week or so, but it is very local tax.

It's very, yeah, we say we don't understand it, right?

Very transparent.

I mean, you can see, you know, do you pay a lot in property taxes?

Do you live in the area with good schools, right, with good services, good libraries, disability services, right?

Are your roads plowed?

Are there potholes on the roads?

So they provide a lot of stability to local jurisdictions and support the most essential services that all of us use, and each and every one of us will be worse off if property taxes are not around.

Maybe we need some window decals, paid for by property taxes.

Yes.

Right.

Just a suggestion.

Next question.

Thank you.

Could you talk to us a little bit more explicitly about the role that tax abatements, TIFs, the reevaluation freezes, What are the pros and cons of those, and how are they influencing the pressures we're feeling right now?

Sure.

So looking at the total tax base, whether it's at the municipal level where a lot of the abatements are approved, or state policy for what can be abated, what can be TIF'd, what can be exempt, Every time that you give a break to one class of taxpayer, it necessarily means that the burden gets shifted over to others.

So, you know, and there are very good reasons to do things like TIFs and abatements and exemptions, but each of those does seem to be increasing, both the number of categories and those that fall into those categories, And the burden does, again, get pushed off to others.

So, you know, from an abatement perspective, you know, you can look and say, well, you know, municipality wants to encourage more home building.

As we know, we've got a, you know, a supply issue on housing, and even those that are available don't want to move because they don't want to pay twice as much in interest.

So, a municipality might say, well, we're going to build, you know, we want to encourage building, so we're gonna give a 15-year tax abatement on any new construction.

And it makes sense.

You've got vacant lots that can be built on, so you build on them, and basically the homeowner only pays tax on the land value for 15 years, which is great.

So it encourages the building.

But what that means is that the homeowners that have been there for 15, 20, 50 years on any site outside of the new build, obviously it means it's throughout the taxing district, but just as an example, those long-term homeowners, they still have to pick up the tax bill for the people that are not, that have the tax abatement.

So we keep talking more and more about kind of things that help out others.

One of the most sympathetic is Homestead.

For anyone over 65 and whose income falls below about $38,000, $40,000— I forget the exact amount.

We want to encourage people to be able to stay, but the more people that are on Homestead just means, again, other homeowners that are not eligible for it, they pick up that part of the tab.

The overall bill stays the same, but there's fewer people to pay the bill.

And that's, I think, where so much of the frustration that has led to the push to abolish property taxes come from.

And I just very briefly, another on exemptions.

You know, the number of very large commercial properties that are exempt throughout the state, but particularly here in Cuyahoga County, you know, they're quite large.

And when you think of places like Metro Hospital, it's like, well, it's a hospital, you know, that's great, we want them to keep their costs low.

Universities like Case Western, you know, great that the, you know, that they have lowered tax amounts or certain properties that are exempt, but again, it just pushes the bill out to other people.

And I think that that's where a lot of the frustration that led to this push to abolish property tax comes from.

Thank you very much, Ron.

I'm sure there are a lot of questions we didn't get to today, so just wanted to remind everyone we do have our live community tour on Monday at Cleveland Metroparks for Ideastream Public Media.

You're welcome to join us there.

Thank you to Dylan Armstrong, Howard Fleeter, Tatyana Guzman, Ron O'Leary, and Stephanie Haney for joining us at the City Club today.

Forums like this one are made possible thanks to generous support from individuals like you.

You can learn more about how to become a guardian of free speech at cityclub.org.

Today's forum is presented in partnership with Ideastream Public Media as part of the Ideastream Explorers Property Tax series.

You can also join them, as discussed, on the Sound of Ideas community tour on Monday, July 20th at the Cleveland Metroparks Zoo.

The event is free and open to the public, but an RSVP is required.

You can learn more about this series and register for the event at ideastream.org.

Thank you once again to our speakers and our members and friends of the City Club.

I'm Mark Ross, and this forum is now adjourned.

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