Richmond Heights School District to consider replacing property tax funding with an

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

The idea was floated before the board during its most recent meeting by David Conley, president of Rockmill Financial Consulting, which has been working with the district since its sought funding for its new high school/middle school building that opened this year. Conley explained to the school board that there are now 208 school districts in Ohio that use for funding 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 earmarked specifically to support school districts. Imposition of the tax must be voter approved by residents of a school district.”

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

Conley’s presentation to the school board comes after board members and Superintendent Renee Willis earlier this month objected to City Council approving tax abatement for the Belle Oaks Marketplace project at the Richmond Town Square mall property. Included in the $260-million mixed-use Belle Oaks project will be residential and retail uses. Only the northern portion of the mall property lies within the Richmond Heights School District, while a greater portion is located within the South Euclid-Lyndhurst School District.

Most of the project’s retail development will also be located within the SE-L School District, which means the Richmond Heights Schools would not receive those income taxes.

Nearly 800 Class A apartments are scheduled to be built as part of the development. Of those, 375 apartments in six buildings will be built within the Richmond Heights Schools District. School officials have voiced concern to city leaders that new students will be moving into Richmond Heights to residences that have had property taxes abated. Thus, Conley suggests, a switch to income tax funding could be beneficial to the school district and to property-owning residents.

Data shows that 39.1 percent of Richmond Heights residents are renters, a figure that will increase 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 grow older, meaning more people on fixed incomes would have to pay higher property taxes.

“When considering the number of future renters that may come into the district associated with the Belle Oaks development,” Conley wrote in his email response, “the number of residents who are renters could exceed 50 percent. The fact that Belle Oaks is largely property-tax-abated means that new Belle Oaks resident renters may not be contributing to the cost of operating the school district.

“A SDIT could create a mechanism to receive some financial support, for the schools, from those future residents. It could also assist in lowering the tax cost of the schools on the district’s current residents.

“The proposal I made to the board of education of Richmond Heights is in response to creating a ‘Taxation Policy’ which will be designed to restructure the district’s taxation model to align better with its changing demographics,” Conley stated, “as well as leverage the future composition of the district’s community.

“The district’s residents are aging, and many are on, or soon to be on, fixed incomes. Property taxes will, over time, begin to impact those residents negatively since property taxes will be driven by the value of their homes, which continue to go up in value (especially as the community becomes more attractive because of Belle Oaks). An income tax could be a fairer way to tax those existing residents who are receiving Social Security, pensions, and other forms of fixed income.”

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

The Ohio Department of Taxation states that all residents living within the school district would be encouraged to file a return to prevent the taxpayer from receiving a delinquency notice from the department for non-filing.

A change to SDIT could result in residents not paying the portion of their property taxes that now go toward funding Richmond Heights Schools.

“For tax collection year 2021, the total property taxes used for operations of the school district (excluding inside millage) is/was 47.70 mills,” Conley stated. “So, theoretically, residents can repeal all 47.70 mills of property taxes, and replace them with an income tax. As a point of reference, 47.70 mills equates to $139.13 per month on a $100,000 home.”

In the 1999 case DeRolph vs. Ohio, the Ohio Supreme Court ruled that the method of funding schools in the state is unconstitutional. Schools are funded in Ohio using a combination of state funds and local property taxes and, in some case, federal funds. Despite the ruling nearly 22 years ago, a change in the system has not been made.

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

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