Fiscal Note & Local Impact Statement

125 th General Assembly of Ohio

Ohio Legislative Service Commission

77 South High Street, 9th Floor, Columbus, OH 43215-6136 ² Phone: (614) 466-3615

² Internet Web Site: http://www.lsc.state.oh.us/

BILL:

H.B. 127

DATE:

May 14, 2003

STATUS:

As Introduced

SPONSOR:

Rep. Jolivette

LOCAL IMPACT STATEMENT REQUIRED:

Yes

 

 


CONTENTS:

Permits municipal corporations to acquire tax-delinquent land for redevelopment free from tax liens

 

State Fiscal Highlights

 

STATE FUND

FY 2004

FY 2005

FUTURE YEARS

School Districts

     Revenues

- 0 -

- 0 -

- 0 -

     Expenditures

- 0 -

Potential minimal increase

Potential minimal increase

Counties and Other Local Governments

     Revenues

- 0 -

- 0 -

- 0 -

     Expenditures

- 0 -

Potential minimal increase

Potential minimal increase

 

·        Permits municipal corporations to acquire tax-delinquent real estate before the foreclosure proceeding begins without necessarily assuming the entire tax debt.  This could increase the number of municipal corporations acquiring such properties.  Thus, increasing the number of properties, and the total value of property that is exempt from taxation.

·        The state General Revenue Fund (GRF), which finances the 10% and 2.5% rollbacks on real property taxes and the state base cost funding for Ohio schools, would be affected by these exemptions.  By reducing the amount of property taxes due, the amount of the rollbacks provided by the state is also reduced.  However, in most cases the exemptions also increase the base cost funding payments made to school districts where these properties are located. 

Local Fiscal Highlights

 

LOCAL GOVERNMENT

FY 2003

FY 2004

FUTURE YEARS

School Districts

     Revenues

- 0 -

Potential minimal gain or loss

Potential minimal gain or loss

     Expenditures

- 0 -

- 0 -

- 0 -

Counties and Other Local Governments

     Revenues

- 0 -

Potential minimal loss

Potential minimal loss

     Expenditures

- 0 -

Potential savings

Potential savings

Note:  For most local governments, the fiscal year is the calendar year.  The school district fiscal year is July 1 through June 30.

 

·        The bill permits municipal corporations to acquire tax-delinquent real estate before the foreclosure proceeding begins without necessarily assuming the entire tax debt.  This may result in a savings to county governments.

·        Under the bill, the tax debt is forgiven to the extent other taxing districts waive their claim to delinquent taxes on the property.  Any waiver of delinquent taxes would reduce potential revenue for the taxing district.  If a taxing district declines to wave their claim to the delinquent taxes, the lien for such taxes and costs will continue. 

·        Exempts acquired property from further taxation for as long as it is owned by the municipal corporation.  This exemption reduces potential future tax revenue for local taxing districts.  Statewide, school districts receive 60% of property tax revenue.  The remaining 40% of property tax revenue benefits counties, municipalities, and other local taxing districts.

·        As a result of the property tax exemptions, some school districts could see an increase in base cost funding, which is funded by the state.   This is because the exemption would lower the taxable property valuation.  School districts that are “on the guarantee” would not see an increase in funding.

 


 


 

 

Detailed Fiscal Analysis

 

The bill authorizes municipal corporations to acquire tax-delinquent real property without necessarily incurring the entire tax debt, and before substantial costs are undertaken by the county in proceeding with the foreclosure.  The tax debt is discharged to the extent that overlapping taxing units (school districts, etc.) release their claims on the delinquent taxes.  Under current law, municipal corporations and other local governments generally may acquire tax-delinquent property on relatively favorable terms only after the property has been offered for sale at public auction, and only after most of the costs of the foreclosure proceedings have been assumed; even then, the tax debt remains with the property, to be discharged, at least in part, from the eventual sale of the property by the local government. 

 

The fiscal impact of this bill is difficult to determine.  Legislative Service Commission believes there could be significant savings to counties by forgoing to foreclosure process.  However, the bill may entice municipal corporations to acquire more real properties than they would under current law.  If this is the case, not only will taxing districts have the ability to forgo tax liens on the properties, but the number of properties no longer subject to taxation will also increase.

 

The 10% rollback on real property taxes and the state base cost funding for Ohio schools are both financed by the GRF.  By increasing the number of properties exempt from taxation, thus, reducing the amount of property taxes due, the amount of the rollback would also be reduced.  On the other hand, the exemption would lead to a lower property tax valuation in the corresponding school district, and this could cause the state’s base cost funding payments to the school district to increase. 

 

The cost of the bill will depend upon the assessed value of properties acquired by municipal corporations, the tax rates in the corresponding taxing districts, and the likelihood that taxes would have been collected had the municipal corporation not acquired the property. 

 

 

 

LSC fiscal staff:  Nickie Evans, Economist

 

 

HB0127IN.doc/lb