As the Marysville Board of Education tries to figure out its next move to secure more operating funds, the case for pursuing an income tax seems to be the most compelling.
The board was presented with various levy simulations Thursday night, each one designed to keep the district in the black through 2027, but leave the district without money in 2028. After the failure of an 8.4-mill property tax levy in July, the board is looking for a ballot issue that will be more palatable to voters.
“From a funding standpoint only the income tax is the most beneficial,” District Treasurer Todd Johnson told the board.
Superintendent Diane Allen indicated after the meeting that she and other district officials actually preferred the idea of pursuing an income tax in May.
“Our preference, at that time, was to lean towards an income tax because it is really the only way that school districts can recognize increases,” Allen said. “But after meeting with people, even our own parents, saying ‘Look, I already pay income tax here. I pay an income tax somewhere else. I can’t get a credit. I don’t want to pay another income tax.’
“You know, we went with the feedback we received,” Allen said of the decision to seek a property tax.
But there would be many benefits for the district to ask voters to pass an income tax increase when the district returns to the ballot in November.
An earned income tax would not be collected on social security or pension payments, a fact that could make it attractive to older voters who turned out in droves when the May property tax ask was defeated by more than 900 votes.
District officials felt the lack of impact to seniors would be a selling point when focus groups formed in 2022 to offer guidance on the levy. But despite the lack of impact to seniors, focus groups of older residents said they did not trust the idea of an income tax.
Johnson told the board that a .75 income tax would allow the district to stay in the black through 2027.
“From a funding standpoint only the income tax is the most beneficial,” Johnson said.
Exact figures on what an income tax would generate are difficult to predict because it changes based on the number of residents living in the district. In a growing district like Marysville, however, it is nearly certain that the amount collected would grow over the year.
That is another aspect that makes it favorable when compared to a property tax, which essentially collects the same amount of money for its entire term.
“When new people move in they would start paying that income tax,” Johnson said, noting that other districts have seen increases in the range of 3% per year on income tax revenue.
Another benefit of an income tax is that it would allow the district to capture revenue without factoring into the effective property tax millage collected. This is important because the State of Ohio has said that the minimum a district can collect is 20 mills.
Marysville currently collects at an effective millage rate of 20.17 mills, barely above that 20-mill floor, and will likely reach that level in the next few years. Essentially, as a district’s valuation grows, the financial burden of voted levies is spread among more taxpayers, meaning the individual taxpayer pays less toward the total.
Once a district is at the 20-mill floor it is allowed to continue at that rate even as the district grows, meaning the dollar amount collected can grow. An approved income tax would not count against the millage rate, allowing the district to reach the minimum.
“We would be able to hit the 20-mill floor from a property tax standpoint, which allows for some inflationary growth on revenues,” Johnson said.
Johnson also pointed out that an income tax levy would not be impacted if the City of Marysville approves more tax increment finance (TIF) districts in the future. The property tax money collected from homes and businesses in TIF districts is collected by the city rather than schools and other entities, for the purpose of improving infrastructure in Marysville.
“Another big benefit of the income tax is its not impacted by residential TIFs,” Johnson said. “So the people that gave us the feedback that were not in favor of a property tax because the (district) is not going to be getting all of the money, some of it would be going to the city, the income tax would obviously take that out of the equation.”
The downside of an income tax, according to Johnson, is that it takes longer to collect than a property tax. If passed in November, a property tax would begin collecting in 2024 while an income tax would see light collection in 2024, growing in 2025, until it reaches full collection in 2026.
This would result in the district digging deeper into cash reserves until the collections reach full strength. Because of this, the district can’t wait long to get such a measure in place.
“I would say November is really our only viable option to go for an income tax,” Johnson said.
Johnson also provided the board with a number of other levy options, all of which would allow the district to operate through 2027. The rumored infusion of $2 million in new state money was factored into the simulations, though confirmation of that cash won’t come through until late July.
He said a 5.5-mill property tax levy would be possible but would drain cash reserves putting the district in desperate need heading into 2028.
Johnson said a combination of a .5% income tax and a 2-mill property levy would also get the district through to 2027.
Johnson also looked at a pair of scenarios that assumed the district made a delay in returning to the ballot.
If the district skips the November election all together and waits to be on the ballot in May 2024, a 7.5-mill property tax would be needed, as the schools would miss out on an entire year of tax collections.
With 2024 being a presidential election year, which historically makes passing school levies more difficult, Johnson looked at a simulation in which the district waited until 2025 to return to the ballot, draining cash reserves until then. He estimated it would take a 12-mill property tax to financially recover in that scenario.
The board will continue to gather information from area voters before making a final decision in July.