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Riverlea News September 2015

Infrastructure Levy
Operating Levy
Your property taxes
 

The Operating Levy

  1. What is the operating levy?

    The operating levy is the main source of property tax revenue for the Village. As stated above, this tax pays mostly for services such as police protection, trash and snow removal, street and park maintenance, etc. The levy comes before the voters every 5 years, and currently consists of 5 mils of voted millage with an effective millage rate of 4.75.

  2. What's the difference between "voted" millage and "effective" millage?

    A property tax levy is typically passed to raise a specific amount of money. The millage rate is calculated by dividing the amount to be raised by the total value of the properties being taxed. When property values go up, the millage rate goes down so that the overall amount of revenue that the levy raises stays the same. The original rate is known as the voted millage, and the reduced rate is known as the effective millage. For example, when the Riverlea operating levy was last renewed in 2010, it raised just over $100,000 per year at 5 mils (an additional $50,000 or so is raised through unvoted millage). Due to the increase in property values since that time we're able to raise that amount at an effective rate of only 4.75 mils.

    When a property tax levy expires it can either be renewed or replaced. A renewal levy keeps the effective millage rate in place, which means that the cost to property owners stay the same. A replacement levy applies the voted millage rate to current property values, which means that the cost to property owners goes up.

  3. How much will the new operating levy cost me?

    The tax issue on the ballot would replace, rather than renew, the existing operating levy, and add an additional 2.25 mils, for a total millage rate of 7.25. This is an increase of 2.5 mils over the current effective rate. Using the formula described on page 2, an increase of 2.5 mils means a tax increase of about $77 per $100,000 of assessed market value, or about $230 per year for a $300,000 home.

  4. Why the increase?

    Over the last 10 years the Village has seen the elimination or reduction of several sources of revenue:

    • The Ohio estate tax, which used to generate about $30,000 per year on average in Riverlea, was repealed in 2012.
    • The local government distribution from the state has been reduced by more than half, from about $30,000 to about $12,500 per year.
    • Investment income has declined from more than $30,000 to less than $1,000 per year, partly because of the near-zero interest rate environment, and partly because of the decline in the general fund balance.

      At the same time the cost of services has gone up. As a result the Village has been in deficit every year for the past 5 years, and for 7 years out of the last 10. The new levy will eliminate this structural deficit and allow us to rebuild our cash reserves. Barring unexpected expenses, we expect cash reserves to stabilize at about 2 years' worth of annual expenses (about $500,000) by the end of this 5 year cycle, at which point the levy can be rolled back to the usual 5-mil amount.

  5. What if the operating levy doesn't pass?

    As the main source of revenue for the Village, the operating levy is essential in order to keep providing services to residents. If it were to fail, then our annual revenue would drop by more than half and we would be unable to pay our bills. We might be able to limp along for a year or so by spending the remaining general fund balance, but failure of the operating levy would effectively mean the end of Riverlea as a functioning municipality and a very uncertain future for Village residents.

    Sources of Village Revenue
    (2005-2009 vs. 2010-2014)
    Sources of Village Revenue

    Revenue includes:
    Permits, fees, etc.
    State tax rollbacks
    Investment income
    Estate tax (eliminated in 2012)
    Local govt.
    distribution
    Property taxes
    Riverlea General Fund Balance and Annual Surplus/Deficit
    (2005-2014, plus projections for 2015-2019: assumes passge of operating levy.) Riverlea General Fund Balance and Annual Surplus/Deficit

Next take a look at the Infrastructure levy description.