Residents may have to wait as long as a year and a half for a reduction in property taxes under the current proposed city income tax. The measure is being considered by City Council for placement on the May 2007 ballot.
While the proposal mandates reductions in property taxes equal to money collected from a city income tax, they are not immediate. If enacted in it’s current form, City Council would have up to 18 months before any reduction in property taxes is required.
During this period the city would be collecting both the new city income tax while still collecting property taxes at their current levels. If Council takes the full 18 months, residents may not see any reduction in property taxes until 2009.
The period between the start of the collection of the income tax and property tax reductions could also prove to be a boon for the city financially. If Council waits 12 months to enact property tax reductions, the city could gain an estimated $10 million* from collecting both taxes. City Council changed the original 12 month period to 18 months in an early revision of the proposal. If Council waits 18 months, the additional gain could be up to $15 million.
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The language dealing with the reduction of property taxes, found at the end of the proposal, calls for an abatement in property taxes which means a reduction. While many debating the issue have used words like “refund” and “rollback”, there is no language specifying a refund or rollback of property taxes in the proposal. A refund would pay property owners back for money collected during the transition. A rollback usually refers to a reduction of a current tax rate based on a percentage. For example, the Homestead Exemption is a 10% tax rollback.
The current proposal before City Council actually contains two options under consideration for implementing tax abatement. In Option A the abatement will start 18 months after collection of a city income tax begins. The current wording implies that reductions cannot start before an 18 month period has passed. In Option B property tax reduction will begin no later that 18 months. Both options give City Council up to 18 months before any reduction in property taxes is required.
City Council will have a second reading of the income tax proposal Monday January, 8 at which time citizens can give public input. Council has also scheduled a third reading for the following day, January 9. Usually readings are spaced a couple weeks apart to allow for consideration of public input. Council’s scheduling indicates a high level of confidence that the proposal will pass the second reading.
(Update: On January 5 the third reading was rescheduled to January 11, 2007 giving Council three days between second and third readings to consider input.)
(Update: On January 8, 2007 the proposal failed to pass on it’s second reading before City Council eliminating the need for a scheduled third reading altogether.)
A partial reprint of the section dealing with property tax abatement is shown below.
SECTION 000.98. ABATEMENT OF REAL PROPERTY TAXES
Option A
(A) Upon initiation of the collection of earned income taxes by the City of Beavercreek, the City Council is mandated to effect an abatement of voted municipal property taxes levied for municipal operations. The implementation of abatements will betwelve (12)eighteen (18) months after collection of taxes begins.
Option B
(A) Beavercreek City Council is mandated to use the net earnings tax to abate voted municipal property taxes levied for municipal operations. Implementation of this abatement will start no later than eighteen (18) months after collection of earnings tax begins.
