FY17 HB64 Reimbursement for the Phase-out of Tangible Personal Properties and Utility Deregulation

Am. Sub. H. B. 64 of the 131st General Assembly resumed the phase-out and made changes in the calculation and distribution methodology of Tangible Personal Properties (TPP) and the Public Utility Deregulation (PUD) reimbursements. These changes combine the reimbursements for the tax losses for these properties and phase them out over a period of time.

In the past, the TPP and Deregulation reimbursement calculations were done separately on the basis of various levy losses a district experienced. These calculations are now combined and distributed twice a year in the November and May of each fiscal year. As before, the law provides for different methodologies for calculating the reimbursement for different levy losses.

Traditional and joint vocational school districts will be reimbursed for the following levy losses: 

  1. Operating Expense Levies
  2. Non-Operating Expense Levies
  3. Operating Emergency and Substitute Levies
  4. Debt Purpose Levies
  5. Inside Debt Service Levies 


Operating Expense Levy Loss Reimbursement

     (FY16 to as long as the levies are in place)

ORC Section 5709.92(C)(1) provides for the comparison of the amount of PUD and TPP current expense allocation a school district or a joint vocation school (JVS) has received in FY15 with the total resources available to it from state and local sources combined as the basis for this calculation. The ratio of the current expense allocation to the total resources of the district is the measure of the calculation for this reimbursement.

Current Expense Allocation

ORC Section 5709.92(A)(8) refers to the total amount of reimbursement a district received in FY15 for all fixed rate current operating levy losses, after accounting for all expired and repealed or replaced levies in FY15, as the current expense allocation. For each district or JVS, the FY15 PUD and TPP reimbursements for these levy losses are combined to come up with this amount.

Total Resources

ORC Section 5709.92(A)(3) provides for the calculation of the total resources of a school district or a JVS by combining various operating funds available to the district from the state and local sources. Total resources for traditional and joint vocational school districts include the following:
  

TRADITIONAL SCHOOL DISTRICTS

JOINT VOCATIONAL SCHOOLS

FY15 State Education Aid FY15 State Education Aid
FY15 PUD Fixed Rate Operating Reimburse. FY15 PUD Fixed Rate Operating Reimburse.
FY15 TPP Fixed Rate Operating Reimburse. FY15 TPP Fixed Rate Operating Reimburse.
FY15 PUD Emergency and Substitute Reimburse. TY14 Total Property Taxes
FY15 TPP Emergency and Substitute Reimburse. FY15 Casino Taxes
TY14 Total Property Taxes  
FY15 School Income Tax  
FY15 Casino Taxes  
FY15 Municipal Income Tax  

 
The ratio of current expense allocation to total resources is the basis for determining the operating expense levy loss reimbursement in FY16 and thereafter. For school districts this ratio is evaluated in the context of a ‘Threshold’ that is established based on the revenue raising capacity of the district as measured by property valuation and income of the residents. ORC Section 3317.018 calls for the calculation of the Capacity Measure, which is presented in the form of a factorial.  For all JVS the thresholds in FY16 and FY17 are set at 2% and 4% respectively.

To establish the threshold for school districts, ORC Section 5709.92(B) provides for the sorting of all the school districts based on their capacity measure from low to high. Based on that sorting school districts are divided into quintiles with each quintile containing 1/5 of the school districts statewide. The threshold is established based on the quintile the district falls into. The following table gives the thresholds for different quintiles.

CAPACITY MEASURE RANGE AND THRESHOLDS BY QUINTILE 

 
Quintile

Capacity
Measure Range

FY16 
Threshold

FY17
Threshold

1

Less than 0.695

1.0%

The sum of previous year threshold plus 1.0%

2

Between 0.695 and 0.909

1.25%

The sum of previous year threshold plus 1.25%

3

Between 0.909 and 1.060

1.5%

The sum of previous year threshold plus 1.5%

4

Between 1.060 and 1.333

1.75%

The sum of previous year threshold plus 1.75%

5

More than 1.333

2.0%

The sum of previous year threshold plus 2.0%

 

Capacity Measure Range and Thresholds by Quintile

If the ratio of current expense allocation to total resources in any year is less than the threshold for a district, then the district is deemed not to be heavily dependent on PUD and TPP reimbursements and therefore no reimbursement will be calculated for it. If the ratio is greater than the threshold, operating expense levy loss reimbursement will be calculated based on the difference between the current expense allocation and the product of the total resources and the threshold.

Non-Current Expense Reimbursement

     (FY16 only)

ORC Section 5709.92(A)(9) refers to the total amount of reimbursement a district has received in FY15 for all fixed rate non-operating levy losses after accounting for all expired, repealed, or replaced levies as the non-current expense allocation. For each district and JVS we combine the FY15 PUD and TPP reimbursements for these levy losses which would include permanent improvement, facilities, recreational, library and education technology levies to come up with this amount. The FY16 reimbursement for these levy losses is comprised of 50% of the total of these reimbursements in FY15.  Reimbursement for these levies will come to an end in FY17.  

Fixed Sum Operating Levy Loss Reimbursement

     (FY16 through FY21)

In FY15, reimbursement for all fixed sum levy losses such as emergency levies and bond issues were combined.  Under the provisions of ORC Section 5709.92(D)(1), in FY16 and the ensuing fiscal years, reimbursement for fixed sum operating levies which amounts to all emergency and substitute levies will be calculated separately from bond and facilities levy loss reimbursements. Under this section of the law, the district will receive 100% of the combined FY15 PUD and TPP reimbursements in FY16. After FY16 however, reimbursement for these levy losses will be phased out through FY21. The law provides a reimbursement calculation for these levies based on tax years, however since the reimbursements are based on fiscal years, this requires adjusting the tax year based reimbursement amounts to reflect exactly what districts should receive in each fiscal year. The phase-out schedule for reimbursements for these levies as provided in the law is as follows:

TY16 Amount = (FY15 TPP Reimbursement X 1.0) + (FY15 PUD Reimbursement X 1.0)
TY17 Amount = (FY15 TPP Reimbursement X 1.0) + (FY15 PUD Reimbursement X 0.8)
TY18 Amount = (FY15 TPP Reimbursement X 0.8) + (FY15 PUD Reimbursement X 0.6)
TY19 Amount = (FY15 TPP Reimbursement X 0.6) + (FY15 PUD Reimbursement X 0.4)
TY20 Amount = (FY15 TPP Reimbursement X 0.4) + (FY15 PUD Reimbursement X 0.2)
TY21 Reimbursement = (FY15 TPP Reimbursement X 0.2)

In order to convert the tax year based reimbursement calculations to fiscal year reimbursement distributions, for each scheduled payment in a fiscal year (November and May), we correspond the half of the tax year based calculation with the fiscal year with which the tax year overlaps. In this manner, in FY17, half of the tax year 2016 calculation is distributed in November 2016 and half of the tax year 2017 calculation is distributed in May 2017. The same distribution methodology will be applied to the ensuing fiscal years.

Fixed Sum Debt Purpose Reimbursement

     (FY16 to as long as the levies are in place)

In FY15, reimbursements for these levy losses were distributed together with other fixed sum levy loss reimbursements. ORC Section 5709.92(E)(1) provides that from FY16 this reimbursement will be distributed as fixed sum debt purpose reimbursement and will be comprised of 100% of the FY15 combined PUD and TPP reimbursements for such levy losses.

Inside Debt Purpose Reimbursement

     (FY16 through FY18)

ORC Section 5709.92(F)(1) provides for the reimbursement in FY16 equal to 100% of the FY15 reimbursement for PUD and TPP levy losses.

To view the FY17 reimbursements broken down by levy type for traditional and joint vocational school districts, please click here

Last Modified: 8/5/2019 5:10:04 PM