FY16 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: 

Operating Expense Levies

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

Operating Expense Levy Loss Reimbursement

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a district received in FY15 for all fixed rate current operating levy losses, after accounting for all expired and repealed or replaced levies in FY15, as the current expense allocation.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. 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.

To establish the threshold, 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	Threshold in Ensuing Fiscal Years
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%

If the ratio of current expense allocation to total resources in any given 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 reimbursements will be calculated based on the difference between the current expense allocation and the product of the total resources and the threshold. Reimbursements are phased out between 1-2 percent of total resources each year..

Non-Current Expense Reimbursement

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

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 following shows the phase-out schedule of this reimbursement:  

FY16 Amount = (FY15 TPP Amount X 1.0) + (FY15 PUD Amount X 1.0)

FY17 Amount = (FY15 TPP Amount X 1.0) + (FY15 PUD Amount X 0.8)

FY18 Amount = (FY15 TPP Amount X 0.8) + (FY15 PUD Amount X 0.6)

FY19 Amount = (FY15 TPP Amount X 0.6) + (FY15 PUD Amount X 0.4)

FY20 Amount = (FY15 TPP Amount X 0.4) + (FY15 PUD Amount X 0.2)

FY21 Amount = (FY15 TPP Amount X 0.2)

Fixed Sum Debt Purpose Reimbursement

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

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 FY16 reimbursements broken down by levy type for traditional and joint vocational school districts, please click here .

To view the FY16 calculation with all of the relevant factors and parameters for traditional and joint vocational school districts, please click here.

Last Modified: 6/9/2017 10:17:50 AM

---