By Marc Kovac
Townships thinking about expanding economic-development zones or creating new ones will have to meet a variety of new state requirements before the end of the year.
And come Jan. 1, they no longer will have the authority to form the joint economic-development zones, or JEDZs, under a new state law that took effect this week, after Gov. John Kasich added his signature to legislation eliminating a section of Ohio law that opponents say has been misused to levy taxes on business owners and employees without giving them a say in the matter.
House Bill 289 focused on JEDZs, which were created nearly two decades ago as a means of encouraging cooperation among local governments and supporting economic development.
In more recent years, some local governments have used the zones to levy taxes on employers and employees, who have no say on whether they approve, said state Rep. Kirk Schuring, a Republican from Canton and the primary sponsor of HB 289.
“Simply stated, what happens is, under this law, all a township has to do is selectively target a private or public institution and say they’re going to impose a tax on them under the guise of economic development,” Schuring said prior to the final House vote on the legislation. “And then, how they validate that is they go to the nonaffected voters and they say, ‘We’re not going to tax you, is it OK if we tax these public and private institutions, public and private employees?”
He added, “That’s bad, bad public policy. It is a tax grab.”
Effective next year, HB 289 prohibits the formation of new JEDZs involving townships and municipal corporations, though existing ones can remain as-is.
New zones or substantial amendments (changes to boundaries or increases in tax rates, for example) to existing zones must be created or completed before the end of this year.
New or amended JEDZ contracts will require economic-development plans that stipulate how income-tax collections will be used, with at least half going to services, facilities and other improvements.
And municipal corporations and townships will have to form review councils to ensure those contracts meet state requirements prior to placing them before voters. The process includes increased opportunities for public review and comment.
Townships could still pursue joint economic development districts, but those require consent from a majority of affected businesses and property owners.
HB 289 had the backing of business, government and union groups, including the County Commissioners Association, the Ohio Chamber of Commerce, the Ohio School Boards Association and the Ohio Education Association.
The Ohio Township Association and others, however, opposed the bill.
State Sen. Bill Seitz, a Republican from Cincinnati, one of two “no” votes in the Senate, said townships are not able to levy income taxes or take advantage of other collections to pay for the services they provide.
“When these large townships that ring our inner cities face bankruptcy, they may very well decide they have no recourse but to become cities themselves,” Seitz said prior to the Senate vote on the bill last month. “And when they do, their budgets will double or triple or quadruple, the size of government will grow as it does in municipalities; their taxing authority will be equal to that of Columbus or Cleveland or Canton or Dayton or Cincinnati.”
He added, “This unrelenting assault on township government is going to have very bad consequences down the line for those of you that care about not growing the size of government.”
HB 289 passed the both the House and Senate late last month on lopsided votes with bipartisan support. Kasich signed the legislation Thursday. Lawmakers included an emergency clause, meaning the bill took effect immediately.