March 24, 2017
This week the General Assembly continued to deliberate on the budget while also working on multiple bills. The largest amount of activity this week involved the transportation budget which was passed by the Senate. Meanwhile, municipal income taxes continue to undergo attention from General Assembly members, as extensive testimony was heard again this week on that subject. The League would like to continue to express our gratitude in the dozens of municipal officials who remain highly engaged and productive in talking to members of the General Assembly, both in district and here in Columbus. Your conversations with your members are essential to maintaining local control in Ohio.
MULTIPLE HOUSE COMMITTEES CONTINUE TO STUDY MUNI TAX CENTRALIZATION PLANS
Municipal income tax issues were heard repeatedly in two committees on Tuesday and Wednesday this past week. On Tuesday morning, the House Ways and Means committee heard proponent testimony opposing the centralized collection of net profit business filings from Policy Matters Ohio, as well as testimony supporting it from John Green, a business owner in Stow, OH, and the Ohio Manufacturer's Association. For those interested in, testimony presented to the committee can be accessed via the committee's website: http://www.ohiohouse.gov/committee/ways-and-means
Highlights from the hearing include:
- Mr. Green's testimony discussed how the remitting net profit payments through the Ohio Business Gateway would simplify his tax filings were his business to expand in the future, though Mr. Green has the option of remitting his net profits through OBG currently.
- The OMA claimed elimination of the "throwback" rule would encourage economic development. Interestingly, a similar argument was made during HB 5 discussions three years ago, that Amazon could not build distribution centers in Ohio were "throwback" not eliminated. "Throwback" stayed, and Amazon currently operates not one but two distribution sites in Ohio.
- Rep. Henne (R-Clayton) asked OMA testifier Mark Engel of Bricker & Eckler if he were concerned about the fact that OBG is not ready to handle centralized collection. Engle replied unless the proposal pass, necessary improvements would not be made to OBG and suggested a potential be "phase-in." Rep. Henne expressed his fear that the proposal puts the "cart before the horse" and that the State would not be ready to process the filings in time.
- Rep. Boyd (D-Cleveland Hts.) said businesses have expressed that they prefer not to use the OBG and suggested keeping OBG optional would be more pro-business. When Engle responded, there was no such things as a perfect system, Rep. Boyd suggested the Legislature listen to the concerns of hesitant businesses.
That afternoon, the House Finance Subcommittee on State Government and Agency Review had Tax Commissioner Testa return for further questioning on the tax changes proposed in the budget. Submitted testimony can be accessed via the subcommittee's website: http://www.ohiohouse.gov/committee/finance-subcommittee-on-state-government-and-agency-review
Testa brought information the subcommittee had previously requested. Rep. Faber (R-Celina) then asked Testa to help him draft "response letters" to constituents writing his office asking he oppose centralized collection. Highlights include:
- Testa said ODT customer services' average response time ranged between 3 minutes and one business day. He failed to mention that unlike local tax offices, those agents would be unable to access the detailed, personal accounts local tax administrators keep.
- Testa said that while registration for net profit filings would have to be ready by January 1, 2018, he seemed to suggest full functionality would not have to be ready until April of 2019. While admitting the net profit filing portion of OBG does not currently work well, he claimed that municipalities were responsible for the State's portal's under performance as they do not currently pay for the portal. He did not clarify by reminding the committee that OBG was created to be a State-provided (as in, State-funded) portal for tax filing remittance.
- Rep. Bulter (R-Oakwood) wanted to know why it was not possible to simply fix the OBG without making its use mandatory. Testa said leaving the OBG an option would not fix the problem of the different rules and regulations among the various municipalities; except, legislation also does not "fix" that. Businesses would still have to file net profit tax for each municipality: the difference would be filing through OBG (which they can already do). The data collection and tax calculations for each municipality would still fall to the business or their tax preparer.
- Rep. Faber asked if ODT had an interest in increasing the 1% administration fee in the future. Testa responded this administration had no appetite for it. This administration's tenure is finished in two years.
- Rep. Kelly (D-Cincinnati) finished the questioning by asking if any municipalities supported centralized collection. Testa responded there are no municipalities that support it.
- Melinda Frank, Income Tax Administrator of Columbus since 1987, then testified. She cited an example from Maryland, which centrally collects local taxes, misdirecting over $21 million due to the misclassification of proper taxing districts. Some local jurisdictions were deprived of funds while others will have to pay back substantial amounts of revenue. She explained how it was possible Ohio could experience similar difficulties with "special tax districts with irregular boundaries" like Joint Economic Development Zones (JEDZs) and Joint Economic Development Districts (JEEDs).
On Wednesday morning, the House Ways and Means committee heard proponent testimony on the municipal income tax portions of the budget bill from Jack Kostak, a business owner, Angela Radic, a tax accountant and Scott Williams from the Ohio Society of Realtors, who was accompanied by Tom Zaino of Zaino Hall & Farrin LLC. Melinda Frank also gave her testimony from the previous afternoon. Highlights include:
- Rep. Scherer (R-Circleville) asked Ms. Radic about the OBG accepting e-filings. Ms. Radic's colleague responded that the OBG had issues that needed addressed, saying system has kicked her out in the middle of making a payment. She expressed concern that OBG would not be able to handle an influx of additional filings and said that the proposed timeline seemed unrealistic. They clarified they support the proposal "with the caveat that the OBG gets upgraded."
- Rep. Rogers (D-Mentor-on-the-Lake) asked Melinda Frank about cash flow to municipalities from net profits. Frank explained that municipalities receive revenues from net profits over the course of the entire year and that substantial cash flow interruption would affect bond payments, daily financial obligations and could force municipalities to borrow money.
- Rep. Schaffer (R-Circleville) wanted to know how something like the Maryland disaster could occur. Frank explained that the state simply cannot have the same level of scrutiny over the collection and distribution of revenues as municipalities can.
- Rep. Scherer asked Mr. Zaino about the shift of municipal net profits from a municipal tax to a state tax. Zaino said shifting the municipal net profit tax to Chapter 57 in the ORC did not make it a state tax because it does not authorize the state to spend the money. Article 12 of the Ohio Constitution says the state can only spend money for the purpose for which it was levied. He did not speak to the General Assembly's legislative authority to increase the administration fee (the portion of the revenues the state is "authorized" to spend) or to eliminate the tax entirely once it is moved from Section 718.
- Rep. Patmon (D-Cleveland) spoke to a municipality's bond credit rating being directly link to its revenue and expressed concern that loss of control of revenues would harm municipal bond ratings. He asked for details on how exactly this loss of control would affect municipal bond ratings and cautioned against "unintended consequences."
- Rep. Cera asked that the committee be sent a breakdown of how ODT plans to implement this proposal and exactly how the money from the administration fee would be spent.
The House Ways and Means hearings on HB 49 have officially concluded. The House Finance Committee will begin hearings on the bill next week.
PRESIDENT TRUMP'S FEDERAL BUDGET PROPOSAL IMPACTFUL TO OHIO MUNICIPALITIES
Last week, the National League of Cities (NLC) held its annual Congressional Cities Conference in Washing ton D.C. which was attended by over 600 municipal officials from across the state including OML Executive Director Kent Scarrett, league legal Counsel Garry Hunter and nearly 70 municipal officials from the Buckeye state.
The five-day event was an opportunity for league staff and municipal officials to learn more about issues impacting municipalities on the local, state and federal level while dedicating one day for meeting members of Congress on the Hill and pressing issues important to local communities. The congressional meetings were also a wonderful opportunity to educate members of congress on issues been presented in President Trump's first budget proposal impacting cities and villages.
The league appreciates the meetings that we participated in with members of Ohio's delegation that included visits with Senator Rob Portman, Reps. Bob Gibbs, Joyce Beatty and Warren Davidson. We appreciate the time afforded our visits and the interesting dialogue surrounding many municipal issues.
The unveiling of President Trump's Federal budget proposal a mixture of good and bad for Ohio's communities. The budget revealed cuts amounting to billions of dollars from domestic program funding, as well as increased programs to several vital initiatives that invest in municipalities.
First let's examine the cuts. These programs are vital to ensuring cities across the United States can grow and prosper. These cuts threaten the hard-won progress many local communities have made. We are asking Ohio's municipalities to take a stand against these devastating blows to the vitality and growth of our cities and villages. These Federal dollars fund programs that municipalities simply cannot make up for. They include:
- Cutting $6.2 billion to Housing and Urban Development (HUD) would mean the elimination of programs that finance revitalization projects for local communities. This includes the $3 billion dedicated to fund Community Development Block Grants (CDBG), which provides affordable housing and economic development, and the Low Income Housing Energy Assistance Program (LIHEAP), which keeps thousands of Ohio homes heated in the winter.
- The elimination of the tax-exempt status for Municipal bonds which threaten municipalities ability to leverage public funds for critical infrastructure and capital improvement projects.
- Cutting $2.4 billion the Department of Transportation includes limiting the Federal Transit Authority's capital investment program for public transit, cutting back the funds that enable thousands of Ohioans to travel to and from work and school each day.
- Cutting $2.6 billing to the US Environmental Protection Agency (EPA) would mean the loss of over two dozen programs, including the Great Lakes Restoration Initiative, impacting the Ohio communities along Lake Erie. The initiative, currently funded at $300 million would be cut to $10 million in operating revenue. Federal funding is the Ohio EPA's second-largest source of revenue, accounting for about $40 million of its $200 million annual budget. The National Oceanic and Atmospheric Administration's Sea Grant program, which funds research on algal blooms, invasive species, and other issues facing Lake Erie, would also be terminated.
- Defund the Appalachian Regional Commission, which spent nearly $10 million on economic development programs in Ohio's 32 Appalachian counties since October, 2015.
- Cutting Federal Emergency Management Agency (FEMA) state and local grant funding by $667 million, reducing disaster assistance to afflicted cities.
- Cutting $1.5 billion to the Department of Commerce includes eliminating the Economic Development Administration and the Minority Business Development Agency, meaning the loss of crucial economic development grants.
- Cutting $4.7 billion to the Department of Agriculture includes eliminating the water and wastewater loan and grant program, which would force rural communities to use private financing and state programs.
- Eliminating the Manufacturing Extension Partnership, cutting assistance to small manufacturers and damaging an important aspect of economic development in our municipalities.
- Cuts to Community Oriented Policing Services (COPS) grants, meaning fewer resources that enable municipalities to provide law enforcement for safer, stronger communities.
But the Federal budget proposal also allocates funds issues that are crucially important to local communities. These include:
- A proposed $500 million increase in opioid prevention and treatment for the Health and Human Services Department and the Justice Department as a two-pronged investment to counter and reduce the epidemic.
- An investment of $4.4 billion in Veterans Affairs, specifically targeting ever-increasing health-care costs.
- U.S. EPA boost in appropriations for improving local drinking and wastewater infrastructure by about $4 million.
- A $1.4 billion increase to expand school choice programs.
These increased funds indicate an important investment in issues that have too long plagued the most vulnerable in our local communities. On the other hand, the cuts would be a great challenge to the federal-local partnerships that have become a crucial part of investing in and revitalizing our states, local communities, and families.
We urge our members to contact your members of Congress and let them know Ohio municipalities support increased funding for important local issues and stand opposed to cuts in crucial local programs. We believe our local communities are worth the investment.
We are providing a link to a sample letter, produced by our federal advocates at the National League of Cities (NLC), which league members may want to consider when communicating with their Federal representatives. NLC model action letter is at: http://www.nlc.org/FightTheCuts
TRANSPORTATION BUDGET LIKELY HEADED FOR CONFERENCE
The General Assembly is readying HB 26 the Transportation Budget for conference committee. A conference committee occurs when the House Speaker and Senate President choose to create one, after both chambers have passed the same bill with different language. The Senate passed their version of the Transportation Budget on Wednesday afternoon after the Senate Transportation, Commerce and Workforce Committee passed the bill that morning.
Before voting, Committee Chairman Frank LaRose (R-Copley) offered and the Committee accepted a substantial omnibus amendment. LaRose stated that he had three goals in this budget: to invest in and maintain the state's existing transportation infrastructure, to invest in public transportation, and to provide local governments with additional funding for roads and bridges.
Highlights of the omnibus amendment impactful to municipalities include provisions that:
- created a floor of $3.50 and ceiling of $5.25 for the deputy registrar fee that can be set by the Bureau of Motor Vehicles. The House had raised the fee to $5.25. The Senate version would allow the Bureau to raise or lower the fee at their discretion through the administrative rule-making process.
- gave transit authorities an additional approximately $30 million in funds from the Volkswagen Emissions Mitigation Trust Fund for the purpose of purchasing rolling stock.
- incorporated SB 6, introduced by Senator Frank Hoagland (R-Adena), that would codify the Ohio Bridge Partnership Program.
- added approximately $48 million over the next two years for local roads and bridges projects through the Public Works Commission's Local Transportation Improvement Program.
- added $15 million in public transit subsidies.
- removed a House provision that would have made failure to display a front license plate a secondary offense only.
The League would like to thank the many people who continue to work hard to put this budget together. Overall, we are happy that funds are being increased for local transportation. However, we are still disappointed that only counties are allowed to assess additional license plate fees under this budget. Municipalities and townships should also be allowed to levy this fee, or at least have some mechanism, to help fill the desperate need for local transportation dollars.
The Transportation Budget must be passed 90 days prior to July 1-which is March 30th. Senate President Larry Obhof (R-Medina) announced his intention to convene conference committee on March 27 while the Speaker has not commented on the date as of this writing.
Senate Transportation Budget Documents:
Full Comparison Document HERE
Summary of Senate Changes HERE
LSC analysis HERE
MEDICAL MARIJUANA CONTROL PROGRAM RELEASES PROPOSED RULES
This week, the Medical Marijuana Control Program released a number of proposed rules to the Joint Committee on Agency Rule Review. Municipalities across the state have expressed great concern about the uncertainties surrounding the medical marijuana laws in Ohio. These initial proposals can be viewed here: http://www.medicalmarijuana.ohio.gov/rules
On May 5 in Hilliard, Ohio, the Ohio Association of Public Safety Directors, a League affiliate organization, will be hosting officials from the Ohio Department of Commerce and the Ohio Pharmacy Board to discuss the new rules and expectations for the future. Details on this conference are available by emailing: firstname.lastname@example.org .
NEARLY 80 OHIO MUNICIPALITIES JOIN IN TELECOM LAWSUIT
Nearly 80 Ohio municipalities have filed lawsuits against the State of Ohio over a wireless equipment law which was passed during the lame duck session of the General Assembly last year. Companies such as AT&T made significant promises to legislators that passing this legislation would usher in new jobs and network modernization. However, the legislature decided to move the legislation extremely quickly and attached it to SB 331, which contained multiple subjects. The League, along with other interested parties, has been working to clarify what the legislation's effects will be and what to expect going forward.
Meanwhile, the courts will decide the fate of the original legislation. The legislation likely infringes on municipalities' constitutional Home Rule authority and likely violates the "single subject rule" which requires that all Ohio legislation (other than appropriations) address a single subject.
To offer an example of the complaints filed, we are attaching the City of Cleveland's complaint HERE
TAX INCREMENT FINANCING (TIF) BILL RECEIVES THIRD HEARING
This week, the House State and Local Government Committee heard testimony on HB 69, which would require reimbursement of certain township fire and emergency medical service levy revenue forgone because of the creation of a municipal tax increment financing district. The bill was introduced by Representative Bob Cupp (R-Lima). We have provided a link to the sponsor's testimony HERE.
Testimony that has been presented to the House State and Local Government Committee on this subject in addition to access to the bill's text, legislative analysis and fiscal impact statement is available on the committee's website at: http://www.ohiohouse.gov/committee/state-and-local-government
The League has not taken a position on the bill but does have some comments. First, to the extent that this adds another exemption from TIF financing, it has the potential to reduce the efficacy of a TIF. Concerns have been expressed that this proposal could make TIF's a less attractive economic development incentive. Secondly, there is concern that the proposal gives townships a stronger negotiating position in the process of creating TIF's, because the Township has a choice whether to accept or refuse the reimbursement; i.e., it gives them another chip to bargain with.
Generally, we are not sure how significant this is in isolation. However, it is part of a disturbing trend where the state gives certain preferences to empower townships over municipalities, despite the fact that municipalities are the primary public engine of economic development.
ACTIONS ON BILLS AFFECTING MUNICIPALITIES
All of the bill's discussed can be accessed, including analysis and fiscal impact statements via the Ohio Legislative Service Commission's (LSC) website: http://www.lsc.ohio.gov
Several bills received actions this week that effect municipalities. First, SB 37, introduced by Senator Cliff Hite (R-Findlay), which would require the Ohio Peace Officer Training Commission to develop and conduct a chief of police training course for newly appointed village, city, and township chiefs of police, was passed unanimously out of the Senate this week. The League did not submit testimony on the bill but asked for some amendments that were not adopted.
Next, the Committee heard testimony on HB 34, introduced by Representatives Steve Hambley (R-Brunswick) and Scott Ryan (R-Newark) which would authorize certain state agencies, local governments, and other boards, commissions, and officers to deliver certain notices by ordinary mail and electronically instead of by certified mail. The Committee took testimony from Shelley Davis, Administrator of the Cuyahoga County Board of Revision, who said the bill could save her agency a large amount of money.
Next, the House State and Local Government Committee heard sponsor testimony on HB 121, which was introduced by Representative Jay Edwards (R-Nelsonville) and would require a public authority to consider all piping materials that meet the engineering specifications for a state-funded water or waste water project. The League opposes the bill because it would forbid municipalities from passing ordinances that exclude PVC piping from bidding in these types of RFP's.
Lastly, the Senate Local Government, Public Safety and Veterans Affairs Committee heard sponsor testimony on SB 60, which was introduced by Senators Michael Skindell (D-Lakewood) and Kris Jordan (R-Ostrander) and would regulate the use of drones for gathering evidence and information by law enforcement officers in Ohio. Skindell said, "The legislation states that, with rare exceptions, law enforcement must obtain search warrants ... based on probable cause... The bill outlines rare instances where drones may be used without obtaining a warrant (emergency situations), and details the post-search application process necessary in these situations. It also provides other limited situations where drones may be used to collect information such as traffic accidents and aiding in locating missing persons whose health or mental state creates the need for such use. Finally, the legislation also provides stringent annual reporting requirements regarding drone use by law enforcement agencies, judges and the
FIRST RESPONDERS PTSD MANDATE PROPOSED TO BWC BUDGET BILL
The Workers Compensation Budget HB 27, introduced by Representative Tom Brinkman (R-Mt. Lookout), received a hearing this week in the House Insurance Committee. Proponent testimony was offered to promote a provision that would allow "mental-mental" claims for cases of PTSD claims among first responders. The proposal (presumably) would change a century-old precedent that a physical injury must accompany any mental claims (i.e., physical-mental), as workers compensation exists to cover only work-related injuries.
Testimony of this nature was given by the Ohio Association for Justice (OAJ) (an association of trial lawyers), the Ohio Psychiatric Physicians Association, and the Fraternal Order of Police. Also, Speaker Cliff Rosenberg (R-Clarksville) was quoted as saying such a provision could proceed as an amendment in this bill, while Senators Frank LaRose (R-Copley) and Edna Brown (D-Toledo) introduced a bill to this effect yesterday (Thursday).
The League has opposed bills to this effect in the past for a several reasons and continues to be concerned if such an amendment were added to the budget package. We have not seen the language of the current proposal, but previous proposals of this sort drew members concern due to:
- a lack of adequate fraud protections.
- costs to employers would be very significant.
- the lack of a satisfactory explanation as to why current treatment options are insufficient.
We have not prepared materials related to this specific proposal, but click HERE
for our letter on this issue, written when this concept was introduced as SB 5.
HEARINGS HELD ON FISCAL EMERGENCY BILL
The Senate Government Oversight and Reform Committee heard proponent testimony on SB 88. The bill was introduced by Senator Lou Terhar (R-Green Township) and would modify the composition and powers of the financial planning and supervision commission of a political subdivision that is in a state of fiscal emergency and to clarify the duties of that political subdivision. Testifying in support was Ohio State Auditor Dave Yost who largely repeated his testimony on an identical bill in the House on HB 103, which was introduced by Representative Bill Reineke (R-Tiffin).
Yost said "Local governments make up the majority of the commission under current system, which frankly is a problem . . . HB103 brings greater objectivity to the commission." The bill makes a number of changes that would reduce the influence-upon the commission-of the jurisdiction in fiscal emergency.
BILLS INTRODUCED THIS WEEK OF MUNICIPAL CONCERN
SB118 PTSD TREATMENT-FIRST RESPONDERS - To make peace officers, firefighters, and emergency medical workers diagnosed with post-traumatic stress disorder arising from employment without an accompanying physical injury eligible for compensation and benefits under Ohio's Workers' Compensation Law for up to one year and to prohibit such a person from receiving a disability benefit from a state retirement system for post-traumatic stress disorder arising from employment without an accompanying physical injury during the time period the person receives compensation and benefits under the Workers' Compensation Law for the disorder.
Introduced LaRose, F Brown, E
HB139 PUBLIC RECORD DISCLOSURE EXEMPTIONS - To eliminate the public disclosure exemption for any permanently retained record 100 years after the date of its creation.
Introduced Perales, R Keller, C
SB103 COUNTY EMERGENCY MANAGEMENT PROGRAMS - To permit a board of county commissioners, as an alternative to entering into an agreement to establish a countywide emergency management agency, to enter into a contract of not longer than four years with the county sheriff or a chief of a fire department that has countywide authority to implement a countywide emergency management program.
Introduced Coley, W