Tuesday night, Springfield Township officials voted unanimously to declare an emergency and to put a new earnings tax on the ballot for the May 6, 2014 primary. Residents will get to decide whether or not businesses in the township will have to pay a new 1.5% tax on their net profits, and whether employees of these businesses will also pay a 1.5% earnings tax on their paychecks. This is especially troubling considering that under normal circumstances a township is unable to levy an earnings or income tax under Ohio law.
Township officials are getting around this by utilizing a provision of the Ohio Revised Code, Section 715.69, Joint Economic Development Zones (JEDZ). In order to enact the zone, the township will partner with Mount Healthy, a neighboring municipality which will collect the earnings tax and then funnel the funds to the township, in turn keeping 15% of the tax for providing this service. The term of the agreement with Mount Healthy is for 40 years, with 3 renewal periods of 10 years each, a total of 70 years of possible taxation and over $78 million dollars of new tax burden.
The reason the trustees have decided to declare an emergency and put this on the May primary ballot is simple – they are trying to beat the Ohio Legislature which has introduced a bill in the House that would restrict their taxation approach. HB289, sponsored by State Representative Kirk Schuring, would require the township to get signoff from 51% of the business owners within the affected zone in order to enact a JEDZ. This new law would effectively kill any effort to enact the earnings tax, unless they get it passed before HB289 is enacted. If the township’s JEDZ proposal is passed by the voters before HB289 works its way through the legislative process, the JEDZ would be grandfathered in.
The township claims that if the JEDZ does not pass, they will have to cut police officers, firefighters, park service personnel, and close the senior center and the Grove Banquet Hall. Here’s the truth – the police and fire departments are funded by their own levies, which are projected to fund both departments until 2017, and township officials have admitted that they may even be able to stretch those funds well into 2018 before another police/fire levy is needed. In addition, they have also admitted that the senior center and the Grove Banquet Hall are self-sustaining and may even turn a profit this year! Why would you close these facilities if they are self-sustaining and might make a profit? The revenues generated by the JEDZ would go directly into the township’s general fund and not for economic development.
The fear that is being sold to the general public with regards to the proposed JEDZ is rather alarming. Rather than look for other solutions that would be less impactful to businesses and their employees, proponents of the new tax would rather scare seniors and other township residents into voting to tax someone else to keep services at current levels. The most alarming problem with this proposal is that it does not affect 80% of the residents, those who do not work in the township yet get to vote on putting a tax in place that would affect the other 20% and also affect many other people who do not live in the township, and therefore do not have a say in the matter. This is a clear example of taxation without representation.
During the trustee meeting on Tuesday January 14 and also during the public hearing on the JEDZ one week prior, the township trustees compared the proposed tax rates to those of neighboring communities and presented it to residents and business owners as if it were an apples to apples comparison. However, the fact of the matter is, the property tax in those other municipalities is nowhere near as high as it is in Springfield Township, making the combined tax burden faced by Springfield Township business owners much greater than the burden in those other communities.
In order to exempt themselves from paying this tax and get votes from residents who also work in the township, the board of trustees has also proposed what they are calling a Community Improvement Corporation (CIC) grant program. The CIC grant would allow residents who work in the township and are subjected to the new earnings tax to get a grant back at the end of the year to “make them whole.” The main reason for this grant is that they know the residents who also work in the township will be more likely to vote yes for the proposal if they know that they don’t have to pay the tax, and can instead vote to tax someone else.
The JEDZ was never intended to be used in this manner. The size and scope of what the Springfield Township trustees are proposing is unprecedented. There are many townships in the state that are abusing the JEDZ. The JEDZ was designed to be used for economic development in rural or other undeveloped areas in order to entice businesses to move into these locations. It is supposed to be a win-win proposition for the businesses and the township. The idea is for it to be mutually beneficial in that the services which are needed in the undeveloped areas are brought in and then businesses move into these areas and increase the tax base for the local government.
Instead, in this case, the businesses get no additional services for this new tax they will be paying, only more financial burden. In many cases this is taxation without representation because many of the business owners and employees of the businesses do not live in the township. What’s even worse is if business owners and employees live in a municipality which does not have a reciprocity agreement with Springfield Township, they will end up paying this new tax on top of what they are already paying in taxes where they reside. There is no CIC grant available for these individuals at the end of the year, even though the business owners are already paying the same high property taxes as the residents of Springfield Township.
There has been a huge groundswell of grassroots opposition to this measure. Business owners turned out in droves to the trustee meetings and public hearings about the JEDZ to voice their opposition. Our group, the Springfield Township Coalition for Responsible Government, staged two protest rallies, one before the public hearing on January 7th and one before the regular trustee meeting on January 14th when they voted to put this measure on the ballot. What the board of trustees did in the face of overwhelming opposition is send the message that they don’t care what anyone thinks. The trustees decided to put this on the ballot no matter how wrong it is because they feel they are entitled to our hard earned money.
Our group plans to fight this from every angle. We have spoken at meetings, started a website and a Facebook page, organized rallies, and visited all the businesses in the township to raise awareness about this issue. Our next step is to get out and talk to the residents, pass out flyers, and put out yard signs – whatever it takes to defeat this unfair taxation scheme. In order to do that, we need your help. Please check out our website, www.StopTheJEDZ.com. We are taking donations for our campaign fund and to cover legal fees. You can also find lots of information about the JEDZ on our website and why we feel it is wrong. There are also many links to media coverage including TV news interviews, articles in the Cincinnati Enquirer, and radio interviews that we have done over the last several months.
Thank you for taking the time to read this, and please wish us luck in defeating this obvious abuse of the JEDZ statute. If you are interested in helping out, you can email us at this link.
President – Springfield Township Coalition for Responsible Government