SHAKER HEIGHTS, Ohio -- City Council will give a second reading on Monday (Feb. 27) to a resolution opposing a proposed state takeover of some local business tax collections.
Mayor Earl Leiken called a special meeting to enact the resolution after a Feb. 13 work session, however some council members balked on its immediate passage.
There was also some question of whether the state legislature will throw its support behind the more controversial aspects of Gov. John Kasich's proposed budget.
Cleveland Heights city officials have also registered some concerns with Kasich's budget proposal to add a new "needs-based provision" for the Local Government Fund -- allocations that many Ohio cities have seen cut in half over recent years.
In addition to further cuts being proposed overall, Kasich wants to set aside 10 percent of the total Local Government Fund -- going to 20 percent in 2020 -- that would be distributed using a "capacity to raise revenue" analysis.
"It is not yet fully understood how a community's 'capacity to raise revenue' will be determined and how it would affect their LGF distribution and access to the set-aside funds," Cleveland Heights officials noted.
Both Shaker and Cleveland Heights have passed city income tax hikes in recent years -- along with Cleveland last November -- at least in part to counteract those funding cuts from the state.
"The state has already hurt us by cutting the Local Government Fund by more than half and now wants to take more from what's left to some of the cities and give that to other cities instead of restoring what was taken," Leiken said.
Along with the nebulous "needs-based" distribution proposed by Kasich, Leiken criticized a plan that would have the state take over collections of net profit business tax filings.
Both cities use the Regional Income Tax Agency for collections and Leiken would like to keep it that way, along with other members of the Cuyahoga County Mayors and Managers Association and the Ohio Municipal League.
With the centralized collection through the Ohio Department of Taxation, the state would keep one percent of the business net profit taxes and give back the rest.
As Shaker continues to work toward strengthening its commercial tax base, the city did collect a little over $1 million in business net profit taxes last year.
Of this, RITA was paid about $34,000, or 3.23 percent of the gross revenues, which would mean a "theoretical" savings of about $23,600 at one percent.
Councilman Tres Roeder has expressed concern about the cost of RITA in the past, although he noted that the percentage kept on business net profits isn't a lot.
Leiken also countered that even with the potential savings to the city, Acting City Finance Director Bob Baker has questioned whether the state could get a collection system in place in a timely way.
"I'd rather pay a little more and get our money than pay one percent and worry about it," Leiken said. "And this proposed method could cause considerable disruption."
Roeder and Councilman Sean Malone added that the Feb. 13 special meeting to pass the resolution on first reading was called hastily, and they did not have enough time to review it.
"There's concern that the state would pay us more slowly, but at this point, we don't know," Roeder said.
Leiken said it was "crystal clear" to him that "this is not in our best interest," adding that RITA also does a good job of collecting delinquent taxes.
Malone said he would like to see the city "take the right strategic approach in dealing with the state legislature," such as more of a lobbying effort.
Leiken said the resolution was drafted by City Law Director Bill Gruber as part of a concerted effort requested through the Ohio Municipal League for lobbying purposes.
The resolution refers to the proposed state takeover as "this latest attack on municipal home rule," and cites the potential for a legal challenge if the legislature does not remove applicable language from the proposed budget.
Councilman Rob Zimmerman said he understood the city administration wanting to go on the record.
But he also believed that the state budget process allowed additional time for fellow council members to review the proposals further.
"I'm going to support this, but I don't have to vote for it today," Councilman Rob Zimmerman said Feb. 13. "I can support it in two weeks."
Leiken contends that all of this is being done ostensibly to cut taxes at the state level, but in effect state officials are "passing the buck" and shifting the burden to cities.
"This is a very slippery slope, in terms of taking away our right to choose best how to collect our taxes, replacing it with a not-yet established state collection bureaucracy -- with great uncertainty as to how it would perform," Leiken said.
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