BY MICHAEL HAWTHORNE
Enquirer Columbus Bureau
COLUMBUS -- Cities would be penalized by the state if they tried to collect taxes from utilities, under fast-moving legislation approved Wednesday by a Senate panel.
The penalty, added as an amendment by Sen. Doug White, R-Manchester, would reduce a municipality's share of state tax revenues by the same amount that city or village collected in taxes from a utility.
Utility companies pushed for the amendment as the latest response to an Ohio Supreme Court decision issued two weeks ago that said cities have the right to impose various taxes unless lawmakers prohibit them from doing so.
"We probably can't head off any back taxes," Mr. White said. "The next best thing we can do is provide a disincentive for cities to do that."
The court decision appeared to favor Cincinnati, Blue Ash and Fairfax in a lawsuit filed by Cincinnati Bell Telephone, which had sued for more than $955,000 in combined refunds of taxes paid to the municipalities.
In response, business groups turned to their allies in the Republican-controlled General Assembly to head off cities from imposing new taxes on utilities, gasoline, beer, cigarettes and other products that historically have been reserved for taxation by the state and federal governments. Legislation sent to the Senate floor by the Finance Committee already included a specific ban on cities imposing future taxes on the gross profits of utilities, similar to the tax Cincinnati had levied on Cincinnati Bell since 1955.
Cincinnati stands to lose about $360,000 a year under the measure. However, that wasn't enough for Cincinnati Bell and other utility companies.
The firms were concerned they could be liable for tax bills issued between May 13, the day the court decision was handed down, and the date the measure became law, said Libby Korosec, a Cincinnati Bell spokeswoman.
Mr. White said the changes have been mulled by lawmakers for several months, but acknowledged that utility companies didn't come to him with the final version of the amendment until Wednesday morning.
Minority Democrats accused Republicans of catering to utility companies, a large source of campaign contributions. But Mr. White said his amendment would protect ratepayers from absorbing the costs of any taxes.
In testimony before the Senate Finance Committee earlier this week, Cincinnati Councilman Tyrone Yates said the measure infringes on the home rule powers of cities. "Cluttering the law with confusing language to imply retroactive application to existing municipal taxes is likewise ill-conceived, if not outright illegal," Mr. Yates said.
Cincinnati Bell sued Cincinnati and the two other municipalities in 1994 after realizing it was the only Ohio telephone company paying a municipal income tax on interstate revenues.
