Monday, November 29, 1999
War over turf now tax fight
Townships want cities' commuter income
BY MICHAEL HAWTHORNE
Enquirer Columbus Bureau
COLUMBUS — A simmering turf battle between cities and townships may explode next year over income taxes commuters pay to cities where they work.
The state has authorized three members of the Southwestern Ohio Township Association to start collecting petition signatures for a constitutional amendment that would free nonresidents from paying municipal income taxes.
Cities say the proposal would rob them of millions of dollars used to finance police and fire departments, parks and recreation programs and sewer and water services.
Backers of the proposal, though, say it's unfair for commuters to pay taxes to cities where they work, especially for those who live in areas with no income tax.
“This is what started the Revolutionary War: taxation without representation,” said William J. Seitz, a Green Township trustee.
Mr. Seitz, a candidate for state representative, said the initiative stems from frustration about the state's annexation law, which townships contend favors cities interested in gobbling up unincorporated land.
“We aren't doing this because we hate cities,” Mr. Seitz said. “But they have yet to renounce annexation as a tool of municipal warfare.”
The proposal could become a politically volatile, anti-tax addition to the November 2000 bal lot. Petitioners first must collect 335,421 signatures, including 5 percent of the voters in half of Ohio's 88 counties, by Aug. 9.
City officials say they would be forced to recoup their losses by levying additional taxes on their own residents. They argue that commuters benefit from various services provided by the cities in which they work, and therefore should be subject to taxation.
Tim Riordan, Cincinnati's finance director, estimated that the city would lose $120 million out of about $250 million in annual income tax revenues.
“It would have a devastating effect on the ability of the city to provide public services,” Mr. Riordan said. “It would be just brutal.”
Income taxes account for a nearly a third of the city's $900 million annual budget, he said. A loss of $120 million would cut revenues by more than a tenth.
Finding a way to make up for the loss would be difficult, Mr. Riordan said. The estimated $120 million the city would lose is about five times the amount Cincinnati collects each year in property taxes.
In a hint of the lobbying effort cities may embark upon if the idea appears headed for the ballot, Marvin Thompson, the Blue Ash city manager, said it would “mean the end of our police department.”
Blue Ash would lose about $13 million a year, an amount equal to 70 percent of the city's general fund, if the proposal were added to the Ohio Constitution, Mr. Thompson said.
“I hope the voters would understand how catastrophic this would be,” Mr. Thompson said. “We're talking about dangerous stuff here.”
Municipal income taxes generally are assessed based on where a person works, not where he or she lives. Some cities credit back income taxes paid by suburban residents to their home communities, but only if the suburbs also have income taxes.
Such a credit isn't possible in townships, which do not have authority to levy an income tax.
Mr. Seitz said he would be willing to drop the ballot initiative if the General Assembly approved legislation reforming the state's annexation law. Other township trustees, he said, want to press the issue no matter what happens with the bill.
Cities and townships often are at odds over attempts by municipalities to annex unincorporated land. Township trustees want county commissioners to have a stronger hand when reviewing annexation petitions.
Hamilton County Auditor Dusty Rhodes pushed a similar anti-tax initiative 15 years ago while he was a Delhi Township trustee. He still supports the idea, though he isn't involved in the latest petition drive.
The last effort was cut short after the Ohio townships association agreed to back off if lawmakers approved an annexation reform bill, Mr. Rhodes said.
“It's 15 years later, and we're still waiting,” he said.
Questions about who pays income taxes shouldn't get mixed up in the separate debate about the power to annex land, Mr. Rhodes said.
“You have a lot of cities that are tax rich and are involved in very, very excessive spending,” he said. “What about stopping spending? Why is it always more, more, more, more with government?”
Enquirer reporter Spencer Hunt contributed.
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