Ohio Municipal League
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OML E- BULLETIN
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No. 14                                                                       May 22, 1998

Municipal Tax Issue Addressed

The Ohio House this week passed a "budget corrections" bill by a margin of 91-6. The bill included the House's reaction to a Supreme Court case that declared that to preempt any field of taxation from municipal taxation the legislature must explicitly place such a preemptive intent in statute.

The case in question was Cincinnati Bell Telephone Co. v. Cincinnati. At issue was whether the city of Cincinnati, the City of Blue Ash and the Village of Fairfax could tax the net profits of Cincinnati Bell, as they had done in 1992, 1993 and part of 1994. The League filed an amicus brief in the case on behalf of the City of Cincinnati. Cincinnati Bell contended that, since the company paid the state's public utility excise tax, the company was exempt from the municipal net profits tax. The company contended that the state tax automatically implied a preemption from local taxation. In its 6-1 decision of May 13, 1998, the Supreme Court essentially eliminated the concept of an implied preemption that would stem from the state merely taxing a specific kind of revenue, holding or transaction. The Court pointed out that "double taxation" on many things, such as income, occurs often in tax policy and that such double taxation alone did not preempt municipalities from taxing something which the state taxes.

The Court said that such a preemption should be made explicit by the legislature in the case of each tax it imposes. In HB 770, which passed the Ohio House on Thursday, the House attempted to make such preemptions clear by prohibiting municipalities from taxing those things which in the past have been taxes exclusive to the state. The provisions of HB 770 making that change do not impact on any traditional municipal tax sources. The provisions include a specific indication that nothing in the provisions restrict a municipalities ability to levy an admissions tax, something which the League felt was not clear in the early version of the provisions. The League-supported amendment to clarify the continued ability of municipalities to levy admissions taxes was offered by Rep. Mike Wise.

Additionally, in response to a frenzy of utility lobby worries, the House also inserted an amendment that we think attempts to bar any retroactive levying of municipal net profits taxes on utility companies in cases in which the municipality had not levied such taxes prior to the Cincinnati Bell v. Cincinnati case.

Disability Retirement Bill Passes

The Senate passed and the House concurred in HB 648 this week. The bill, which started out as a controversial revamp of Ohio's public pension systems, stirred little emotion in its final form. While the bill still contains some good provisions related to the administration of the public pension funds, especially the Police & Fire Disability and Pension Fund, the controversial provisions of the bill, such as the offset of workers' comp and pension disability benefits, were taken out of the bill.

One part of a League-supported "employer notification" idea was left in the bill. Under the provisions of HB 648, in the future, cities will be notified of the rank and number of employees who have filed for PFDPF disability retirements prior to the award of such a disability pension. The League had asked that cities be told the name of the officer seeking such a disability prior to the awarding of such a pension.

In another provision, the bill would extend from three to five years the length of time that an officer on disability retirement could return to a city and be given his or her job back, following a successful rehabilitation.

HB 204 RECEIVES 1ST HEARING

HB 204, as previously reported, contains a provision that is important to the cities and villages throughout the state of Ohio. The bill, sponsored by Representative Lynn Wachtmann, contains a provision that increases the competitive bidding threshold from $10,000 to $15,000 for municipal contracts. According to Senator Schafrath's office, chairman of the Senate committee hearing the bill, the bill may be voted out of committee this week.

SENATE ECONOMIC DEVELOPMENT, TECHNOLOGY & AEROSPACE, 11 a.m., South Hearing Rm.

SB 238 REINVESTMENT AREAS (Horn) Prohibits a municipal corporation or county from entering into a community reinvestment area(CRA) tax-exemption agreement with any person that has business operations elsewhere in Ohio if part or all of those operations will be relocated to the CRA and makes other changes. (2nd Hearing)

HB 434 ECONOMIC DEVELOPMENT ZONES (Schuring) Makes various changes in procedures governing the creation of joint economic development zones and makes other changes. (3rd Hearing-Possible vote)

SENATE WAYS & MEANS, 1 p.m., South Hearing Rm.

SB 237 ELECTRIC DEREGULATION (B. Johnson) Provides for competition in retail electric service and makes other changes. (3rd Hearing)

SB 232 PUCO (Nein) Removes federally licensed providers of commercial mobile service from regulation by the Public Utilities Commission, but continues their statutory designation as public utilities and telephone companies under Ohio's Public Utility Law. (3rd Hearing)

SENATE FINANCE & FINANCIAL INSTITUTIONS, 2 p.m., Finance Hearing Rm.

HB 770 BUDGET CORRECTIONS (Johnson) Corrects, supplements, and modifies certain authorizations and conditions established for the operation and administration of state programs and makes appropriations for the biennium ending June 30, 1999. (1st Hearing-pending referral)

HOUSE PUBLIC UTILITIES, 4 p.m., Rm. 121

HB 760 CABLE TELEVISION (Olman) Provides for fair competition in the provision of cable television services by establishing conditions under which governmental cable operators may be formed, including the franchising of those operators by the Public Utilities Commission, and by taxing such operators in the manner of private cable operators. (1st Hearing)

HB 220 ELECTRIC COMPETITION (Amstutz) Establishes a state policy promoting competition and customer choice in the supply of electricity within the state; requires existing electric distribution companies to receive approval by the Public Utilities Commission of their plans to make the transition to competition and customer choices and makes other changes. (3rd Hearing

HB 732 ELECTRIC DEREGULATION (Mead) Provides for competition in retail electric service, including provisions regarding market structure, consumer protection, retail marketing areas, and transition revenues and makes other changes. (3rd Hearing)

SENATE FINANCE & FINANCIAL INSTITUTIONS, 10 a.m., Finance Hearing Rm.

HB 770 BUDGET CORRECTIONS (Johnson) Corrects, supplements, and modifies certain authorizations and conditions established for the operation and administration of state programs and makes appropriations for the biennium ending June 30, 1999.(2nd Hearing-Possible vote)

HOUSE LOCAL GOVERNMENT & TOWNSHIPS, 4 p.m., Rm. 121

HB 765 TOWNSHIP PARTITIONING (Terwilleger) Provides that a township reduced at the request of a municipal corporation to less than 22 square miles may continue as a reduced township unless a petition is filed by the township electors, changes the procedure for partitioning a township, and changes who may petition in a township to have the unincorporated township territory separated from the incorporated township territory. (2nd Hearing-Possible vote)

SENATE STATE & LOCAL GOVERNMENT & VETERAN'S AFFAIRS, 5 p.m., South Hearing Rm.

HB 204 GOVERNMENT PURCHASES (Wachtmann) Allows certain political subdivisions to purchase supplies and services outside of a Department of Administrative Services purchase contract. (2nd Hearing)

1998 SALARY SURVEY REPORTS: MAJOR CHANGES

Summary reports of the 1998 city and village elected official salaries surveys are being published in Cities and Villages, beginning with the March/April issue. Detailed reports on elected and appointed officials, as well as other staff positions, are now available. The reports provide comparability by population, geographical distribution, and general fund appropriation for cities and villages. Additional comparability by form of government is available for cities. Upon request, one copy will be provided at no charge to each of the cities and villages that returned the completed survey by the deadline. Surveys that were returned too late to be included in the report will not be given credit for a free copy. OML member municipalities that did not respond to the survey but want a copy of the report will be charged $10 for the village report and $25 for the city report. All others will be charged $100 for the set. Call the OML at 1-800-561-3597 to request a copy.

FEDERAL AFFAIRS

From time to time there are efforts in Congress to subject all public employers and employees to the Social Security Tax. Well . . . its under discussion once again. There is no specific piece of legislation but consideration is being given to require all public employees to be under social security as a way to infuse more dollars into the troubled social security system.