Majority Ohio House Republicans will make major changes to the two year state operating budget proposed by Governor John Kasich. While both Kasich and the Ohio House are dominated by Republicans, major differences over the Governor’s tax proposals are apparent. In addition, the House Republicans filled the budget bill, HB 64, with a long list of economic and community development oriented provisions to address local needs.
House Republicans Propose Major Ohio Tax Policy Changes
The Ohio House gutted the Kasich Tax Proposal as expected by eliminated all the suggested tax increases but providing a 6.3% across the board income tax cut beginning in FY 15 that lowers the top income tax rate below 5% and provides over $1.2 billion in tax relief to Ohioans over the next two years. The Ohio House also made permanent the 75% small business tax deduction. Increases in the state sales tax, elimination of sales tax exemptions, and increasing the state severance tax on oil and gas production all hit the chopping block. House Republicans also made changes to the Governor’s Ohio Job Creation Tax Credit Authority Program. An amendment adopted requires the Tax Credit Authority, upon the request of a taxpayer subject to an existing JCTC or JRTC agreement, to amend the agreement to account for decreases in state income tax rates. The tax credit percentage and any threshold excess income tax revenue (in the case of a JCTC) or income tax revenue (in the case of a JRTC) would be decreased by the same percentage that state income tax rates decreased since the agreement’s effective date or June 30, 2013, whichever is later. In addition, the House Republicans amended Ohio’s Tax Increment Financing statute by authorizing townships with a population of 15,000 or more to amend a TIF resolution adopted before December 31, 1994, to extend the exemption of the parcel or parcels included in the TIF for up to an additional 15 years. The amendment does not permit an increase in the percentage of improvements exempted from taxation and requires the township to notify the affected school districts and counties before adopting the amendment. Also, the Ohio Enterprise Zone was given a two year extension in the bill.
Dayton’s Aviation Industry Getting Fuel for Economic Growth
The House Republicans adopted several provisions targeted at supporting the aviation industry. First, the House Republicans requires an appropriation for airport improvements and calls for the Ohio Department of Taxation to draft legislation to exempt sales of aviation fuel from the state sales and use tax and, instead, tax such sales under a new, separate excise tax levied solely on sales of aviation fuel by the end of FY 2016. The House Republican budget also requires the Federal Research Network to be allocated to Applied Research Corporation to collaborate with Wright Patterson Air Force Base, NASA Glenn Research Center, Ohio’s research universities, and the private sector to align the state’s research assets with emerging missions and job growth opportunities emanating from the two federal installations, strengthen related workforce development and technology commercialization programs, and better position the state’s university system to directly impact new job creation in Ohio. Finally, the House Republican budget earmarks $4,000,000 for the Defense/Aerospace Workforce Development Initiative for the Applied Research Corporation to strengthen Ohio’s aviation, aerospace and defense industries. Also, HB 64 was amended to add earmarks of $250,000 in each fiscal year to establish, support the Wright State Policy Institute and the Workforce Immersion Program at the Wright State University, a $2.5M grant was provided to the Montgomery County Port Authority for the Midtown Redevelopment Initiative, establishes Defense/Aerospace Workforce Development Initiative and funds this program with $10M, and earmark of $2,500,000 in each fiscal year for Wright State University to support the development of the Global Engineering and Management (GEMS) program.
Long List of Budget Earmarks in State Budget
Of greater interest is the long list of specific budget allocations the House Republicans made in HB 64 that have a direct impact in local economic and community development projects. A partial list of these changes include:
- $500,000 to fund the Healthy Lake Erie Program;
- $2.0M in each fiscal year for the Thomas Edison Program to support small- and mid-sized manufacturers with $450,000 in each fiscal year to assist in accelerating the development and adoption of technology for small- and mid-sized manufacturers, $450,000 in each fiscal year to assist small- and mid-sized manufacturers in adopting emerging digital technologies, $425,000 in each fiscal year to develop and manage an accessible online of technological resources to support small- and mid-sized manufacturers, and $675,000 in each fiscal year to administer the Applied Research Grant Program to award direct cash grant assistance;
- Appalachian Local Development Districts will be awarded funding for $173,287 to the Ohio Valley Regional Development Commission, (B) $173,287 to the Ohio Mid-Eastern Government Association, (C) $173,287 to the Buckeye Hills – Hocking Valley Regional Development District, and (D) $70,139 to the Eastgate Regional Council of Governments;
- Requires GRF appropriation for the Ohio-Israel Agricultural Initiative;
- Earmarks $17.25M for the Ohio Association of Foodbanks;
- Earmarks $625,000 in each fiscal year for the Ohio Alliance of Boys & Girls Clubs;
- Earmarks $125,000 for the Indian Lake Watershed Project;
- Earmarks $50,000 to study the effect that zebra and quagga mussels have on Lake Erie, and $50,000 to study the effect that Canada geese have on Lake Erie’
- Earmarks $2,854,000 in FY 2016 and $2,996,000 in FY 2017 to support the development and implementation of information technology solutions through OARnet;
- Earmarks $134,244 in FY 2016 and $141,136 in FY 2017 for 4-H Clubs in Cincinnati and Cleveland;
- Earmarks $75,000 in each fiscal year to the Ohio University Leadership Project, Ohio University’s Voinovich School of Leadership and Public Affairs, Ohio State University’s John Glenn College of Public Affairs, Bliss Institute of Applied Politics at the University of Akron, Center for Public Management and Regional Affairs at Miami University, Ohio Center for the Advancement of Women in Public Service at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, University of Cincinnati Internship Program, Center for Regional Development at Bowling Green State University, Center for Liberal Arts Student Success at Wright State University, Kent State University Columbus Program, University of Toledo Urban Affairs Center, Center for Urban and Regional Studies at Youngstown State University,
- Earmarks $2,000,000 in each fiscal year to support the National Center of Education Research on Corrosion and Materials Performance at the University of Akron;
- Earmarks $150,000 in each fiscal year for The Washington Center Internship Program;
- Earmarks $10,000 in each fiscal year for the Ohio Student Education Policy Institute;
- Increases funding for the Appalachian New Economy Partnership to $1.5M
- Raises funding for the Hayes Presidential Library to $500,000;
- Earmarks $1,000,000 in each fiscal year for the STEM Public Private Partnership Program.
Tourism Support Key for House Republicans: Tourism Development Districts Created
House Republicans also made several substantial targeted economic development oriented changes. The House Republicans adopted an amendment to create Tourism Development Districts that authorizes municipal corporations and townships to designate a special district of not more than 100 contiguous acres within which a sales and use tax of up to 2%, a development fee, or an admissions tax of up to 2% may be levied to fund tourism promotion and development in that district. Bonds backed by tourism development district revenue to fund tourism promotion and development in the district can then be used to gain further revenue. Other tourism based amendments to HB 64 include:
- Earmarks 2% of beer excise tax revenue, up to $1 million annually, for grants to be made under an existing program authorizing grants for local organizing committees or local governments for a sporting event site selection group;
- Earmarks $70,000 in each fiscal year for the Ohio World War I Centennial Working Group;
- Earmarks $500,000 in each fiscal year for Lake View Cemetery to us se for maintenance of the James A. Garfield Monument;
- Earmarks $250,000 in each fiscal year for the Cincinnati Museum Center, and $250,000 in each fiscal year for the Western Reserve Historical Society;
- Earmarks $500,000 in each fiscal year for preservation of the Murphy Theatre; and
- $10M million capital appropriation to begin work on the rehabilitation of the Buckeye Lake dam plus funds a tourism campaign for Buckeye Lake.
Agriculture Industry Benefits from House Republican Changes: State Fairgrounds, Ag Society, Stark County and Warren County All Benefit from Budget Amendments
Also, House Republicans amended the bill to authorize a county with a county or independent agricultural society hosting an annual harness horse race with at least 40,000 per-day attendees to levy, subject to the approval of county voters, a lodging tax of up to 3% for up to 5 years and issue anticipation bonds and notes to pay for permanent improvements at sites where an agricultural society conducts fairs or exhibits. Also, a Stark County Regional Arts District amendment authorizes the Board of County Commissioners of a county with a population of not less than 375,000 and not greater than 390,000 to create a regional arts and culture district to promote arts, culture, and excellence within the community with an emphasis on outreach to children. Authorizes such a county, upon voter approval, to levy a cigarette tax and an alcoholic beverage tax in support of the regional arts and culture district. The rules governing such a cigarette tax or alcoholic beverage tax would be identical to those that apply to Cuyahoga County for taxes levied in support of its regional arts and culture district and sports facilities. Another amendment directed to Warren County authorizes a county with a population between 175,000 and 225,000, that has an amusement park with an average annual attendance over two million, and that levied a 3% lodging tax on December 31, 2014, to levy an additional 1% lodging tax for the purpose of constructing and maintaining county-owned sports facilities and financing efforts by the convention and visitors bureau to promote travel and tourism with respect to the sports facilities. Under continuing law, lodging tax rates are generally capped at 6% with up to 3% levied by the county and up to an additional 3% levied by the municipalities and townships located within the county. Other earmarks relevant for the ag and fairgrounds project include:
- Creation of a grant program for capital improvements for county and independent fairgrounds with 2:1 state match;
- $4.7M for the Agricultural Society Facilities Grant Program to provide grants to county agricultural societies and independent agricultural societies to support capital projects;
- A 5% increase in funding for the OARDC, Cooperative Extension and Sea Grant Programs;
- Earmarks $750,000 in fiscal year 2016 for the purchase and upgrade of infrastructure and equipment at the OSU Agricultural Technical Institute to provide distance education courses for College Credit Plus students.
Passage of the House Republican budget is expected on April 22, 2015 and additional amendments to the bill are likely to be adopted prior to its passage out of the House. Do not hesitate to contact The Montrose Group at email@example.com if you need assistance in addressing your economic development and government relations issues.