Now the State Wants to Collect Your Local Income Taxes Too

The State of Ohio has over 540 municipalities that charge a municipal income tax.  Each can have its own rates, rules, forms, deadlines and enforcement actions.  No other state in the country allows as many taxing authorities.  The state already collects county sales taxes and school district income so the idea of centralized collection isn’t unheard of.

The business community (as represented by the Ohio Society of CPA’s) has long lobbied for a simpler system than our current one, as they claim there are high administrative costs for working with such a complicated system when they have employees in several communities.  It should be noted here that our own councilman Rich Corfman performs this very function of dealing with municipal income taxes in the various communities in our area through his job and says it’s not a problem, but our current administration is convinced otherwise.

In order to make Ohio a more business friendly state, various administration officials have been floating the idea of a centralized income tax collection system that would provide uniformity and simplicity for these businesses that have to deal with all these different municipalities.

In fact, Ohio Lieutenant Governor Mary Taylor was here in Orrville speaking to the Exchange Club this past spring.  There, she floated the idea of centralized income tax collection and made a tongue-in-cheek comment to the effect she was hoping there weren’t any elected officials there.  I was the first to speak up and said to forgive our skepticism, but these proposals don’t often bring the benefits that are touted, citing the Commercial Activities Tax as an example.  (This was another “business friendly” tax scheme where manufacturers didn’t have to pay property tax on their machinery and equipment, but instead a much broader “commercial activity” tax base across all businesses (except financial institutions) is used at a low rate.  The result has been less overall revenue with the unintended consequence of a spike in taxes for service businesses.)

The Ohio Society of CPA’s is the main force lobbying for municipal income tax reform and Governor Kasich seems to be the first one to really listen to them, ostensibly to be able to attract more businesses to the state.  On December 19^th, 2011, Orrville City Council passed a resolution stating our strong objection to the idea of Centralized Income Tax Collection as part of the package they propose, but there are other aspects as well.  (I advocated we take a stance on some of the other aspects too, but in the interests of expediency, Council opted to speak to just Centralized Income Tax Collection at this time.)

Instituting a Net Operating Loss Carry-Over Provision.  Orrville is 1 of 151 Ohio communities that doesn’t allow a business to carry over a net loss into the next year to defer their liability.  The proposed reforms would require municipalities to allow a carry-over and would reduce their income tax collections.

Standardization of Enforcement.  Every municipality has to enact laws regarding the collection and enforcement of their income tax, but their application and enforcement varies.  Orrville only recently instituted a mandatory filing rule. 

12-Day Occasional Presence Provision.  Now, you can work in a community for only 12 days before you have to file income taxes for that community.  Reforms would increase that time frame to as long as a few months. 

Every community would say their current system is superior to the changes being proposed by Ohio Society of CPA’s for reasons such as the following:

• ·         It makes for bigger government.
• ·         Municipalities would have to wait for extended periods of time to get their revenues from the state.   (Orrville collects daily now.)
• ·         Municipalities provide local service, which is far superior to speaking to someone from the State on the phone.
• ·         Last but certainly not least—the state will likely charge an administrative fee that would likely be more than it costs municipalities to administer the programs themselves.

I understand the Kasich administration wants to do everything it can to make it easier to do business in Ohio and that Ohio’s myriad income tax collection entities presents challenges for businesses.  My view is it should pursue reform that builds on the strengths of the current system instead of tearing it down and creating a new set of problems.

There are a number of options the administration can pursue that are revenue neutral, utilize the considerable investment that has already been made in income tax collection and provide superior service to Ohio citizens.

First, as mentioned in the City of Orrville’s resolution, the state can enhance its own website for this purpose, the Ohio Business Gateway.   This site has some capability now to electronically file, but is overly complicated and not considered as a viable option.  The state should improve its existing electronic solution and utilize the investment that has already been made.

Second, municipalities are represented by an association known as Ohio Municipal League.  They should be included in these discussions.  The OML contends that conversations are taking place and legislation is being drafted by the Ohio Society of CPA’s even now.  The Ohio Department of Taxation is engaged in double-speak, saying, “It’s a possibility that’s being explored,” but at the same time saying, “There’s no plan or timeline to discuss the issue…”  There is a concern it could simply be attached to another bill and without the proper legislative review and opportunity for input.

Finally, municipalities need to do their part too and acknowledge the problem that exists.  Instead of simply opposing any effort to change our outmoded system of 540 individual silos, municipalities should engage their elected representatives with suggestions for solutions that don’t draw scarce revenues away, but still streamline the process and show a willingness to partner with the administration on addressing our common issues.  Otherwise, our current course will continue and we’ll have another failed scheme that fails to deliver for Ohio citizens.

My Take on Issue 2

"I am 100% right and you are 100% wrong."  Our society is rapidly devolving into this kind of thinking, lead by the special interest groups that blast the airwaves with half-truths.  I'm on a mission to make sure ads--from both sides--that only tell half-truths don't work on us anymore, because we have learned to look at both sides and make decisions based upon the facts instead of our widely held popular notions.

Issues are much more complex now and few people understand just how far-reaching the impact is of this legislation.  Nor are we aware of the much larger agendas of the sides that have put all the money in this game.  The old adage of  "follow the money" has never been more true.

If you follow me at all on Facebook (http://facebook.com/paulvance) you know I have looked at both sides of this issue.  I have read a lot of the bill (at least the provisions that are the most publicly debated) and I have researched the claims of both sides.  I have also personally spoken with as many people who will discuss it, both for and against.  I've spoken not just with union workers, but with union representatives.  I've read emails sent out by teachers and superintendents, I've put myself on the mailing lists of both sides and read them all.  I can only ask before you blast me that you do the same as I--research both sides.

This process is not comfortable.  This issue has brought out the worst in some of the best people on the planet--legislators and public service workers.  As soon as I say where I am going to lend my support, I am saying I support some things I very much disagree with.  The side I have chosen is not 100% "right" and the other side is not "wrong."

I have friends on both sides of this issue.  I am involved in government and want to serve precisely because we face significant problems and want to add value to the process.  In my experience so far, I have found for the most part, those who serve in government to be exceptional people.  My experience has also allowed me to work with public service workers more than I had before.  The same is true here.  Public service workers care more about their jobs and take more pride in who they are working for than most.  There is no way you can say one or the other of these is right or wrong.

Let me begin with why we are here.

The Financial Situation

Our economy has gone off a cliff.  The stimulus programs of both George Bush and Barack Obama put money in the system and stopped the free fall.  It has been a hard landing but at least it has stabilized.  Ohio, though vulnerable to job losses in manufacturing, has come through better than some other states because we are at least addressing our problems.  Other states aren't and are on their way to bankruptcy.

Some make the case that we don't tax enough to provide the services we need.  We tried a tax increase in Orrville and it was defeated by a vote of 2-to-1, even though we have one of the lowest income tax rates you'll find anywhere.  The only way you can make a budget work in that environment is to control costs.

At that point, people talk about how wasteful government is and that we should be able to cut the fat from somewhere else.  I wholeheartedly agree government is wasteful.  I can quibble with our budget, but most of the dollars that are wasted are on mandates and regulations that have a good premise but lack sense in their execution.

Bottom line:  When it comes to government, management represents the taxpayer.  Employees, of course, are taxpayers as well.  But management is there to represent the best interests of the taxpayer and what is best for their community.  They are the ones who accountable for making the difficult choices in how taxpayer dollars are going to be spent and to make sure a community remains in a strong financial position.  They must be able to control their costs in order to do this.


The Role of Unions


Without the very best employees, governments stand to lose the support they have in their communities.  This is especially true of law enforcement.  I serve in local government in Orrville, Ohio, where we couldn't be more proud of the department we have.  Public service workers such as these deserve our best.  They need to be paid as much as a community can afford and be treated with the respect they deserve.

The role of unions has changed.  Originally, they started out protecting people who were forced to work in dangerous conditions and could be treated unfairly.

Now, their role is primarily to protect jobs.

Bottom line: My approach is to protect people over jobs.  This means I am more liberal in social policy than my conservative friends would like (providing unemployed workers with income support and access to basic services until they are able to find employment again), but not liberal enough to protect jobs to the point where taxes must be raised or funds borrowed simply to keep people employed.

This is my main reasoning for voting "Yes" on Issue 2.

Notice I haven't addressed the claims being made on the airwaves about voting no.  I have researched them.

"Issue 2 makes it illegal to negotiate for safe ______________".

One of the biggest is, "Issue 2 makes it illegal to negotiate for safe ______________" and you fill in the blank with safety equipment or staffing or whatever.  The actual wording in the legislation is, "It will be inappropriate to use collective bargaining to negotiate for __________________."  There is the half-truth.  Yes, you can't collectively bargain for them, but there is nothing in the legislation that says you can't have working groups or committees where management and workers can sit down and discuss issues such as staffing levels.  In fact, that is exactly the arrangement the heart hospital has where the nurse is on TV saying it would be illegal to negotiate for safe staffing levels.  The other half of the truth is it is the union who would call such common-sense cooperation "bargaining" and deem it to be "illegal."  This is the part where unions now protect jobs instead of people.


"You won't have the fire or police protection you have now."


Here in Wayne County, we already don't when it comes to Sheriff deputies--with the union system in place.  In our case, sheriff deputies with less seniority were allowed to be laid off rather than the Department making the necessary cutbacks.  This decision by union members meant jobs weren't protected and neither was public safety.  The whole thing ended up in court--jobs being protected instead of people.

And on the Vote Yes side...

"Public workers need to pay their fair share for retirement and benefits."

A lot has been made of this but the fact is a lot of public workers are already there and this doesn't have that large of an impact for them.

I know I have not addressed every point in this debate.  It devolves at this point and I think most people know the back-and-forth.  Both sides have good points.  I simply wanted to explain my view on the issues that made a difference for me.

Feel free to weigh in below.  I reserve the right to pull any comment that is not respectful and fitting for a place where people want to have an honest, open discussion.  I know everyone won't agree with me and I'll probably agree with some points you have to make.

One last thing--Governor Kasich, you've made it pretty difficult for a lot of us to support this issue simply because of how you have acted.  I have had to separate the issue from you and the ill-considered things you have said over and over again.  If this issue goes down, you can thank the fact that you have not yet learned how to think before you speak.  You are employed by us as well, and we deserved better.

More photos from the Jerry's/Runion's Fire

It is amazing to think that firefighters prevented damage to Ron's Barber Shop.

Some photos of the debris that has been removed from Jerry's and Runion's Furniture.

Here is the rear entrance to Jerry's.  I didn't go in, but Darrin Wasniewski says the seating area came through pretty well.

Several crews from Design Restoration are already at work at Runion's and a big crew is expected to be there tomorrow to do the clean up.  Runion's insurance agent, Tony Rohrer from Hummel Group was there as well, making sure everything was being taken care of.


A small group of people helping out at Runion's were providing support and there were some smiles to be had in the midst of the difficulty.  There's a certain amount of joy that people have that is there seemingly no matter the circumstances.  It's not that you are happy, it's just that this is the kind of community that will lift you up in difficult times and it makes a big difference.


Linda Runion reported someone bought a sofa and love seat today!

Jerry's Cafe & Bar/Runion's Furniture Fire

An early morning fire has caused heavy damage to the roof and interior of Jerry's Cafe & Bar in downtown Orrville, OH.  The fire was initially reported by a passerby around 4:15am.  It appeared to start at Jerry's and then spread to Runion's Furniture. 

The Orrville Fire Department and some mutual aid departments remain on the scene this morning.  While I was inside Runion's, an additional smoldering hot spot was identified, so work will be continuing there for some time.

Firefighters dug a trench in the roof of Jerry's when they arrived to let the fire escape that way.  The State Fire Marshall is currently in Jerry's and would not allow photographs at the time I was there.

The fire came out of exhaust fans on the side of the restaurant and caught the Runion's Furniture roof on fire.  Runion's has a tin ceiling with blown in insulation above, so the fire spread through the insulation.  Contrary to an earlier published report, the roof did not cave in--it was pulled down by firefighters.

There was also a rumor that Ron's Barber Shop was destroyed as well.  Thanks to the skillful work of the Orrville Fire Department and several surrounding departments providing mutual aid, Ron's suffered no damage whatsoever.  The barber shop is a wood frame building, built in 1870, and is supported by a wood timber foundation.  Ironically, the sale of the barber shop to Ron's long-time employee was being finalized this morning.

Lieutenant Jeff Lorson, Chief Information Officer for the Orrville Fire Department, shares the very latest about what is known of the fire.

Below are pictures and video of the interior of Runion's Furniture.  This is the room where the fabric samples hung on the far wall.  

The streaks you see are from insulation that continues to fall.

I talked with a number of people who couldn't say enough about the great work the fire fighters have done at this fire.

Most of the tin ceiling in this area had to come down.

This a terrible tragedy for two business who are loved not just for their products but because of the people who own them and work there.  Our thoughts and prayers go out to Jack Runion, Jerry Demlow and all those affected by these fires.  We support you and trust that you will be back and better than ever soon.

What's On My Mind Today--Cuts to Orrville's budget, unemployment, new jobs, sandwich signs and PNC bank clockwatching

After the Daily Record's press deadline last night, the Conference Committee settled on the details for the next state budget that takes effect July 1.  The final vote could come as early as tomorrow.  What's at stake for Orrville?  Our share of $865 million in cuts to local government funds as well as grant dollars we rely on for expenses like repairing our roads.  I'm sure more details will come out today and we'll probably have something more official coming out at next Tuesday's City Council meeting.

Meanwhile, Orrville has a state-mandated deadline to submit next year's budget, so we've been working on a budget without knowing what the cuts to our finding will be.  "Challenging and uncertain," is how one adminstration member termed it at our budget workshop last night.

Highlights for next year include a complete replacement of Mineral Springs street next year at an estimated cost of $1 million.  Since our entire Capital Improvements budget is only $1.5 million, Ohio Public Works Commission grant funding is essential.  Ella Street is on the slate for 2013.

Bobby Warren once again proves why he's one of the best reporters in the area by tracking unemployment trends in Wayne and Holmes County against the stimulus bill timeline in today's Daily Record.  We're seeing slight ticks downward and in my view it's too soon to see much of a correlation between the stimulus bill and our employment numbers.  There was very little spending in our area, so we get the second or third-level impacts.  (Isn't government stimulus spending just another form of trickle-down economics?)

A theme picked up in the story is the kind of job that is typically being created nowadays, best summarized by the CNC machinist.  Part machinist, part programmer--not just a button pusher, but doesn't require a college degree either.  These kinds of jobs can't be done by robots or by Chinese slaves, so we're finding a niche here for them.   Best of luck to you if you're raising a family on the wages though and union reps need not apply.  (One topic for future research is the impact of these kinds of job on our society, which virtually guarantee 2-income homes and little real savings.)

Side note:  Commissioner Scott Wiggam says businesses tell him their main competitor is the unemployment bureau.

It seems we have reached some agreement here in Orrville on a sandwich sign ordinance.  Why do we need to regulate something that isn't causing any problems?  Well, because technically you aren't even allowed to have sandwich board signs on the sidewalks as it is now.  The new ordinance up for vote next Tuesday will make all of you sign posters law abiding citizens once again.

The PNC Bank clock now has its own Facebook page, created by Clockwatcher Kristin Lorson.  As reported last night, the temperature was a very comfortable J8 degrees, which is another reason living here in The Promised Land is oh-so comfortable!

2010 Legislative Year in Review--Part 1

This is the first installment of a legislative year in review of 2010 for the City of Orrville.  I am an at-large member of City Council and it's just my take on things from where I sit.  I'm not trying to represent all of Council and there may be those who disagree with my view.  They can write their own blog or add their comments to this one.


JANUARY


The Budget


The budget pretty much sets the agenda for the year and reflects the priorities of the administration.  We had strong income tax revenues in 2009, so it was interesting to see what Mayor Handwerk's administration would want to do in 2010.  The answer?  Continue to save wherever possible.  I can't emphasize what I'm about to say enough.  This simply doesn't happen in government.  Normally governments want to spend every dime they have and then some.  Not this one.  Mayor Handwerk and the administration deserve a lot of credit for their sustained commitment to a conservative budget.


At the beginning of the year, we didn't know what would happen in state funding.  While it held strong in 2010, we're hearing now we may receive NOTHING in 2010.  That means half the money we spend on street improvements likely won't be there next year and further proves the wisdom of remaining conservative with spending in 2010.


New Trash Contract


The new year also brought a change in trash collection.  Our contract had switched from J & J Refuse to Waste Management and now we were switching back to J & J, saving residents about $2 a month.  


I had been pleased with Waste Management.  They had newer equipment than J & J at the time and I had a chance to see their impressive recycling facility firsthand.  When J & J came to us with a compelling rate this year, I shared my concerns with the administration about switching back.  The Mayor and Safety-Service Director visited the J & J facilities and assured me things were looking good there.  I took them at their word and voted for the switch.  They were right on.  J & J had indeed upgraded their equipment and have done a great job this year.


New Industry--Orrvilon


There are some votes that are more exciting than changing trash haulers, and voting on an economic incentive for Orrvilon (formerly Holtec--they even changed their name) to locate here ranks as a highlight for the year.  It's not every day a manufacturer decides to locate in your city and there is a lot of work that goes on behind the scenes to make it happen.  Mike Hedberg from the Office of Orrville Economic Development was instrumental for us.  He acted as the realtor for the building that was available, worked with the Utilities Department on making sure their considerable electrical power requirements would be met and worked with the state officials on the economic development package.


The incentive we offered Orrvilon is called a Job Creation Income Tax Credit.  The company commits to create a certain number of new jobs.  When that target is met, they can claim a portion of the income tax generated from those new jobs as a tax credit.  It's a great program as the incentive is tied to job creation targets.  The City wins because new jobs have been created and the company wins with the tax credit as a result of those new jobs.


FEBRUARY


Funds for a New Dog Park


In February we applied for a grant from the NatureWorks program to fund the development of a dog park.  That grant was eventually approved and the park is slated to get underway in the Spring of '11.


Orchard Glen Development


We also approved the street dedication and plat map for the Orchard Glen development on Hostetler Road.  This neighborhood is a version of the "rent to own" concept and provides a path to home ownership for those who would otherwise only be able to rent.  The development looks great and is proving to be an asset for the community.


MARCH


Law Director Salary Increase


March brought the first controversial topic of the year.  It had to do with a salary increase and it wouldn't be the last time Council would be divided over the topic.  The Law Director had served without any salary increase for a number of years.  He made it clear he would continue to serve without an increase but we needed to at least address the issue instead of letting it go year after year.


We tried our best to determine what Law Directors earn in comparable communities.  That task is difficult, as there are few communities of 8,500 people that have their own municipal power plant, which significantly adds to the responsibilities of the Law Director.  I made another of my famous charts from the data we were able to obtain which showed the proposed salary to be right in the middle of what Law Directors are earning.  Not everyone was convinced but there simply wasn't a perfect comparison available.  It was enough to get my support and the resolution passed.


Major Water Project


When it comes to spending money, you find that Council will spend a lot more time debating items that we are familiar with--purchasing a vehicle, setting someone's salary, etc--that in the big scheme of things are fairly low dollar items.  However, when it comes to the Utilities, the scale is so much larger you find yourself relying much more on the experience of the Utilities Director.


While there can be considerable wrangling over say, purchasing a vehicle, when the Utilities proposes spending say, $1.5 million on a new water project, how are we to know if that is a reasonable figure?  That's why the Public Utilities Board was created when Ron Amstutz was Mayor here in the 70's.  That board is broken down into committees that focus on the various areas of the utilities and we rely heavily on their recommendations.  


This year's project was to drill a new well just across the Stark County line in a different aquifer with much more output than the one we currently get our water from now.  Drilling the Stark County well wasn't as much about meeting today's needs for water, but securing a good supply of water well into the future at a cost much lower than it would be in the future.


Road Salt Contract


Another one of those items that we don't think about but is important is securing a good source for road salt.  There have been some wild fluctuations in the price of road salt.  Many communities find themselves scrambling during a hard winter and unable to get adequate supplies at a reasonable price.  In March, we secured a contract to participate with ODOT for road salt, insuring we'll have an adequate supply for the winter at a reasonable price. 


That will wrap up the first quarter of 2010.  Look for more posts as we move through the rest of the year.

The Purpose of this Blog

Back in the days of the Courier-Crescent newspaper in Orrville, OH, editor Paul L. Powell called Orrville "The Promised Land."


This blog is my attempt to remind us to live out the promise of Orrville each and every day.