Like his counterparts in other municipalities, Chuck Brinkman, fiscal officer for the Village of Genoa, foresees problems with a proposal for the state to assume collections of local income taxes.
And the village is joining forces with others to keep the state from trying to centralize collections.
Genoa council recently passed a resolution stating its objection to the state’s proposal to begin collecting tax revenue itself for all municipalities and redistributing the money back to the entities, said Village Administrator Kevin Gladden.
The tax revenue collection consolidation plan is lead by Gov. John Kasich’s administration, Tax Commissioner Joseph Testa as well as the Ohio Society of Certified Public Accountants.
That change, however, drums up a number of problems, say municipal leaders.
The chief concern is how timely the state will be in returning the funds, Gladden said. “And what about disputes in taxes? How are those going to be resolved here when the state is collecting the money?” he added.
Fiscal Officer Brinkman said the state is also calling for a 2-5 percent administrative fee for its proposed new role.
Genoa collects about $800,000 annually in tax revenue. That amounts to a possible loss of between $16,000 and $40,000.
“We can’t afford to give the state this money to do nothing,” Brinkman said.
Under the current structure, it isn’t likely Genoa and others would reduce employee rolls because of a new tax collection policy either. “There is still a lot of other work to do,” he said.
The OSCPA would like to see one set of tax rules for all municipalities, Brinkman said. “They want to be able to throw it into an envelope and send it off to one place, nice and tidy.”
The OSCPA recommended as part of its Ohio Budget Advisory Task Force Report the state look into centralizing local tax collections, possibly by piggybacking them on tax returns, to ease the burden on taxpayers operating in multiple locations.
Approximately $4 billion in local income taxes is collected annually by the state’s municipalities.
Gary Gundmundson, a spokesman for the Ohio Department of Taxation is quoted in the OSCPA website as describing the current collection system as burdensome on businesses because tax codes vary among cities and villages. That format, he said, could be a potential roadblock to attracting new business to the state.
There are more than 560 municipalities assessing an income tax in the state, according to the taxation department.
Not having daily access to local tax funds also worries Brinkman.
Right now, as tax revenues come in, fiscal officers such as Brinkman can invest them in certificates of deposit or other short-term investments. And the money is readily available.
Under the state proposal, the village would not be sure how long it would be before the money is returned, leading to possible cash flow delays, Brinkman said.
And with the state officials managing all the tax revenues, all the records would be in state departments.
“I would have no idea who is paying their taxes or not. I would not know if local businesses are paying their taxes. The state would have all the records. And if there are disputes, there is no telling how long it would take to resolve them,” Brinkman said.
“You lose money. You lose turn around time. You’re not even going to know if you got all the money you should have. They’ve got everything. They’ll be controlling everything,” he said.
Led by the Ohio Municipal League, some communities are rising to strike down this proposal before it gains any more momentum.
Some of them have even called for a performance audit of the state tax department, questioning its efficiency.
“I’d say they’re getting their soldiers ready for the fight,” Brinkman said.
In its legislative bulletin dated Nov. 18, the OML said its staff has been “frozen out” of discussions between the legislators, Testa, and the accountants’ organization.
“We thank those councils that continue to examine this radical proposal by the state and whom have expressed through resolutions their opposition to this proposal going forward,” the bulletin says.
And in a Nov. 4 letter to Testa, Ohio Auditor David Yost expresses concern the plan could increase costs and create cash flow problems for local governments.
“A delay in receiving local tax dollars could force short-term borrowing and attendant costs,” the letter says. “If the state chooses to push forward with this project, it must be cognizant of the repercussions at the local level.”
Kent Scarrett, a legislative representative for the OML, said resolutions of opposition to the proposal have been passed by municipalities state-wide.
In northwest Ohio, the city councils of Oregon, Fremont, Sylvania, Norwalk, Napoleon, and Van Wert have expressed their opposition as have councils in the villages of Walbridge, Ottawa, Holland, and Whitehouse, he said.
(News Editor Larry Limpf contributed to this story)