Youngstown Daily Legal News

Proposal could allow TIF tax opt-out

KEITH ARNOLD
Special to the Legal News
Published: October 7, 2016

Ohio Senators seated on the Ways and Means Committee may have the chance to weigh in on a House measure that would allow some property owners to opt out of a proposed tax increment financing, or TIF, incentive district.

Subsequent to the House of Representatives' passage of House Bill 12 last spring, the bill last week was referred to the Senate committee for further consideration.

HB 12 would amend the requirement in current law that political subdivisions proposing TIF incentive districts must provide notice to the owner of each parcel within the proposed incentive districts, before adopting the TIF ordinance or resolution.

Additionally, an owner of real property located in a proposed TIF district, whose entire parcel is not within the project's overlay, may exclude the property from the district by submitting a written response that conforms to any content requirements included in the notice.

A TIF generally creates funding for public or private projects by borrowing against the future increase in the property-tax revenues.

The effect is achieved via service payments from property owners, in lieu of, and equal in amount to, taxes that would otherwise be due on a portion of the value of improvements to that property for a specified period of years.

Bill sponsor Rep. Jim Butler, R-Dayton, learned from constituents some possibilities for improvement of the proverbial win-win situation a TIF incentive district often promises.

"If a property owner feels that a TIF incentive district will be beneficial to them, great, they can continue to include their properties in that TIF district," Butler said during sponsor testimony. "This bill simply allows property owners the freedom to choose the course of action best suited to their unique needs.

"If some property owners think using parcel TIFs will be more beneficial than being included in a district TIF, House Bill 12 gives them the ability to petition to exclude their property. Under current law, they have no such ability."

The notice to be sent to all owners of real property in the proposed district, per the bill, must include a map of the proposed district with an overlay defined in the bill as square or rectangular and not more than 300 acres.

Butler ticked off three reasons for the proposed change.

"One. Being included in a TIF incentive district disallows property owners from using parcel TIFs, which are far more common, until the original bonds from the TIF incentive district are paid off, which can take up to 30 years in some cases," he began. "Two, by being included in a TIF incentive district without having any say in the matter, it is possible that situations could arise where one property owner within the district reaps more of the benefits of an infrastructure improvement project than a property owner a quarter mile down the road does. If these two properties are owned by competing businesses, it is entirely possible that some property owners end up funding their competitors indirectly.

"Lastly and importantly, it should be noted that just because House Bill 12 gives property owners the ability to opt out of a TIF incentive district, there is nothing in it that says they have to do so."

Those who choose to opt out of a proposed TIF district would pay taxes rather than service payments on the value of any improvements to their properties, HB 12 proposes.

Alternatively, improvements to a parcel excluded from a TIF district under the procedure in the bill could be exempted from taxation, with service payments required instead, as part of a parcel or project TIF.

Butler, who sponsored the bill with fellow Republican Rep. Tony Burkley of Payne, explained that the intent of the bill is to ensure that property rights are protected.

"Because if a property gets included in a TIF incentive district, the owner of that property is not eligible for a parcel TIF - parcel TIFs are far more common and provide direct benefits to specific properties rather than entire districts," the lawmaker said. "My intent is to prevent property owners from unfairly being included in a TIF incentive district where the infrastructure improvement projects will not benefit their properties."

According to Ohio Legislative Service Commission analysis of the measure, the opt-out option may result in additional tax payments to units of local government, equal in amount to the service payments that would be received otherwise.

Alternatively, the effect may result in service payments for parcel or project TIFs that would otherwise be made as part of TIF districts.

Fellow Republican Reps. Niraj Antani of Miamisburg and Robert Sprague of Findlay have signed on as bill cosponsors.

A hearing before Ways and Means had not been scheduled as of publication.

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