Ohio Public Law Update

    View Authors May 2004
    Tax Increment Finance and Special Assessments: A Good Combination?

    Special assessments have long been used as a means to finance the costs of public infrastructure projects. Another economic development tool, tax increment finance (TIF), has also been utilized by communities in recent years to finance public infrastructure projects. Some communities have even used these tools on the same project. One might ask, "Why?"

    The basic premise for special assessments is that certain parcels of real property will specially benefit from the construction of a public infrastructure project and that the owners of those parcels should pay an allocable portion of the cost of that public infrastructure project. For the owners of those parcels, this payment represents an additional cost above and beyond the real property taxes due on those parcels. TIF is a tool that can also be used to finance a public infrastructure project that directly benefits certain parcels of real property. However, a TIF is a little different from special assessments in that the owners of the parcels make payments in lieu of taxes equal to what the real property taxes would have been absent the creation of the TIF. In short, a TIF does not require the property owners to make additional payments, but a special assessment does.

    TIF and special assessments are capable of working together effectively. For example, TIF eliminates any additional payments for the property owner (beyond the payments in lieu of taxes) and allows the community to utilize payments in lieu of taxes to finance the cost of the public infrastructure project. In the event that the private project does not proceed as quickly as the public infrastructure project, the TIF may generate insufficient monies to pay the costs of the public infrastructure project. However, if a community has implemented a TIF/special assessment combination, the special assessments can be collected in the early years until the private project develops and starts to generate sufficient payments in lieu of taxes to cover the costs of the public infrastructure project.

    Clearly, the combination of TIF and special assessments can be very effective in facilitating the development of partnerships between the public and private sectors. As a word of caution, this partnership requires thoughtful analysis in developing the structure and preparing the legal documentation to implement these tools.

    Recent Legislation of Interest

    Update to Contract Certification - Senate Bill 189

    Last issue, we reported on House Bill 95, which included contract certification requirements under Revised Code Section 9.24. Since then the Attorney General has issued an opinion (Opinion No. 2004-14) answering certain questions regarding those requirements raised by the State Auditor and the Ohio legislature has passed a Bill (Senate Bill 189 - scheduled to take effect June 29, 2004) which amends and clarifies those requirements. Attorney General Opinion No. 2004-014, issued on April 15, 2004, provides that Section 9.24 does not apply to contracts funded with federal funds that the State receives and passes through to political subdivisions. The Bill also makes this clarification. The Opinion further provides that a contract is subject to Section 9.24 only if it is in writing and awarded pursuant to a formal competitive contracting procedure, including competitive bidding, requests for proposals or invitations to bid.

    Senate Bill 189 permits state agencies and political subdivisions to independently verify that a contractor with whom they are about to contract has no unresolved finding for recovery, in lieu of utilizing a database on the State Auditor's website as currently required under Revised Code Section 9.24. The Bill identifies companies or agreements to which the contract prohibitions of Revised Code Section 9.24 do not apply, including bonding companies or companies authorized to transact the business of insurance in the State, subject to certain conditions. The Bill provides that Revised Code Section 9.24 applies only to those contracts for goods, services, or construction estimated to exceed $25,000, or to any contract if the aggregate dollar amount of contracts entered into with that contractor in the preceding fiscal year exceeds $50,000. The Bill also exempts employment contracts from its provisions.

    Compensation for Tax Incentives - Senate Bill 82

    Effective February 12, 2004, this Bill, among other things, expressly authorizes compensation agreements under Revised Code Section 5709.82 related to tax abatement and tax increment financing projects to be entered into with taxing districts other than school districts, provided that the payment to the school districts and each taxing district is the same percentage of the tax revenue foregone. Either a school district or the other taxing district may expressly consent to receive a smaller percentage.

    Recent Decisions of Interest

    A property tax exemption granted under R.C. 5709.87(C) is not limited solely to an increase in value of portion of property subject to environmental remediation. The exemption is applicable to the increase in the assessed value of land constituting the property described in certification, and the increase in assessed value of the improvements, buildings, fixtures and structures situated on that land. Columbus City School Dist. Bd. of Edn. v. Wilkins, 101 Ohio St. 3d 112.

    A lawsuit filed in state court against public officials in their individual capacities is barred by res judicata, where the lawsuit is filed and decided in federal court against the same public officials in their official capacities for the same conduct performed in their official roles. Kirkhart v. Keiper, 101 Ohio St. 3d 377.

    Official records are sealed by a court pursuant to R.C. 2953.52, after a not guilty finding or dismissal of complaint does not violate the public's constitutional right of access to public records. State ex rel. Cincinnati Enquirer v. Winkler, 101 Ohio St. 3d 382.

    A county is authorized by R.C. Chapter 165 to issue debt for contribution to a project for a private corporation without requiring that such private corporation make payments to fully cover debt service on that debt and county may pledge non-tax revenues of the county for payment of such debt service as long as such non-tax revenues are not restricted to other uses. 2004 Op. Att'y. Gen. No. 2004-005.

    The public records laws require a county recorder to make public records maintained in that office available for inspection, without charge, to members of the public, including those who bring their own equipment (such as a digital camera) to make copies of the records they inspect; a county recorder may adopt reasonable rules governing the use of such copying equipment. 2004 Op. Att'y. Gen. No. 2004-011.

    A county may receive from the Ohio Department of Development monies provided through the federal Small Cities Community Development Block Grant program and lend those monies to private businesses for purposes of economic development. 2004 Op. Att'y. Gen. No. 2004-016.

    In Bulletin 2004-002, the State Auditor issued additional guidance on the question of which particular county offices must have policies on expenditures for meals, refreshments, coffee and other amenities, and also which county offices must have written travel policies. The Auditor has deemed expenditures on alcohol to be, by definition, without a proper public purpose and therefore in violation of law. She has announced her intention to issue findings against any public entities that expend any public monies for alcohol.