Ohio Public Law Update

    View Authors Winter 2006

    TEL Constitutional Amendment to Appear on November Ballot

    Initiative petitions containing a sufficient number of signatures have been submitted to place the so-called "tax and expenditure limitation" (TEL) amendment to the Ohio Constitution on the November 2006 general election ballot. As proposed, that amendment would:

    1. Require prior voter approval for (a) State or local subdivision expenditure increases beyond certain specified limits (generally the greater of 3.5% or the sum of the rates of inflation and population growth, with additional adjustments also to be made for local subdivision land annexations), and (b) increases in or the creation of new local subdivision taxes;
    2. Require that at the end of each fiscal year the sum of all unencumbered moneys in the State general fund and 10% of the unencumbered moneys in all State non-general revenue funds be appropriated (a) one-half for refunds to taxpayers and (b) one-half to a State budget reserve fund created by the amendment, with provision for further tax refunds of any moneys in that fund that exceed 15% of State expenditures in the preceding fiscal year;
    3. Require an amount not less than 5% of the State expenditures for the prior fiscal year be appropriated to a State local government fund created in the amendment for distribution to local governments; and
    4. Prohibit the State from requiring political subdivision compliance with unfunded mandates.

    The proposed amendment provides for limited "emergency" exceptions to the prior voter approval requirements and for enforcement of its provisions through taxpayer lawsuits.

    Assisting Housing Development in Ohio

    Article VIII, Section 16 of the Ohio Constitution declares it to be a public purpose "to enhance the availability of adequate housing in the state and to improve the economic well-being and general well-being of the people of the state," and to carry out that public purpose, political subdivisions are empowered to spend public moneys (including through the issuance of bonds and making grants, loans or guaranties of loans) to assist in the "acquisition, financing, construction, leasing, rehabilitation, remodeling, improvement, or equipping of publicly or privately owned housing." Note that this power granted to political subdivisions by Article VIII, Section 16 does not require that the housing be made available to or limited to any particular income class; thus, the tools used and incentives provided pursuant to Article VIII, Section 16 may be applied to achieve the goal of providing adequate market rate housing or affordable housing in a community.

    Loan Programs and Debt Issuance

    The housing powers granted to political subdivisions under Article VIII, Section 16 of the Constitution are quite broad. For example, unlike the economic development powers found under Article VIII, Section 13, there is no prohibition on the use or pledge of moneys raised by taxation to provide housing assistance, and political subdivisions can use or pledge moneys raised by taxation, including the issuance of general obligation bonds to provide housing assistance to private developers. Note, however, that if a political subdivision intends to issue general obligation bonds or otherwise use moneys raised by taxation for housing, it must form a Housing Advisory Board pursuant to Chapter 176 of the Revised Code and develop a comprehensive housing plan for the development and maintenance of affordable housing.

    In addition to general obligation bonds, political subdivisions have the authority to issue revenue bonds to provide housing assistance in the form of loans, loan subsidies or grants. These can take the form of "conduit bonds," in which the political subdivision issues bonds and lends the money to a private developer to construct the housing, and the developer assumes the obligation to repay the bonds, or revenue obligations, in which the political subdivision agrees to make available a specific revenue stream to repay the debt. One example of this latter type of debt that has been utilized by a number of communities in Ohio (including the cities of Cleveland, Columbus and Toledo and Lucas County) is participation in a down payment assistance loan program. One such program is offered by Fannie Mae, whereby Fannie Mae makes funds available to the political subdivision by purchasing a taxable special obligation of the subdivision, and the subdivision uses the proceeds to provide down payment assistance to families whose incomes meet certain guidelines.

    Tax Abatement and Tax Increment Financing

    Two programs exist under State law that allow political subdivisions to grant residential property tax abatement for the construction of new housing or improvement of existing housing. One, the Community Reinvestment Area (CRA) program, enables municipalities (or counties, for unincorporated areas within the county) to identify areas within their boundaries that qualify as community reinvestment areas under Ohio Revised Code §§ 3735.65 - 3735.70, and permits real property tax abatement to individuals who construct or rehabilitate homes located within the CRA. For an area to qualify as a CRA, there must be a finding that "housing facilities or structures of historical significance are located in this area and new housing construction and repair of existing facilities or structures are discouraged." There are limitations on the duration of the abatement (i.e., not more than 15 years for new construction) and additional requirements, including notice and compensation provisions for the local schools, minimum expenditure requirements, compliance monitoring requirements and the formation of a "housing council."

    In addition to the CRA program, Revised Code Chapter 1728 contains a tax abatement program for the redevelopment of "blighted areas" located in an "impacted city." This program can be useful to urban communities; however, the criteria for being an "impacted city" are more stringent than those required to establish a CRA under the CRA program, and the improvements under the Chapter 1728 program must be owned and made by a "community urban redevelopment corporation" established under Chapter 1728. The benefit to this program over the CRA program is that the exemption for single family, two family or three family residential improvements is 30 years (20 years for other improvements), rather than the 10 or 15 year exemption under the CRA program.

    In addition to tax abatement, the Ohio Revised Code contains a number of potentially applicable tax increment financing (TIF) programs that could be used to provide incentives to developers or homeowners. While the CRA tax abatement program can be effectively utilized by individual homeowners or developers interested in building or improving a single home, the TIF programs will be of greater utility in situations in which a community or a developer is making improvements to an entire development or neighborhood. Many of the TIF programs contain requirements that are more stringent or cumbersome than the CRA program, including a number of new requirements that became effective January 1, 2006. However, in certain circumstances, TIF programs can be used to provide additional capital for projects, or to provide a dedicated revenue stream to fund public improvements that support a particular housing development project.

    Other Programs

    Linked deposit programs can be used to help reduce interest costs to homeowners who borrow money to make improvements to their homes. Under such a program, participating lenders make loans available to individuals who wish to make improvements to their homes and the municipality or county purchases a certificate of deposit from the participating lending institution and receives a lower rate of interest than might otherwise be offered. In return for paying the political subdivision a lower rate of interest on the certificate of deposit, the lending institution agrees to reduce the interest rate on the "linked" loan made to the homeowner. Thus, use of government funds through the purchase of certificates of deposit will allow for the availability of reduced interest loans to homeowners.

    In addition to the programs described above that can be administered by a political subdivision, the Ohio Housing Finance Agency and the United States Department of Housing and Urban Development both have several programs available to homeowners and home buyers that can be used to carry out the objective of increasing both single family and multifamily housing opportunities in communities, including loan and grant programs.

    Recent Legislation of Interest

    Senate Bill 82 – This Bill, which becomes effective May 1, 2006, prohibits political subdivisions from requiring permanent full-time employees to reside in any specific area as a condition of employment. To ensure adequate response times by certain employees to emergencies or disasters, political subdivisions are permitted to require that employees live in the same or an adjacent county in Ohio.

    Senate Bill 236 – This Bill, which became effective January 4, 2006, implements the portions of the constitutional amendment passed by the voters at the November 8, 2005 election relating to the issuance of State obligations to support the development of sites and facilities and research and development projects. The Bill creates the Job Ready Site Program, under which the Department of Development provides grants for eligible commercial, industrial or manufacturing sites and facilities. At least two-thirds of the funding will be awarded pursuant to an annual competitive process, and the remainder will be awarded at the discretion of the Director of Development. Eligible applicants include political subdivisions. The Bill further authorizes the Third Frontier Commission to make grants, loans or guarantees to support research and development projects under a competitive process.

    House Bill 3 – This Bill is a significant election reform act. Among other things, the Bill reduces the number of times notices of election must be published to two, and requires notices of election to be posted to a website if a website is maintained by the board of elections. The Bill also permits petitions relating to elections to be signed by an attorney-in-fact if a registered voter is unable to sign by reason of a disability. Voters must bring a valid photo identification or other designated proof of identification to the polling place or vote by provisional ballot. Other changes relate to the State initiative and referendum process, the process for registering voters and the mechanics of voting. The provisions relating to voter identification, website posting and attorney-in-fact become effective June 1, 2006, although other provisions take effect at varying times, not sooner than May 2, 2006.

    Recent Decisions of Interest

    Ordinance approving contract for construction of public improvements for development as retail superstore is administrative action not subject to initiative or referendum. State ex rel. Oberlin Citizens for Responsible Dev. v. Talarico, 106 Ohio State 3d 481

    R.C. 1309.406(A) does not apply to payments made by an accountant debtor that is a governmental unit pursuant to R.C. 1309.109(D)(14). MP Star Financial, Inc. v. Cleveland State Univ., 107 Ohio State 3d 176

    Landowners have property interest in the groundwater underlying their land and governmental interference with that right can constitute taking. McNamara v. Rittman, 107 Ohio State 3d 243

    Property owner failed to demonstrate, beyond fair debate, that two acre minimum residential lot size zoning requirement, as applied to proposed use, was arbitrary and unreasonable or substantially unrelated to the public health, safety, morals or general welfare of the community. Jaylin Investments, Inc. v. Moreland Hills, 107 Ohio State 3d 339

    Tax commissioner had no authority to consider real property tax exemption application where application was not accompanied by county treasurer's certificate showing that all nonremittable taxes, interest and penalties had been paid in full to date of application or that applicant had entered valid undertaking under R.C. 323.31(A) to pay all delinquent nonremittable taxes, interest and penalties charged against the property. Strongsville Bd. of Edn. v. Wilkins, 108 Ohio State 3d 115

    Trial court erred in dismissing, for failure to state a claim pursuant to Civ. R. 12(B)(6), complaint of union and city employees for value of stock paid over to employer-city as putative health care policy owner by demutualizing health insurer that provided coverage to employees, since plaintiffs alleged that insurer historically provided in its contracts or bylaws that employees owned the policy. State ex rel. Teamsters Local Union No. 637 v. Marietta, 4th District Court of Appeals, Case No. 05CA8, December 28, 2005, 2005-Ohio-7108

    City's failure to define purpose of excess appropriation in ordinance was fatal to appropriation. Springfield v. Gross, 164 Ohio App. 3d 1 (Ohio App. 2nd Dist.)

    Revenue from a levy under R.C. 5705.24 may be used to fund a "Child Victim" Detective's position within the office of the county sheriff if it is reasonably determined that funding for that position is necessary for the support of children's services and the care and placement of children and comes within the purposes set forth in the resolution and ballot language by which the levy was adopted. 2005 Op. Att'y General No. 2005-044

    Social security numbers contained in a court's civil case files are not public records for purposes of R.C. 149.43 and prior to releasing information from a court's civil case files, the clerk of court has a duty to redact social security numbers included in those files. 2005 Op. Att'y General No. 2005-047

    Board of county commissioners has no authority to transfer title to county property to its office of economic development or to a nonprofit corporation operating that office for the purpose of the transferee's selling the property, without competitive bidding or public auction, to a buyer previously selected by the county commissioners at a price agreed upon by the buyer and the county commissioners, even if the transferee remits to the county commissioners the purchase price paid by the buyer. 2006 Op. Att'y General No. 2006-001