JEDDs and JEDZs Spinning Ohio Taxpayers’ Heads

JEDDs and JEDZs Spinning Ohio Taxpayers’ Heads

“Mission creep” hazards abound in taxation across federal, state and local, and international jurisdictions.  Ohio’s Joint Economic Development Districts (JEDD) and Joint Economic Development Zones (JEDZ) illustrate such potential pitfalls. The JEDD and JEDZ are concepts Ohio put into play 20 years ago under Ohio Rev. Code § 715.69 et seq. to Ohio Rev. Code § 715.90. The objective was clear, concise, and compelling: To afford local governments an effective tool to help generate revenue and jobs.

A JEDD is an entity formed contractually, subject to state oversight, to create a tax revenue sharing arrangement between a township and a municipality without undertaking annexation. This can be an essential tool for Ohio townships, which are not authorized to collect income tax.

Two elements invite possible abuse:

  1. A JEDZ is a variant of significance because it permits townships and municipalities without common borders to divine tax revenue sharing arrangements.
  2. Also, aside from state oversight, localities can deploy a JEDD/JEDZ for any reason, and there are few limitations on how JEDD/JEDZ revenues must be used.

As often happens, economic circumstances and the political environment driving the JEDD/JEDZ legislation have changed over the years. Nowadays, local governmental entities in Ohio are not benefiting as much from state largesse as they once did.  Many Ohioans applaud the budget cuts and tax cuts introduced in the last couple of years under Gov. John Kasich and the Republican legislature.  But there has been fallout, and localities by and large feel they are paying the price under the current regime.

In this environment, will local governments in Ohio overreach in their use of JEDDs and JEDZs?  Presently, a township and noncontiguous city are negotiating to impose the city’s income tax on selected workers in the township, workers who may not reside in the township or the partnering city. Is this fair? For its part, the city’s apparent reason for this partnership is new revenue. (See The Columbus Dispatch, August 6, 2013.)

In a separate proposed deal between another noncontiguous city and township, farmers in the township are raising objections, as they see that they will be paying the lion’s share of the bill.  Township leaders want road and sewer line improvements to accommodate new business establishments anticipated.  Farmers have not been asked to weigh in on the merits – it’s up to township voters at large. (See The Columbus Dispatch, July 5, 2013.)

Of interest is how these two scenarios eventually play out and how many more JEDDs and JEDZs Ohio townships and cities will hatch going forward.


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