TAX NEWS - June 2010

Ohio Tax: Hudson, Stow, Falls consider tax zone

A proposal by three Summit County cities to join economic forces -- the first of its kind in Ohio -- is making its official rounds through the respective city councils.

The Western Reserve Joint Economic Development Zone has been under negotiation for two years, and if approved would have Hudson, Stow and Cuyahoga Falls sharing the development of the property and tax revenue from a 99-acre area off the state Route 8 Seasons Road interchange.

On Wednesday, Hudson City Council became the first of the three cities to give the pact the first of three readings required before a vote. Stow and Cuyahoga Falls councils are expected to follow suit by the end of the month.

The partnership was sought after Summa Health System and a group of local physician investors announced their intent to build a 100-bed hospital in northern Summit County.

After the three cities began individually vying for the facility, hospital officials encouraged them to work together.

In 2008, the three mayors signed a memorandum of understanding to pursue the zone, and negotiations have been under way since.

During his leadership of the Summit County Mayor's Association, Hudson Mayor William Currin was a vocal advocate of regionalism and collaboration between local governments.

Currin said he hopes the Western Reserve Joint Economic Development Zone will serve as a role model throughout the state.

"As we saw communities competing against each other, we realized we could achieve more by working together," Currin said.

Summa is still in the early stages of securing financing, so no construction date has been set, but spokesman Mike Bosko said the hospital is "on track and we are moving forward as planned."

Akron area residents may already be familiar with the concept of a joint economic development district, or JEDD, which allows for partnerships between cities and townships.

The idea, pioneered by Akron Mayor Don Plusquellic and now part of Ohio law, was intended to end contentious annexation battles by allowing cities and townships to collect and share income taxes from workers within a JEDD.

A similar partnership between cities (a joint economic development zone, or JEDZ) is far rarer. While JEDZs are not required to report to the Ohio Department of Development, the department said it only knows of four such zones, and none involving three cities.

Here are highlights of the 28-page contract that would form the Western Reserve JEDZ:

- Hudson, Stow and Cuyahoga Falls will each contribute 33 acres of "suitable" land to the zone. (That could grow in the future, especially if Boston Township joins the partnership.)

- Hudson will install and provide electric service to the Hudson and Stow properties (including the hospital, which is proposed for the Stow side of the border.) Cuyahoga Falls has a year to decide if it wants to provide electric service to its share of the zone. If not, Hudson will.

- Stow will install and provide water on the Hudson and Stow properties. Cuyahoga Falls will provide water to its own sector.

- All three cities will share the cost of sanitary sewer line construction, now under way.

- The cities have already shared the cost of improving Seasons Road. Aside from grants, each city contributed $50,000.

- The cities will split the local share of the cost of building the Seasons Road interchange, which opened in February. Stow and Hudson already paid the $3.7 million. Cuyahoga Falls will reimburse each city about $616,000.

- All three cities will contribute equally to planning, research and economic development studies for the zone, and work together to market and promote the area.

- Income tax revenue collected from the zone will be divided equally among the three cities. Stow also will share income tax collected from hospital employees working in a nearby medical office building that is not located in the zone.

- Beginning in 2014, the communities also will share real-estate revenue generated in the zone, based on the lowest millage of taxation common to all three cities. Currently, the sharable millage is 3.1 mills.

- Hudson will enact a 3 percent bed tax. This is to match taxes already levied by Stow and Cuyahoga Falls so that any hotels or motels in the zone pay the same tax regardless of which city they are in. Revenue from the tax will be shared equally.

Stow Mayor Karen Fritschel said the JEDZ "is immensely important to all three communities because the progress of the hospital project in the months ahead depends on this."

Fritschel said she expects the hospital will be a major lure for other businesses interested in supporting the hospital, something that should benefit all communities.