The Ohio legislature last week gave final approval to a bill that would give school districts a long-sought voice in local decisions to grant property-tax exemptions to attract business development.
Lobbying by business and local governments succeeded in killing, however, a provision in the original version of the bill that would have given school officials veto power over the granting of new exemptions.
Tax abatement has long been a point of contention between school boards and local units of government in the Buckeye State. County and city officials argue that the property-tax breaks spur growth.
Many educators, on the other hand, complain that the exemptions deprive schools of needed property-tax revenues.
As passed by the House last week after unanimous passage by the Senate in mid-November, the bill requires city and county governments at least to solicit comment from affected school districts before granting tax exemptions. It also formally authorizes the local jurisdictions to negotiate with school districts to provide compensation for revenue lost when exemptions are given, as some have already been doing.
Opponents of the veto provision in the original bill had warned that having the school district involved as a powerful third player would hopelessly mire abatement deals and discourage firms from moving to the state.
Some critics of tax abatements, however, argued that the measure ultimately agreed to by lawmakers was far too weak. The compromise bill “isn’t worth the powder to blow it up,” said Paul Yacobian, treasurer of the Cleveland public schools.
“The thing is so watered-down that it is a worthless piece of paper,” Mr. Yacobian added. “The school districts have no say, other than that they can squawk.”
Cleveland schools are estimated to lose about $140 million in potential revenue over the next 20 years as a result of property-tax abatements.
The sponsor of the bill, Representative John V. Bara, a Democrat from Elyria, said the advisory powers in the final version of the bill are “the best we can get this year.”
Ohio law permits local political subdivisions to grant property-tax exemptions under six separate programs designed to spur urban renewal, new business investment, and other growth.
Cities and counties are not required to notify the affected school districts when they enter into abatement agreements, however.
Several district officials interviewed last week said tax abatements in their areas had been given com8pletely without their advice or consent, even though districts on average get about half of their revenue from local property taxes.
“They lose potential tax money, but they aren’t even in the agreement,” Representative Bara said.
But while many school boards have asked for a greater voice in exemption decisions, the education community in the state has not been united on the abatement issue.
“It is hard to get an agreement by our members about what role we should take,” said Douglas T. Putnam, deputy director of legislative services for the Ohio School Boards Association.
The o.s.b.a. has taken the position that school boards should have veto power or at least a vote in the granting of exemptions. Many of the organization’s members, however, “don’t want school districts to be involved in the economic-development process,” Mr. Putnam said.
The potential costs and benefits of abatements often are difficult for school officials to discern, observed Joseph W. Rutherford, administrative assistant for legislative services to the Toledo schools superintendent.
Mr. Rutherford pointed to an official estimate showing that his district has lost $1.2 million a year in potential revenue as a result of tax abatements on new development. But that figure assumes the development would have taken place without abatement, he explained, and also fails to take into account tax revenues resulting from an improved economic climate and new development spun off from the projects.
Partly as a result of differences in their views, districts currently vary widely in terms of the roles in abatement decisions they have been granted voluntarily by cities and counties.
In some parts of the state, overzealous city officials have alienated the education community by allowing them to be “shut out” by developers in abatement discussions, acknowledged H. Guy Ford, director of economic development for the Ohio Chamber of Commerce.
On the other end of the spectrum, the Columbus City Council requires developers to get school-board endorsement of abatement requests. Robert Barrow, supervisor of government relations for the Columbus schools, said his board assesses the economic impact of abatements and to date has not denied any major abatements that would create a substantial number of jobs.
Officials in some districts say privately that they do not want to be exposed to the controversy frequently surrounding abatement decisions.
The Columbus board’s support of most exemptions “has transferred some of the political heat of abatement opponents toward the board of education and away from the city council,” Mr. Barrow observed.
Mr. Bara said he will introduce legislation next year that would allow cities and counties to abate only that portion of property taxes that pays city and county expenses.
In the meantime, several districts have been seeking to recoup losses from abatements by asking their local governments to reimburse them with income-tax revenues or added services, or by moving to levy special income taxes for schools.
