Sub. House Bill (H.B.) 289, passed by the Ohio House and now pending before the Senate, if enacted, will significantly change the statutory provisions for Joint Economic Development Zones (JEDZ or Zone) and would ultimately prohibit, as of January 1, 2015, the creation of new JEDZs, the renewal of existing JEDZs, and the substantial amendment of existing JEDZ contracts. H.B. 289 also places new, substantial requirements on JEDZs created or amended between the Bill’s effective date and December 31, 2014. Note, however, that this Bill will not impact Joint Economic Development Districts (JEDDs).
A JEDZ can be created through two statutory methods. The first method is the “municipal-only” method under Ohio Revised Code Section 715.69. The other method, deemed the “alternative method” and created under R.C. 715.691, allows municipalities and townships to create a JEDZ and levy an income tax in the Zone if one contracting party does not levy a municipal income tax. H.B. 289 is generally applicable to both methods of JEDZ creation, although there are a few distinctions discussed below.
Provisions Applicable After January 1, 2015
- H.B. 289 terminates the authority of municipalities and townships to create new JEDZs or renew existing JEDZs after January 1, 2015.
- The Bill also prohibits the contracting parties from substantially amending an existing JEDZ contract after the same date. The Bill defines a substantial amendment as any change to the JEDZ contract that increases the rate of income tax that may be imposed within the Zone, changes the purpose for which the income tax may be used, adds one or more contracting parties, or changes the area included within the Zone.
Provisions Applicable After the Bill’s Effective Date Through December 31, 2014
H.B. 289 also contains provisions applicable to JEDZs created or amended between the Bill’s effective date and December 31, 2014, which have lasting implications.
- During this period, any new JEDZ contract created or substantially amended must include an economic development plan for the Zone set forth within the terms of the JEDZ contract, along with a schedule for the implementation of new or expanded services, facilities or improvements in the JEDZ, or surrounding area.
- A seven-member joint economic development review council must be formed before the JEDZ contract, or substantial amendment thereto, is approved through legislative action of the contracting parties. The council will approve or disapprove the economic development plan, provide recommendations for better implementation of the plan, and evaluate the effectiveness of the JEDZ. If the council disapproves of the economic development plan, the JEDZ cannot be created. The council also prepares annual reports on the JEDZ. The county auditor of the county with the largest portion of the JEDZ territory serves as chairman of the council.
- For alternative JEDZs under R.C. 715.691, the Bill requires that 50% of the revenue from income taxes imposed by a JEDZ be dedicated to the provision of new, expanded or additional services as specified in the economic development plan.
- If the joint economic development review council determines in its annual report that the JEDZ contracting parties have not complied with the contract’s economic development plan or schedule for implementation of new, expanded or additional services, facilities or improvements, the Bill permits a private cause of action in common pleas court to terminate the municipal-only JEDZ or phase-out of the alternative JEDZ income tax.