Local Government Development Agreements: Are They Always About Development?

Ohio allows townships to negotiate agreements with other townships or municipalities to facilitate economic development in the township through a joint economic development district (JEDD) or joint economic development zone (JEDZ). But, the character of the township territory in the JEDD/ JEDZ fundamentally changes because the businesses, including employees, become subject to a municipal income tax on their business profits and wages as a part of the JEDD/JEDZ.

While there are some concerns about JEDDs, the real issue is JEDZs. There is a fair process in creating JEDDs where affected businesses have an opportunity to voice objections to having a local income tax imposed upon them. However, no process exists for the creation of JEDZs; a township can agree with municipalities to create a JEDZ without input from affected businesses.

We’ve seen a recent trend where townships and municipalities band together to create a JEDZ at least partially to raise revenue for local government coffers rather than to spur economic development. In Pickaway, Delaware, Licking, and Hamilton counties there were attempts to form JEDZs by “drawing in” major employers even though they objected to paying a local income tax and the required economic development purpose of the JEDZ was unapparent. And, the answer is not a vote on the proposed JEDZ, as some have suggested. It wouldn’t be difficult to gain voter approval for revenue from a new income tax levied elsewhere and paid by parties other than the voters. It’s a great deal for the township and the municipality that “administers” the new JEDZ tax for a fee, but clearly not for the affected businesses and employees.

What was cooperative economic development that benefitted local governments and businesses is now perceived as a tool that has been abused by some local governments and thus needs to be reined in. Fortunately, House Bill 289, which passed the House and is currently pending in the Senate, addresses this abuse. It balances the concerns of businesses about becoming subject to municipal income taxes they object to and local communities seeking legitimate economic development.

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