REGION — A Franklin County Common Pleas Court judge dismissed a class-action lawsuit Feb. 21 brought forward by Ohio municipalities — including the City of Lima — contesting a law that gives businesses a second option to pay their local taxes.
Of the roughly 160 municipalities represented, the lawsuit includes Lima, Van Wert, Delphos, Bluffton, St. Marys and Minster.
Local governments say the state is overreaching aspects of “home rule,” and the new law cuts the amount of taxes received by municipalities by imposing a 0.5 percent handling fee on any tax collected through the state’s secondary system.
The original impetus behind the law was to streamline tax filings by businesses operating across town and county lines.
“How can a judge disregard the 500-plus cities that are going to be affected by this in a negative way?” Van Wert Mayor Jerry Mazur said. “But that’s what the court system is for.”
Many city and village legal councils expect the filers of the lawsuit to appeal the action, and the final decision will most likely be made in the Ohio Supreme Court. Due to such, the new law will not affect tax filings in the foreseeable future due to a preliminary injunction request, which puts a freeze on laws examined in the judicial system.
Lima Law Director Tony Geiger said a similar lawsuit has also been filed in Toledo, which is also contesting the new law.
Depending on the actions of the court, the final decisions should affect tax filings no earlier than one to two years, Geiger said.
Despite the legal problems, villages and cities are amending municipal law to ensure they are in compliance with the state.
If the class-action lawsuit were to be dismissed at the highest court levels, the actual effects to municipalities remain to be seen.
Mazur said the half-percent handling fee would put a damper onto the amount of local tax shuffled through state’s hands, which would need to be made up by increasing the city’s tax base.
“Gross net profit tax, it’s a huge value. This is the first step in the state taking over all of the tax opportunity that we have,” Mazur said. “It takes up a lot of money to make up what the state takes from us.”
St. Marys Law Director Kraig Noble said the effect may be minimal depending on how businesses decide to pay their taxes.
“Our department has a good working relationship with most of the industries. They may choose to stay with our department,” Noble said.
“We’re very disappointed in the results, and I would expect the attorneys in Columbus are considering our options and would hope they find grounds to appeal the decision,” Minster Village Solicitor James Hearn Sr. said.
Reach Josh Ellerbrock at 567-242-0398.