Estate Tax Issue

From the Springfield Township Board of Trustees

Written on 4/14/ 2011

View The Trustee Joseph Honerlaw's Testimony At The Bottom Of This Page

The Township Board of Trustees and staff have been meeting with our State Legislators in the House and Senate and with other local government officials in response to two proposed bills that will greatly reduce Township revenue and will impact the ability to maintain many important services. HB 3 and its companion bill, SB 90 are proposals to repeal the State’s Estate Tax. Sub. HB 153 is the Governor’s Budget bill. If enacted by the legislature, Springfield Township would lose approximately $2.1 million dollars annually, or roughly half of the revenue for the General Fund by 2013. It is imperative that the Board take aggressive steps to protect the residents that we were elected to represent. The loss of this revenue will directly impact on residents due to lost services or the need to increase local taxes.

The Ohio Estate Tax has been an integral component of the state Tax structure for financing local governments since 1893. The estate tax is levied against the value of a resident decedent’s gross estate less deductions and exemptions. Ohio is one of 20 states with an estate tax. Ohio does not collect tax on an estate unless its net taxable value is greater than $338,333.Only approximately 7,000 (6%) of 110,000 Ohio estates were subject to the tax in 2009.Local governments such as Springfield Township depend on the estate tax as an important source of revenue since 80% of estate tax revenues collected by the state are distributed back to the community where the deceased individual lived. Approximately, $1.5 million, or 40% of the township’s general fund revenue was derived from the estate tax in 2010. Services such as road repair, snow removal, parks and recreation, community events, senior services, housing code enforcement and economic development programs and investments are funded in part with estate tax revenue.

The Board addressed this issue at our April 12th meeting. As much as we do not like the estate tax and don’t like additional taxes, the repeal is going to have a very negative impact on local governments and on the services we provide to our citizens. When you couple this with the Governor’s budget proposal to reduce the Local Government Fund by 50% over the next two years and eliminate reimbursements that the Township receives for the Tangible Personal Property Tax and other public utility payments, this will amount to over $2 million dollars a year in lost revenue to Springfield Township. This would result in the need for a 2.5 to 3 mill levy just to replace this revenue. We do not believe our residents can sustain that kind of increase, especially in light of future police, fire and road issues that will be needed.  

Township Trustee Joe Honerlaw has testified twice before both the House and Senate Ways and Means Committees. Mr. Honerlaw addressed not only the damage that will be caused to Springfield Township, but also to the State Government and economy. He explained the collaborative and efficiency projects that the Township has undertaking in the last 10-15 years to reduce cost and improve intergovernmental cooperation and service levels.His full testimony can be read below. In summary, the Board believes it is very poor policy to eliminate a large source of income without conducting a complete and comprehensive review of the negative impacts and reform of the entire Ohio Tax Code. Residents who would like to find out additional information about this issue may contact Township offices at 522-1410.Additionally, if you would like to discuss this issue with your State Legislators their contact information can be found at http://www.house.state.oh.us/    

Trustee Joe Honerlaw's Testimony:

Written testimony of Joseph Honerlaw, Springfield Township Trustee before the Senate Ways and Means and Economic Development Committee, April 7, 2011. 

Good morning Chairman Schaffer and Honorable Members of the Senate Ways and Means and Economic Development Committee.

My name is Joe Honerlaw and I am a Township Trustee for Springfield Township, Hamilton County, Ohio. I have held this office since 1996.

I am in a unique position to be testifying before you on this bill. I am a fiscally conservative Republican who is from a farming family that has farmed continuously for over one hundred years in Ohio.I am also an attorney who manages my own practice, a practice that focuses heavily on estate planning.So needless to say, I certainly understand this issue well from a personal perspective.

Yet despite the personal feelings I may have about the Estate Tax, it is in my capacity as Township Trustee that I am before you today to express my opposition to SB 90 in its current form.

This opposition is due to the disproportionate correlation that exists between the need or benefits created by the proposed repeal and enormous damage and harm that such repeal will cause.The damage that I would like to address is not only to that of Springfield Township, but also to other local governments, the State government, the State’s economy and to the overwhelming majority of the residents of the State of Ohio.

I believe the repeal of the Estate Tax will actually lead to higher local taxes or less critical services which will result in less desirable communities for us all to live in.

Springfield Township is a first ring suburb in the Greater Cincinnati area, consisting of approximately 16 ½ square miles and has nearly 40,000 residents. The Township is a Home-rule, full service provider of Police, Fire/EMS, Roads, Parks, Zoning and Senior and Community Services to its residents.

In 2010, the estate tax represented 35%, or about $1.5 million of our annual general fund revenue. During the last ten years, the Township has averaged this amount and has, only once, received less than $ 1 million.These dollars have been used to fund infrastructure improvements, snow removal services, parks and recreation programs and capital improvements, housing and property code enforcement, senior services, general obligation debt repayment and the purchase of emergency service equipment.The continued success of our community is absolutely reliant upon the retention of LGF and Estate Tax at or very near current levels. The Governor’s budget proposes a reduction to LGF of 50% over the next two years meaning the loss of $250,000 already.

Because we are predominately a bedroom community, Springfield Township residents have already anted up and taxed themselves 21.61 outside mills for Police, Fire/EMS, and Road Services.This coupled with 1.19 inside mills for the Township and another 87.9 mills for School Taxes and 21.4 mills for County Services makes Springfield Township one of the most heavily property taxed communities in the county and possibly the State.

Simply put, raising property taxes to offset the potential cuts to the Estate Tax is not an option. Our residents have supported many of the issues put before them by the Township during the past 20 years, but have spoken loudly that they can afford no more.

Cutting services is not a viable option either, because the demand for these basic services will not be reduced and many of the eleven neighboring jurisdictions that border the Township, with whom we currently partner with, have similar financial constraints themselves.The Township already achieves high levels of departmental efficiency and economies of scale due to our outcome based performance budget system and our rich history of intergovernmental cooperation.

Regional cooperation agreements with other local governments (counties, cites, villages, townships, school districts and special purpose organizations) exist in every department of our Township and have become a necessity for economic survival, even under current funding levels, due to our limited legislative authority to raise revenues.

The Township also contracts with the Village of Greenhills and the City of Forest Park on a yearly basis to provide Fire and Emergency Medical Services to certain areas of the Township where response times would be otherwise unacceptable.

The Township serves as the administrating agency of DART, a street level drug abuse resistance team, that partners 13 southwestern Ohio police agencies together to combat suburban drug trafficking problems that are not covered by state and federal agencies. The Police Department also participates with 19 other southwestern Ohio police agencies in the purchasing of equipment and software for a Judgmental Use of Force (JUSF) Firearms Training Simulator.In addition, our Police Department also provides School Resource Officers to two different school districts located in the Township through cooperative agreements with the Mt. Healthy and Finneytown Local School Districts.

Springfield Township was part of an agreement between the Hamilton County Engineers Office, City of Forest Park and Colerain Township to jointly fund the engineering for improvements to SR 127 and worked cooperatively to secure funding for the construction of this important project.

The Township is also a member of the Center for Local Government. The Center is a non-profit consortium of 51 local governments (35 municipalities, 14 townships, 1 County and Fire District) in southwest Ohio.The mission of the Center is to improve public service delivery among member jurisdictions through improved information exchange, cost reductions, shared resources, interjurisdictional collaboration, and new approaches to capital and skill acquisitions.

The Township has managed its risks and reduced its costs for liability and property insurance through its membership in the Ohio Plan, a local government risk management insurance pool, comprised of over 700 local government jurisdictions throughout the State of Ohio.The Ohio Plan was created in the late 1980’s when many governments could not get insurance from private markets.

I have cited these cooperative agreements as just a few examples of some of the unique ways that Springfield Township has improved service while reducing costs.They exemplify the type of local government cooperation that already exists and takes place throughout Hamilton County.

Springfield Township has managed to be successful because of our ability to cooperate with our neighbors and our ability to effectively manage our resources to provide high quality services to our residents. A reduction to our already stretched existing revenue base will undo many of the successful challenges we have met as a community and severely damage our ability to meet the demands of the future head on.

Another aspect that I would like to discuss is the negative impact the bill will cause at the State level and to other local governments.

This bill does nothing to improve the State’s budget woes.To the contrary, it adds approximately $66 million dollars to an $8 billion deficit. So rather than providing some relief and help by filling the enormous hole we have, it digs it even deeper.

You have heard proponent testimony claim that the repeal of the estate tax will allow business to grow, add jobs, and how the repeal will allow the State to retain its wealthy retirement age residents.I believe that the data on this is sketchy at best and that the converse may actually take place with regard to business growth and job creation.

Eliminating over $300 million dollars currently received by already cash strapped local governments from the estate tax will cause immediate direct and indirect job losses.Many local governments will have to lay off employees who provide critical safety and public services.Others will be forced to cut back on quality of life recreational, park and senior services, making our communities less desirable places to live.And still others will be eliminating important capital improvement projects that are necessary to replace aging infrastructure and public facilities.Not only will the public value that these projects bring be lost, but so too will the thousands of private sector jobs that are required to build them, such as the engineers, architects, planners and construction workers. I believe the negative trickle-down effect of this bill on the State’s economy has been greatly underestimated, especially in the short term.

As for retaining our wealthy residents who are moving out of state to supposedly avoid the estate tax -- how is it then that the estate tax currently generates nearly $400 million of revenue per year? Those that are leaving are doing so far more to avoid the income tax and the cold Ohio weather, rather than the estate tax. After all, Michigan does not have an estate tax, but our wealthy retirees are not moving there and how well is their economy doing without an estate tax?

Our State is obviously facing unprecedented financial challenges and we, as elected officials at the state and local government level, have an enormous task ahead of us.Eliminating the estate tax at this time is not part of the solution for the residents of our State. This type of action will only serve to shift the problem and place the burden on local governments where our residents live and businesses exist.

In an era where local governments continue to lose greater control of their own destiny through continual state and federal mandates, further reducing their already limited revenues would be irresponsible and potentially disastrous. I believe that this is exactly the wrong time to repeal the estate tax. Such repeal should only be considered as part of a comprehensive review and reform of Ohio’s tax code.

As a Township Trustee, I see the difficult and negative impacts that the repeal of the Estate Tax will have:it will mean that your taxes are going to up locally or your services are going to be seriously reduced.Either way your community will become a less desirable place to live.

Thank you very much for your time and attention today. I am happy to answer any questions you may have.