Akron is awaiting state approval for nearly $4 million in taxes for economic development projects.
Three of the 16 projects date back to 2007; six others were submitted for approval to Summit County — a step required before they go to the state — in 2008.
The city, under scrutiny from the state auditor for its budget, had hoped the Ohio Department of Taxation would approve its Tax Increment Financing (TIF) applications by the end of last year.
City officials think its unfair that the state, which put Akron into a new “fiscal caution” category for its budgeting practices, is lagging by as much as four years in approving applications that would help Akron’s financial position.
“We are getting all the heat for our budget, but part of the problem is stemming from the people who are complaining,” said Stephanie York, Akron’s spokeswoman.
Tax Increment Financing is an economic development tool Ohio municipalities use to entice new businesses or to keep existing companies looking to expand. This was part of the package used to encourage Goodyear Tire & Rubber Co. to build its new world headquarters in Akron.
A TIF deal freezes the value of the land before any improvements are made. Taxes are paid as if the land had never been developed. Additional money collected for the increased value of the land goes for a specified time to the project instead — often to the municipality that purchased property or made public improvements, like new streets and sidewalks, needed for the project.
After a local government approves a TIF deal and the project is under way, the TIF application is submitted to the county, which is in charge of collecting property taxes, for approval. If the county determines the TIF is in order, it forwards the application to the state taxation department.
Akron is waiting for the state to sign off on 16 TIF applications that it estimates would result in the city being reimbursed for $3.96 million in property taxes by Summit County. The oldest applications were submitted to Summit County in December 2007, while the most recent were given to the county in December 2010. The projects include the Ascot Industrial Park in North Akron, the Ganley auto dealership property on East Market Street, the 22 Exchange student housing complex downtown and the Northside development.
State’s explanation
Shelley Wilson, executive administrator for the state taxation department’s Division of Tax Equalization, said Akron’s applications are taking longer because the city uses a type of TIF that is more complicated and takes longer to process. She said this TIF involves property acquired by a municipality for a redevelopment, rather than the less complex TIF that is for public improvement costs associated with a project.
“We try to work as quickly as we can and also as properly as we can,” she said.
Wilson said the approval of TIFs isn’t a simple matter. Often other government entities, like school districts, might end up losing tax revenue because of the agreements. So, she said, the state gives the applications careful consideration.
If not all of the required information is provided, Wilson said, the state might request additional data or turn down the TIF application.
“Cities are sometimes a bit naive,” she said. “They assume it’s a slam dunk.”
Asked how many municipalities have pending TIF applications, Wilson said the state doesn’t categorize exemption applications until they are approved.
Wilson said the state has been successful in decreasing its pending applications for every type of real property that is subject to tax exemptions. She said the number of applications was cut from 6,000 in 2010 to about 2,500 this year.
Wilson said her office tries to approve the less complicated TIFs within eight to 10 months from when they are submitted to the state. She said she expects Akron’s pending TIF applications to be handled within 60 days.
Akron’s response
Akron officials are hopeful its applications are approved within the next few months, especially because the city is under the watch of Ohio Auditor Dave Yost and facing a difficult year financially.
“We would be very excited to see that come in,” said Adele Roth, Akron’s development manager. She said she is willing to go to Columbus and bring any documentation the state needs to help speed up the process.
“Whatever we need to do to help push them along, we’d like to do that,” Roth said. “It’s a problem.”
Roth and Rita Weinberg, who is in charge of compiling and submitting Akron’s TIF applications, said Summit County typically takes three to six months to approve an application. They said the state’s approval process used to be quicker, with an application given to the county in December approved by the taxation department by the end of the following year.
“For them, it’s now a four-year process,” Roth said.
City leaders said having the money from the TIF applications would have helped Akron with its end-of-year bottom line, with the information it must provide bonding agencies and with the negative fund balances Yost is concerned about.
Akron must submit its second attempt to Yost by Monday on a plan to correct the budget problems he found in the city’s 2010 audit, released Oct. 5. Yost ordered the city to fix poor accounting practices that led to an $87.8 million fund deficit, which involves funds with negative balances that can be covered by other money in the budget. He criticized Akron for undertaking projects without the revenue to pay them.
City officials point to the economic development projects it has done with the help of TIF as an example of the type of projects Akron must pay for up front and get reimbursed for later. And, with TIFs, the city must get state approval before being reimbursed.
“They owe us a lot of money,” Weinberg said. “They are putting the squeeze on us at a time when they are putting the squeeze on us from another angle.”
Stephanie Warsmith can be reached at 330-996-3705 or swarsmith@thebeaconjournal.com.