Tuesday, November 25, 2008

'Not business friendly' post #16 - I told you so

How I wish I were wrong...but I did tell you this was going to be a problem.

Today the Lucas County Commissioners hold the first of two hearings (at 2 p.m. in the Commissioner hearing room on the first floor of Government Center) on the proposal to increase the Lucas County Conveyance Fee from $3 to $4.

The conveyance fee is a tax for transferring any property within the County. The fee is charged per $1,000 value of the home, so a $100,000 house would have a fee of $300 or, if the increase is approved, $400.

The claimed purpose of this increase is to fund the Lucas County Improvement Corporation, as recommended by a 'task force' the Commissioners put together to address many of the issues that were arising and the criticism from Comm. Ben Konop.

Comm. Pete Gerken supports the idea, but Comm. Tina Skeldon Wozniak has been non-committal in her public comments. Comm. Konop opposes the tax, saying we don't need another tax in the county, but his main objection is not the tax, rather the intended use. He wants to destroy the LCIC and failure of a source of funding would help. Interestingly, he was much more receptive to the idea of using the tax for a housing fund, as suggested by Toledo Councilman Joe McNamara.

The LCIC was re-created in 2005 following the election of Pete Gerken as a commissioner. Originally - and prior to being sworn in as a commissioner - he met with current Comm. Wozniak and then Toledo Mayor Jack Ford to discuss merging the county and city economic development efforts. Unfortunately, when he shared with me this idea, I had to inform him that such a merger was not allowed under Ohio law.

Plan B was to take the existing LCIC and reorganize it into a different type of entity, including designating it as the county's economic development agency and expanding its staff. Gerken's thought was that the new LCIC would somehow get the proceeds of the Port Authority tax levy, in light of the separation of the Regional Growth Partnership (which had been funded with those dollars) from the Port Authority and its re-establishment as a completely privately-funded, business-led economic development agency.

My objections to Gerken's plan was that it created a large bureaucracy, put all the power in the hands of the elected Mayor and the majority of the Commissions (as they got to make appointments), and had no source of funding to meet the increased budget costs that would result from the re-organization.

As I said at the time, the devil is in the details - in this case, the details on how the entity was to be funded. But that didn't dissuade Gerken and Wozniak who went ahead anyway with new offices, new staff and additional costs.

Now, especially with the financial situation in the county, they don't have the funds necessary for the organization to continue in its present form.

Enter a new tax - the conveyance fee increase.

At the time, I told them that the only way they could generate the amount of money necessary to support the structure they were proposing was to spend county dollars for the expansion - or to raise a tax due to the dwindling amount of available funds within the county's general fund.

The Commissioners, in setting up a 'task force' to 'examine' the issue and 'make recommendations' have a degree of deniability when it comes to this new tax - they think. However, we all know that the responsibility falls firmly at the feet of Pete Gerken and Tina Skeldon Wozniak for refusing to address this issue BEFORE going ahead with the new structure.

Please don't get me wrong - I support the idea of the LCIC and believe it has been highly successful in getting all the jurisdictions in Lucas County working together. That's a major accomplishment. But it could have had that success without the internal structure Gerken created - and it wouldn't now need a new tax to support it - if anyone would have heeded my questions and concerns at the time.

Now we are faced with a dilemma - how to fund the organization that is an established and important part of the economic development tools we offer in Lucas County. The way to attract people and businesses to this area is NOT to make them pay more in taxes for the privilege of coming here or growing here. That point seems to be missed by many who hold elective office in the County and City offices.

Strange that no one is talking about how the size of the organization can be reduced, or how it can work with some of the other economic development entities to reduce its costs of operations - or even if it can perform some of the public sector activities under the original structure before Gerken redesigned it in his own image.

No, such ideas are never discussed or considered - especially by the creators of the problem.

This tax is not business friendly. And it's a bit contradictory that the Commissioners have a Foreclosure Task Force to help people avoid foreclosures on their homes at the same time they're seriously considering raising the cost of actually selling that home. And then there are the housing fund advocates who have, for years, wanted that tax for themselves, saying that the money spent in the county on economic development is enough while the money spent on housing isn't and needs have permanent local funding.

So all the housing fund people are in favor of raising the tax with the caveat that they get some of it. Of course, all the people in favor of raising the tax are the recipients/beneficiaries of the tax - imagine that!

The Toledo Board of Realtors has announced their opposition to the tax, for the reasons stated here - it's just one more nail in the coffin of the county, making one more excuse for someone to go elsewhere.

Personally, I think the Commissioners deserve the struggle they're facing - I told them this would be the outcome, though I hate that I was right.

ASIDE: This is the same warning I issued over the new arena being built - the funding stream was not sufficient to meet the projected costs. The Commissioners recently passed a resolution pledging to cover any shortfall between funding stream and costs, pledging the taxing authority of the Lucas County to the purpose. I'd like to be wrong on that prediction, but I'm not hopeful.

And one final thought: if the Commissioners were really as interested in economic development as they say they are, why did they allow increased tax levies, including a new tax for COSI, to go on the ballot??? Inquiring minds...

10 comments:

DeeDee Liedel said...

As you know, Maggie, I am Sylvania Township's board representative to the LCIC. I struggle a lot with this tax increase.

I firmly believe that adequate funding should come from current tax revenue. However, the reality is that the county isn't going to cut something else to come up with the money LCIC needs and it has also become apparent in the last 2 years - the member organizations 'support' through membership dues fluctuates with the elected officials in those member jurisdictions. Unless the funding stream is fixed, I see no reason why Sylvania Township should continue to be a member of an organization where Toledo holds so many seats yet pays only 20% of their dues.

I really see this as a breaking point for the LCIC. I believe the organization has done good work, and can continue to do so ... but only with a secure stream of money and with the politics removed from the equation.

I agree that we need to look at cutting costs - earlier this year Rob Robinson talked about moving out of the Port Authority building which was costing tens of thousands of dollars in rent and find smaller (hopefully donated) office space. That never happened - perhaps it has something to do with the county guarantee to rent that space from the Port? All of the power is in the Executive Committee which is controlled by Toledo and county appointees - only two members are from the suburbs.

This is a situation which has been waiting to erupt since the LCIC's restructuring, and that is unfortunate. The people who have volunteered their time and energy and resources, as well as the employees who are dedicated to the mission of the LCIC, deserve better than what they've been getting - a strained budget (even before the recent economic problems) and political tug-a-war.

As opposed as I am to increased taxes, I have to grudgeingly support this one but ONLY if it is dedicated to funding the LCIC and remainder of the task force's recommendation is implemented (which is to restructure executive committee of the LCIC through a by-laws change).

Maggie Thurber said...

DeeDee - I understand your position.

I'd like to see all those other changes implemented FIRST, including moving to more affordable offices...then you'd know how much money the LCIC truly needed - rather than impose a tax without first knowing what savings can be achieved.

The deal with the Port for that space was very questionable...I know a lot went on behind the scenes and had to do with the Blade's position that the Port Authority move over there. Nothing is ever 'just as it seems' in Lucas County politics.

Too bad the approval of the funding couldn't be conditioned upon implementing the restructuring of the bylaws, cheaper accommodations and cost cutting...

It might even gain MY support that way...lol!

Mad Jack said...

Unfortunately, when he shared with me this idea, I had to inform him that such a merger was not allowed under Ohio law.

I'd have paid $20 to be a fly on the wall for that conversation. I'll bet he went through the usual stages - lack of comprehension, denial of facts, anger at unfairness, attempted bargaining... before finally deciding that since he couldn't lie about it, he may as well accept it and formulate a new plan.

How about lower taxes, Dee? Property taxes are already too high, and now you want to make them higher. I see no benefit to the LCIC or Rocket Ventures. And, when funding is a concern (as it should be in government funded office space) high profile rent should be the very first thing to go.

Following along the housing trail I discovered Lucas County Foreclosure Timeline in a foreclosure help section of the Lucas County site.

I'm speechless.

Fortunately, I'm writing.

What this time line amounts to is that any mortgage lender who makes a risky loan should immediately begin praying that the new homeowners make their payments. Never mind on time; just make the payments. The whole foreclosure process is amazingly hard for the lender. And Lucas County wants to give advice on how to make this process harder?

Will someone please give the mere civilians of Lucas County a break!

Frank said...

I wonder how many new businesses would come to Lucas County if the tax rate was to go down? While already mentioned, we are taxed pretty high and there are folks who are leaving the area due to losing their jobs, new job elsewhere or businesses closing shop because of high taxes, small profits, and other things.
We have already seen that even if you do increase taxes (or renew them) does not mean it will truly happen ( see 3/4 percent tax for police & fire in Toledo).
Just be like everyone else. Tighten the purse strings and deal with it.

Carol said...

We all know that economic development is a tiered process and is a staple in any municipal government structure. That's basic Civics 101.

However ... the proposed increase in the conveyance fee for real estate is out of whack.

The reason there is less revenue being collected in fees/taxes/charges is that there is considerably less population. There is also the spectre of the national economy putting stresses on business to compete in the global marketplace. Businesses that can't compete because their overhead is climbing on a daily basis, but their income is not.

So, now we are in a Catch-22.

Pete Gerken believes that raising the conveyance fee from $3.00/$1000 to $4.00/$1000 is a magic cure. That a homeseller really won't feel it at the closing table.

Well, Pete, how about a little NEWS FLASH! Far too many folks that are able to sell their homes in this market are having to show up to the closing with money in hand to be able to get out from under their mortgage. This is money that they are either borrowing, taking from their retirement funds, have saved for a child's college fund, etc.

Now, do you really think that that homeseller won't notice that extra $400 - $1000? Do you really think that that kind of money is "disposable income" for the folks in Lucas County?

Well, if you do, then you have/make too much money and you've lost touch with reality.

In Durham County, NC the conveyance fee is $2.00/$1000. There is steady and consistent business growth, residential home building, urban rehab/renovation, and a government support system that does everything it can to HELP the area succeed --- not stand in the way and attempt to cajole people into paying more and more for less and less.

Instead of trying to place a bandaid on a gaping wound, why not try figuring out what's causing the wound so that it can be treated appropriately?

The answer to every financial woe in government is NOT take more from the citizenry.

DeeDee Liedel said...

"Now, do you really think that that homeseller won't notice that extra $400 - $1000?"

For the extra cost to be $400 to $1,000, the cost of the house is going to be $400,000 to $1,000,000. I don't think the majority of home sales are in that price range.

Let's be realistic about what this increased fee means:

For the sale of a $100,000 home, it will increase closing costs $100, taking the typical cost for a seller from about $12,500 to $12,600, or an increase in cost of 0.8%.

I'm not going to claim this is nothing, it is in fact incrementalism and a way that the commissioners don't have to cut unnecessary spending on pet projects. But don't make it in to something it is not by saying it will increase costs hundreds to a thousand dollars.

And let's face it, after all of the tax levies in Lucas County passed (except some local school issues), its clear that the constituency has no problem raising taxes. This tax is peanuts compared to what the voters just did to the business climate of this community.

Maggie Thurber said...

And let's face it, after all of the tax levies in Lucas County passed (except some local school issues), its clear that the constituency has no problem raising taxes. This tax is peanuts compared to what the voters just did to the business climate of this community.

true - but that doesn't make another tax 'right.'

Mad Jack said...

Let's be realistic about what this increased fee means:

For the sale of a $100,000 home, it will increase closing costs $100


Ok, Dee, since it's no big deal, why don't you just pay it out of your own pocket?

Tim Higgins said...

Maggie,

All respects to DeeDee and her efforts; but this is just one more example of government trying to solve their problems by taking an increasing share of a diminishing market (something I am far too familiar with these days).

In troubled financial times, the answer is never to raise taxes, but is instead to ask government to live within its means.

Carol said...

Dee Dee - I tossed out a couple of amounts for illustrative purposes only.

Quite frankly - it doesn't matter if it's $10 or $1000 - the process is the same and the result is the same.

Already over taxed homeowners are being expected to, YET AGAIN, reach into their pockets and come up with yet more money to fund something that is already being funded with tax dollars.

I believe this falls under double taxation.

But what do I know - I'm just a Realtor that has to continually break this kind of news to people that are already overwhelmed by the flawed, and consistently inconsistent, politics of Lucas County.

In case anyone missed it - Toledo is tied for first place for the highest unemployment in the state. Now you are asking people to give up even MORE of the money they don't have.

Where will it end? When will it end? When the last person walks away from the area? When there is nobody left to tax?

Maybe that's the intent - then it can become a disparate kingdom inhabited by the select few.

Well, for a cool $300,000 those wannabe kings can have every piece of real estate I own there. And I'll call it a day.

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