Thursday, December 27, 2007

The Dublin Model

In the Sunday December 23, 2007 issue of The Columbus Dispatch was a story titled "Strategy to attract new businesses paying off for Dublin." The most important sentence in the story was near the end:

Unlike other central Ohio cities, Dublin doesn't give property-tax breaks – money that primarily funds public schools – to businesses. Instead, officials offer to finance road improvements or give income-tax rebates if companies meet job-creation goals.

It sounds like the elected leaders of the City of Dublin understand that a high-quality, well-funded school system is the single most important institution in a community. It's the condition that must be satisfied if you want to attract professional people to your town – people who will bring, and attract, businesses that will pay property taxes to help fund the schools as well as income taxes to fund the municipal operations (police, fire, utilities, etc). Dublin now has a mix of professional buildings, manufacturing, and retail spaces which generates healthy revenues for both the city and the schools. Only a very well funded community can afford to plant concrete corn after all!

I've always thought it odd that a city government can waive property taxes. It's not their money - the city doesn't get any of the property taxes. The primary source of income for a city is income taxes paid by people who are employed within the city limits. So the school district wants to see expensive commercial buildings constructed while the city wants the businesses occupying those buildings to have a big payroll. But if the city abates the property taxes, it costs the city nothing and the schools take the hit.

To be fair, it has often been the case in Hilliard that an arrangement is made whereby a new company has its property taxes abated, but yet it pays to the school system an amount equal to what the property tax revenue would have been without the abatement. My understanding is that this is the form of the deal with BMW Financial.

What's the benefit to a company like BMW Financial to have its property taxes abated, yet pay the schools their full share anyway? The answer is that more than the just the schools are funded by property taxes. Many county-wide programs such as Children's Services, MRDD, Metro Parks and the Zoo depend on property taxes, and they get nothing when property taxes are abated. You decide if that's a good thing, but it's another case of a municipality being able to give away someone else's money.

No good deed goes unpunished however. I would argue that one consequence of Dublin's success is that the State of Ohio has concluded that Dublin has the capacity to supply the bulk of its own school funding, and can therefore get by with less money from the State. As of 2003, only 20% of the state income taxes paid by residents of the Dublin School District made it back in the form of school funding. Compare this to 102% for Columbus City Schools and 656% for East Cleveland City Schools (that's not a typo – it's six-hundred-fifty-six percent).

In that year, Hilliard got back 59% and I suspect that percentage has been going down ever since. Hilliard is viewed much like Dublin by the State of Ohio – that we have the capacity to shoulder much of our school funding costs by ourselves.

In other words, we're pretty much on our own. We got into this mess because thousands of new homes were built in Hilliard over the last decade and the city officials did nothing to stop it. In fact, those officials helped make it happen. To let the city officials also give away the commercial income stream for the schools makes things even worse.

We all need to keep an eye on these folks.

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