Ohio is facing a looming water quality crisis, and state lawmakers have proposed a potential solution that could come before voters in the fall. Over 11.1 million Ohioans depend on water from the taps of Ohio’s public water systems. In many communities, this infrastructure is aging and badly in need of repair. Officials in Cincinnati, just one of Ohio’s 1,218 community water systems, are maintaining a sewer system that is more than 100 years old. Overall, Ohio rates only a C- for the state of its infrastructure, as determined by the American Society of Civil Engineers. In addition to inheriting an aging infrastructure, dozens of Ohio communities are also under legal orders from the US EPA that require them to address the overflow of raw sewage into sources of drinking water and recreation. According to the Greater Ohio Policy Center, 88 cities are operating under consent orders with US EPA. These orders mandate that communities fix their outdated system designs that carry a combination of sewer and wastewater or result in overflows of raw sewage into sources of freshwater during storm events. It is estimated that repairs could cost over $14.5 billion, three-quarters of which is needed in Ohio’s mid-sized cities with 200,000 or fewer residents. The total cost of upgrades needed by Ohio’s sewer, drinking water and wastewater systems is estimated at approximately $26.4 billion. Most of the responsibility to build and maintain infrastructure falls on local governments. Typically, 99 percent of the cost of water system are paid for by local taxpayers. And in many Ohio communities, these rates have increased dramatically in recent years in order to support necessary repairs. The average annual bill for residential sewer service in 2014 was $626, up 3.2% from the year before and growing faster than the cost of inflation. Water service costs the typical residential customer another $573 each year, and those costs are also climbing faster than other household expenses. Yet, despite its importance in supporting growth in both residential and business users, spending on capital infrastructure has actually declined as the economy has grown. Investment in infrastructure on a per capita basis dropped from $1.17 in 1960 to just eighty-five cents in 2007 (in 2009 dollars). Part of the reason that communities are unable to keep up with mounting capital construction projects to deal with an aging, and in many cases, toxic water and sewer infrastructures is that local government are coping with funding declines. An IO analysis found that Ohio cities have been cut by nearly half a billion dollars annually as a result of state policy changes enacted since 2011. For many of the communities we examined, the loss of state revenue was between 10 and 25 percent of their annual budgets. Taken together with effects of the global recession on tax collections, many communities have little left after meeting basic budgetary obligations to pay debt service on bonds to finance needed infrastructure repairs. There are a number of financial aid programs available for water and sewer projects, but each is aimed at a specific need, such as rural or Appalachian communities or low-income populations, and many have very low maximum loan or grant amounts, or require matching funds. Ohio’s Senate Minority Leader, Joe Schiavoni has proposed issuing up to $100 million in bonds annually for 10 years to provide a boost to local communities upgrading their water, wastewater and sewer systems. The proposal from Schiavoni, Senate Joint Resolution 3 (SJR3), would provide another tool for communities trying to move projects forward. The proposal, which has sponsors from both parties, would permit the state to issue $1 billion in bonds over ten years in order to award grants to local communities for wastewater treatment systems, water supply systems, and stormwater and sanitary collection, storage, and treatment facilities. Schiavoni proposed the legislation after sewage overflows into Youngstown’s Mill Creek Metroparks resulted in an extensive fish kill from toxic E. coli bacteria. The Senator learned the city faced $147 million in necessary system upgrades, mandated by a settlement with the US EPA to bring it into compliance with the Clean Water Act, and is working on a timeline of up to 20 years to complete the work. Youngstown is hardly alone. In addition to the other 86 systems mandated to upgrade to avoid sewer overflows, Cincinnati is obligated to spend $3.4 billion on its aging system, a mutli-decade endeavor that has already resulted in residential sewer bills climbing to nearly $1,000 per year. In addition to moving projects forward on a faster timeline, the proposal could also give the state a needed jobs boost. Researchers at the University of Massachusetts determined that 19,769 total jobs are created for every $1 billion in public spending on water infrastructure. The US Conference of Mayors commissioned a study that found investments in water and sewer infrastructure often have greater returns than spending on other types of infrastructure because of its contribution to economic activity. In fact, spending on public infrastructure creates more jobs than tax cuts. SJR3 is currently pending in a Senate Committee, but if passed by both chambers of the legislature, would go to voters for approval in November.
As the debate over Ohio’s economic successes or shortcomings continues, a closer look at individual communities can be illuminating. The town of Marietta, the site of the Governor’s sixth State of the State Address, reflects the struggles that many communities across the state continue to face. While Gov. Kasich’s push to expand Medicaid has helped many in Marietta access care, the median household income lags the statewide average, tax shifting policies strain lower-income residents, and local schools continue to lose valuable state finding. Our latest analysis takes a closer look at these policies and the impacts on Ohio’s first capital City: Marietta, Ohio. Here are a few of the key points:
- The median income in Marietta remains nearly $10,000 less than the statewide average, and 25 percent of Marietta residents – and nearly 4 in 10 children – live below the poverty line.
- The workforce in Marietta has shrunk by 5 percent over the last five years, declining from 6,868 in 2010 to 6,505 today.
- The bottom 20% of income earners in Marietta have seen state taxes increase as a result of a shift to a more regressive tax code.
- Medicaid expansion has resulted in over 3,000 Washington County residents gaining access to health care.
- State funding cuts have resulted in a nearly $1 million annual revenue loss to Marietta, an 11 percent reduction from the city’s 2010 budget.
- Marietta schools have lost $1.7 million (adjusting for inflation) in state aid since 2010, while local property taxes have increased 22 percent.
Next week, voters in cities across Ohio will be asked to consider how much taxes they pay to sustain vital public services in their communities. In total, 33 cities are on Tuesday’s ballot asking voters to approve property and/or income tax measures for public safety (police, fire, and EMS), parks & recreation, or capital improvements (roads, water, and sewage systems). As a result of state policy shifts, the difficult reality over the past five years, even as the Recession loosened its grip, was that many cities were forced to trim their budgets to the bare bones. And, in many cases, belt-tightening was not enough. Local taxpayers are now being asked to pick up the slack. Of the 33 issues on Tuesday’s ballot, thirteen (40%) call for an increase in taxes. Below are snapshots of some of the communities explaining how state policies have forced their hands on tax hikes: Trenton: 5.25 mill levy for police funding
Journal News – City Manager John Jones said state budget cuts have decimated the city’s general fund by almost $200,000 per year. There are 13 people on the police force serving the city’s population of 12,500, including the chief, he said. That’s down from 17 people a decade ago when there were about 4,500 fewer people to protect.Gallipolis: 1 percent income tax increase for public safety expenses
Gallipolis Daily Tribune – Members of the public have asked why the city has seemingly lost so much money over the years. According to the three city officials, much of the funding has been loss due to cuts in state funding and tax law changes. According to budget records, in 2011, the city had access to $3.97 million to operate departments. Funding dropped to roughly $3.93 million in 2012. It fell further to about $3.55 million in 2013.Elyria: ½ percent income tax increase for multiple expenses
Newsnet5 – [Councilman] Jessie blamed an economic downturn and cuts to the state’s local government fund and the estate tax — cuts that have cost Elyria about $2 million a year. “Our governor can say he’s balanced the state’s budget and he’s done it on the backs of every city and municipality in the state,” Jessie said.Toledo: ¼ percent income tax increase for road repair
Toledo Blade – …state government has cut its aid to Toledo — often a matter of returning tax dollars Toledoans send to Columbus — by more than $83 million since 2008. Toledoans have benefited less than richer Ohioans from the state tax cuts these spending reductions helped pay for. Two-thirds of Toledo’s general-fund budget goes to personnel costs. Seven out of eight jobs funded by the budget are in public safety — police and fire protection and courts. Few Toledoans would suggest that the city should have fewer police officers and firefighters, or that their pay should be cut.Cities across Ohio are dealing with difficult budget constraints as a result of policy changes at the state level. Starting in 2011, Governor Kasich and the Ohio legislature enacted cuts in revenue shared with local communities, eliminated the estate tax, and phased out reimbursements revenue lost in the last round of state tax cuts in 2005. Distributions from the Local Government Fund were cut in half, dropping from $647 million in 2004 to $347 million in 2014. Overall, cities are estimated to lose a total of $495 million per year thanks to the collective changes in policy. While cuts have been made to our cities, state lawmakers have elected to deposit over $2 billion into the state’s rainy day fund. Maintaining a cushion for a rainy day, while prudent, should not come at the expense of adequate local police & fire protection, parks and a safe and well-maintained infrastructure. The sound bite of tax cuts and creating a $2-billion-dollar rainy day fund may sound good on the campaign trail, but the real world consequences, including higher taxes at the local level, must be considered as well.
This month, a new Ohio law takes effect, changing the way local income taxes are levied by cities around the state. It sets out what income may be taxable, and what types of income may not. In some cases, this results in a substantial loss of resources for Ohio communities that levy an income tax. These tax losses could lead to further budget consequences such as service cuts and tax increases. When combined with the significant loss of revenue that municipalities are already facing as a result of policy changes enacted by Governor Kasich and the legislature over the past four years, the potential impact to Ohio communities is staggering. Last year, we estimated that the statewide impact to communities from House Bill 5 if it passes could amount to over $82 million per year. When combined with other cuts from the state over the past five years, we estimate that Ohio cities and villages will have $495 million less in their annual budgets to provide services to residents and businesses. Read our 2014 report about House Bill 5 and its impact to Ohio cities.