Bill Summary – FastDemocracy

OHIO LEGISLATIVE SERVICE COMMISSION
                                            Office of Research                        Legislative Budget
www.lsc.ohio.gov                              and Drafting                                  Office
                             S.B. 120                            Bill Analysis
                      135th General Assembly
    Version: As Introduced
    Primary Sponsor: Sen. Schuring
    Effective date:
    Andrew Little, Attorney
                                                       SUMMARY
                      ▪ Allows local governments to direct up to 10% of payments made in lieu of property taxes
                         under tax increment financing (TIF) arrangements to land banks for economic
                         development purposes.
                                              DETAILED ANALYSIS
        The bill allows local governments to direct a portion of payments made in lieu of property
taxes (PILOTs), pursuant to TIF arrangements, to land banks. The maximum portion is 10%, and
the reservation made for land banks must be made when a TIF arrangement is approved. If such
a reservation is made, the land bank must use the funds exclusively for economic development.1
Under current law, PILOTs, with certain exceptions, are required to be used to fund public
improvements that benefit the development projects subject to the TIF and, in some cases, to
reimburse local governments for forgone property taxes.
       The key to understanding the bill’s operation lies primarily in understanding elements of
land banks and TIFs that are not directly amended by the bill. So, while not affected by the bill,
the remainder of this analysis discusses that relevant background information.
Background
                 Land banks
        “Land bank” is a name given to different arrangements authorized under Ohio law for
programs or corporations intended to return land that has fallen into disuse, disrepair, or tax
delinquency to some productive use. Under continuing law, “land bank” typically refers to a land
reutilization program organized by a township or municipal corporation, or a county land
1     R.C. 5709.40, 5709.41, 5709.43, 5709.73, 5709.75, 5709.77, 5709.78, and 5709. 80.
                                                                                               November 20, 2024
Office of Research and Drafting                LSC                           Legislative Budget Office
reutilization corporation (CLRC) formed by a board of county commissioners. The former is a
series of procedures available to townships and municipal corporations to acquire and dispose
of tax delinquent property. A CLRC is an independent community improvement corporation that
may implement a land reutilization program. Because a CLRC is a type of community
improvement corporation, though, it possesses all the powers of a community improvement
corporation. Those are broader than those of a land reutilization program on its own and include
the ability to acquire property outside of the tax foreclosure proceedings that the land
reutilization programs formed by a township or municipal corporation are focused on. The bill
also includes 501(c)(3) organizations whose sole purpose is to acquire and dispose of property to
facilitate economic development as land banks eligible to receive TIF PILOTs, referred to in the
bill as “qualifying nonprofit organizations.”
     Tax increment financing
        A TIF, is a mechanism available to local governments, i.e., municipalities, townships, and
counties, to finance public infrastructure improvements and, in certain circumstances, residential
rehabilitation. TIFs operate by authorizing a political subdivision to grant a property tax
exemption with respect to the incremental increase in assessed valuation of designated parcels
after the TIF arrangement is approved. So, any value increase resulting from improvements to
the property will be exempt from property taxes for a period of time. The amount of property
tax that would have been collected on that increased value is instead directed to other uses.
        That occurs through a process in which owners make PILOTs to the local government that
created the TIF. PILOTs may be up to the amount of property taxes forgone as a result of the TIF
exemption. TIFs thereby create a flow of revenue back to local governments that create them up
to the amount of taxes that would have been paid without a TIF arrangement.2 Typically, the
financing is achieved by the issuance of bonds to which the local government pledges the service
payments, and the bonds are usually used to fund improvements that benefit the parcels covered
by the TIF.
                                          HISTORY
                             Action                                       Date
    Introduced                                           05-11-23
ANSB0120IN-135/ts
2   R.C. 5709.40, 5709.73, and 5709.78.
P a g e |2                                                                                   S.B. 120
                                                                                          Introduced
Statutes affected: 
As Introduced: 5709.40, 5709.41, 5709.43, 5709.73, 5709.75, 5709.77, 5709.78, 5709.80