Municipal groups urge pause on reciprocity-change bill, warn of constitutional and budget risks (HB 503)

At a third hearing on House Bill 503, municipal representatives urged the House Ways and Means Committee to pause consideration of a proposal that would require voter approval for municipal income tax reciprocity-credit changes.

Jonathan McGee, general counsel for the Ohio Municipal League, testified the bill "does three things" that raise constitutional and practical concerns: it inserts what he described as a new referendum-like step into the legislative process for municipal reciprocity credits, it creates a redundant initiative/referendum mechanism for a narrowly defined subject, and Section 3 would act retroactively by reaching back to August to nullify properly passed municipal changes. McGee said those features may be constitutionally infirm and could undermine municipalities' ability to manage budgets, supply public safety services and meet bond obligations.

Carrie McCarthy, executive director of the Ohio Mayors Alliance, told the committee municipal income tax is the largest revenue stream for cities and is critical to funding police, fire, pensions and large capital projects. She asked lawmakers to "hit the pause button" and study the fiscal impacts, saying cities are still adjusting to a prior decade of state-level changes that reduced local revenues.

Committee members pressed opponents on whether the bill would directly reduce current revenue or only permit voters to reject future modifications. Advocates and some members framed the proposal as giving voters more say over municipal tax decisions; opponents said it would create uncertainty that could reduce local budget flexibility. McGee and McCarthy said they were open to regional studies and collaborative approaches with the legislature but opposed the bill in its current form. The committee closed the third hearing without taking a vote.