Rittman taxpayers vent frustrations over city's 15-year income tax mistake

RITTMAN − A loud clack echoed through the recreation center gym.

The last resident placed the microphone on the podium and picked up her notepad full of questions and answers before returning to her seat.

She capped off nearly three hours and 30 minutes of questions, complaints and frustrations taxpayers had about 15 years of unauthorized income tax collection at a special City Council meeting Monday night.

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Rittman city officials promised to answer every inquiry from an audience of more than 150 people. By 10:30 p.m. and after dozens of speakers and a thinning crowd, the city did just that.

The ordeal is not over, said President of Rittman City Council Melissa Shows, who urged residents to continue asking questions and airing their concerns.

"I understand the distrust that has split this town," Shows said. "We are still learning a lot and there is still a lot to learn. As we learn more, we will continue to be transparent."

City of Rittman: 'We shoulder the blame' for income tax snafu

The city is to blame for the unauthorized 0.5% income tax rate that should have expired in 2007, shifting the tax rate back to 1%, said Law Director Matt Simpson during the Monday meeting.

The original 0.5% increase passed in 1977 was slated to expire 30 years later, but when voters approved a 1996 tax code change, the expiration date was never copied into the updated city ordinances, Simpson said.

The result was around $8.8 million in extra taxes that should not have been collected because no one knew about the expiration date.

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"It is difficult to believe so many eyes did not see this, I understand," he told residents. "We didn't cause the problem, but we shoulder the blame."

From 1996 through 2007 up to when the discovery was made in the third quarter of 2022, someone should have found the error, he said.

"I wish someone would have caught it and told us because we wouldn't be here today," Simpson said.

Part of the reason it took so long to discover the issue, Simpson explained, was that the original legislation proposing the 0.5% income tax rate increase included the only mention of the 2007 expiration date.

"It is not normally done looking at the foundational legislation; we believed those who came before did their jobs right," he said. "It's not uncommon for an income tax to pass without an expiration date."

Rittman officials took time to research, prepare an answer

When Finance Director Matt Bubp found the error, no one in the administration believed it. The city not did immediately come forward, Simpson explained, because they had next to no information about the problem.

First, they had to verify the issue, he said. Administrators, including Simpson and Bubp, dug through tax records and meetings to find the original 1977 tax increase document, verifying the existence of the expiration.

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They then combed through more files to discover what happened to the expiration date. They pinpointed the mistake to have taken place during the 1996 city tax code change.

Once verified, the city needed to know its next financial and legal steps, Simpson said. This included understanding the one-year state statute of limitations for municipal income tax refunds and learning how to make these refunds a reality.

For Bubp and City Council, the budget needed to be tweaked to make up for the loss of revenue in 2022. While no major changes took place, without a 1.5% income tax rate, Bubp said, cuts will be made in future budgets.

Once answers were collected, the city decided to go public in early January.

The city's delay in publicly announcing the issue angered residents at the Monday meeting, but Shows believes that anger would have been worse if they had announced it sooner.

"People would have been outraged we didn't have any answers or solutions; it would have made this worse," she said.

'Unpopular answer'

The law director acknowledges the city's answer to refund the 0.5% income tax overcharge only for 2022 is "unpopular," however, he said, the city is following the Ohio Revised Code, which sets a one-year statute of limitations on a city's requirement to repay unauthorized income tax collections.

For residents, it's an unfair solution.

"If we were not to pay for 15 years, you would put a lien on our houses and garnish our wages," said one resident. "But there's no recourse when the city does this."

It's not fair, Simpson told the audience. "It seems the city is playing with a different set of rules, and that is because we are," he said. "But it is in the Ohio Revised Code, which we didn't make."

He continued, noting everyone working for the city of Rittman, including the administrative team and council members were overtaxed.

"We know how you feel," he said. "We're angry too."

How taxpayer money is spent

Residents who took the podium posed different questions, but there was a constant theme: How was the taxpayer money spent?

This included grilling city leaders on how roads are resurfaced, how computer software and hardware is purchased and when the city approved pay raises for city workers.

Knowing the city might need to tighten its belt with a 1% income tax rate, council members said they approved pay increases for administrators, including City Manager Bobbie Beshara, Bubp and Simpson.

Met with shouts and raised arms, Councilman David Williams defended the decision. He said the raises were a form of compensation and a way to keep the administrative team from leaving during a confusing crisis.

"They are dedicated and hardworking," Williams said. "They also did not cause this problem; they discovered it and are doing their best to make sure it doesn't happen again."

Williams wanted to incentivize the administrative team to stay on. This included Bupb, who has experience in helping communities out of financial crises.

Bubp also broke down how the city uses the income tax. Three-quarters of it goes into the general fund, making up nearly 56% of the total fund.

The final quarter goes into the capital improvements fund, which pays for projects costing $5,000 or more and lasting five years or more.

A majority of the income tax funds police, capital projects, administration, finance and tax, fire and emergency services, recreation, public health, parks and more, he explained.

Other action at the Jan. 31 Rittman City Council Meeting

• Council unanimously approved a resolution directing the Regional Income Tax Agency to apply a 1% income tax rate for 2022.

• Approved an ordinance amending the city's tax regulations.

• The city will seek a permanent 0.5% income tax rate increase in May. If voters fail to approve it, the issue will appear on the fall ballot.

This article originally appeared on The Daily Record: 'There's no recourse.' Rittman taxpayers angered by income tax error