Even the threat of a possible lawsuit was not enough to keep Reynoldsburg City Council from approving a contract Monday for a proposed joint economic development zone (JEDZ) with Etna Township.

Even the threat of a possible lawsuit was not enough to keep Reynoldsburg City Council from approving a contract Monday for a proposed joint economic development zone (JEDZ) with Etna Township.

A public hearing was held Monday, May 5, before council committee meetings, which were followed by a special council meeting.

Council members went behind closed doors during the special meeting to consider the agreement, returning later to approve it 6-1, without discussion. Councilman Dan Skinner abstained.

The JEDZ agreement would grant the township the ability to levy Reynoldsburg's 1.5-percent income tax and give Reynoldsburg the ability to collect the tax on 1,497 acres in Etna Township, located at each corner of Interstate 70 and state Route 310 plus the remaining properties in the Etna Corporate Park.

Etna Township Administrator Rob Platte said the JEDZ could generate about $400,000 annually, with 70 percent going to the township, 20 percent to Reynoldsburg and 10 percent to a JEDZ improvement fund.

He said the township would use the JEDZ money for funding road improvements such as paying its share of the state's $12.5-million Route 310 bridge project.

Reynoldsburg City Attorney Jed Hood said without a JEDZ agreement, townships do not have the power to implement income taxes.

However, Etna Township voters will ultimately decide whether to approve the agreement, which Hood said would be on the ballot for a special election in Etna Township on Aug. 5.

"If the issue passes, we would be acting as the taxing agent and engaging in promoting the economic development of that area," he said.

He said 3 percent of the revenue from the JEDZ would go to the Regional Income Tax Authority (RITA) to oversee the collection of the tax.

Attorney John W. Zeiger, speaking at the public hearing, cautioned city officials that the agreement leaves Reynoldsburg vulnerable to paying expensive legal fees.

Zeiger said his firm, Zeiger, Tigges & Little, has been retained to represent Ascena Retail Group, which he said is the largest employer in the designated zone.

"Reynoldsburg has contractually obligated itself to assume 100 percent of the legal expenses arising from any challenge that is brought to the creation of the JEDZ," Zeiger said. "This could create a legal cost exposure of hundreds of thousands of dollars. And Etna, which potentially receives 70 percent of the tax monies for its general fund, never pays a dime."

He said the contract language also permits both Etna Township and Reynoldsburg to use the funds in any way they choose, which he said is illegal under the Ohio Revised Code. The code requires that funds raised by taxes levied as part of a JEDZ agreement be used for economic development improvement within the proposed zone, Zeiger said.

"The Supreme Court said a city should have a relationship with the people it taxes," he said. "These people (Ascena employees) are not a part of your community."

He said two recently adopted JEDZ contracts in Jefferson and Perry townships were rescinded and taken off the ballot.

City Auditor Richard Harris said Etna Township approached Reynoldsburg first about the JEDZ, but the agreement benefits both parties.

"They are the ones that need us to collect the taxes, and it is a way to get additional revenue without having to go through all the development issues," he said.

Harris said many employees of businesses in the zone may not experience an increase in income taxes, since most communities, including Reynoldsburg, offer an income tax credit for people who work outside the community where they live.

"If they live in a community that offers a 100-percent tax credit, as Reynoldsburg does, they will not see an increase if the JEDZ passes," he said. "If they live in a community that does not offer the full tax credit, they could see a small increase."

Harris said if employees live in a township that does not collect income taxes, they could see a 1.5 percent income tax increase.

Platte said Etna already has two voter-approved JEDZs, one covering an area on the south side of U.S. Route 40 and one covering a portion of the Etna Corporate Park.

"People should realize this is not an increase in taxes unless the township people live in does not levy an income tax," he said. "What it does is redirect the income tax dollars from the city you live in to the city or township where you work."