O^^^G9VAL

S-S-S-S-S-s-s-s-S-S-s-s-s-s-S-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s

IN THE SUPREME COURT OF OHIO

s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s

David D. Jankowski, et al., On Appeal from the Lucas CountyCourt of Appeals, Sixth Appellate District

Appellants,Cow•t of Appeals Case No. I-09-1130

vs.Trial Court Case No. CI104-2400

Moncl ova-Maumee-Tol edoJoint Econoniic DevelopiientZone Board of Directors, et al.,

Appellees.

S-s-s-s-s-s-s-S-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s

MEMORANDUM IN SUPPORT OF JURISDICTION

OF APPELLANTS DAVID D. JANKOWSKI, ETAL.

s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s-s

Albin Bauer, II, Esq. (0061245)EASTMAN & SMITI I LTD.One SeaGate, 24`" FloorP.O. Box 10032Toledo, Ohio 43699-0032Telephone: (419) 241-6000Fax: (419) 247-1777E-Mail: abauer@eastmansinith.cam

Attorncys for AppellantsDavid D. Jankowski and RobcrtBarnhart

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Walter J. Celley, Esq. (0038739)Celley & Sanderson LLP27457I-Ioliday Lane, Suite EPerrysburg, Ohio 43551Telephone: (419) 872-5695Fax: (419) 872-4476

Attorneys for Appellees Board ofTrustees of Monclova Township andMonclova-Maumee-Toledo JointEconomic Development Zone Boardof Directors

Sheilah II. McAdams, Esq. (0011408)Marsh McAdams Ltd.204 West Wayne StreetMauniee, Ohio 43537Teleplione: (419) 893-4480Fax: (419) 893-5891

Attorneys for Appellees City of Maumeeand Monclova-Maumee Toledo JointEconomic Development Zone Boardof Directors

Adam W. Loukx, Esq. (0062158)Department of LawCity of 1'oledoOne Government Center, Suite 250Toledo, Ohio 43604-2293Telephone: (419) 245-1020Fax: (419) 245-1090

Attorncys for Appellees City of Toledoand Monclova-Maumec 1'oledo JointEconomic Development Zone Boardof Directors

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TABLE OF CONTENTS

Page

TABLE OF AiJTHORI'I'IL'S .......... . ........................................................ ................ ........................... ii

EXPLANATION OF WIIY TIIIS IS A CASE OF PUBLIC OR GREAT GENERAL INTERESTAND INVOLVES A SUI3STANTIAL CONSTITUTIONAL QUESTION ....................................... I

STATEMENT OF FACTS ..................................................................................................................4

STATEMEN'I' OF TIIE CASE ............................................................................................................6

ARGUML'NT IN SUPPORT OF PROPOSI'I'ION OF LAW ..............................................................7

ProTgsition of Law No. 1: R.C. 715.691(H) does not authorize the use of inconletaxes for municipal purposes that are unrelated to the joint economic developmentzone levying the tax . ......................................................................................................................7

A. In The Overall Context of R.C. 715.691, the Spending Provision in R.C.715.691(11) Requires JEDZ Income Taxes To Be Used Solely For PurposesBenefitting '1'he JEDZ . ..........................................................................................................8

B. The Court of Appeals Errect By Reading The Conditions On The Use OfJEDZ Taxes In R.C. 715.691(H) Disjunetively Rather Than Conjunetively . ......................9

C. Courts Must Avoid Adopting a Statutory Construction That Allows TheStatute To Operate Unconstitutionally, If There Is A Plausible ConstructionThat Allows The Statute To Comply With The Constitution .............................................10

Pro op sition of Law No. 2: A contract to create a joint econoniic development zoneunder R.C. 715.691 is invalid if the contract's provisions violate the express ternisand pui-pose of R.C. 715.691 . ......................................................................................................13

CONCLUSION ....................................................................................................................................14

CERTIFICA'I'E OF SERVICE ........... .................................................................................................14

APPENDIX Appx_Pagc

Decision and Judgment ol'tlie Lucas County Court of Appeals (Jan. 22, 2010) .................................1

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TABLE OF AUTHORITIES

Pa e s

Cases

Amos v. Mathews ( 1930), 99 Fla. 1, 126 So. 308, 326 ................................................................. 12

Bell v. Northern Ohio Tel, Co. ( 1948), 149 Ohio St. 157, 78 N.E.2d 42 ...................................... 13

13ishop v. Hybud Equip. Corp. (Stunmit App. 1988), 42 Ohio App. 3d 55, 536 N.E.2d 694....... 12

Colonial Mortg. Service Co. v. Soutlmrd(1978), 56 Ohio St. 2d 347, 384 N.E.2d 250 ................ 9

Commerce & Indus•try Ins. Co. v. Toledo (1989), 45 Ohio St. 3d 96, 543 N.E.2d 1188 ................ 8

Desenco, Inc. v. Akron ( 1999), 84 Ohio St.3d 535, 706 N.F,.2d 323 ............................................ 10

Friedlander v. Gormctn (1933), 126 Ohio St. 163, 184 N.E. 530 ............................. 2, 4, 11, 12, 13

In r•e Petition for Transfer of Funds (Montgomery App.), 52 Ohio App. 3d 1,556 N.E.2d 191 ..................... ..................................................................................................... 11

Jankowski v. Monclova-Maumee-Toledo Joint Is'eon. Dev. Zone (Lucas App.), 2005-Ohio-6652 .................................................................................................................................... 7

Jankowski v. Monclova-Matimee-Toledo Joint Econ. Dev. Zone (Lucas App.), 2010-Ohio-181 ............................................................................................................................ 7, 8, 10

Manistee Lurnber Co, v. Twp. qf Springfield (1892), 92 Mich. 277, 52 N. W. 468 ...................... 12

Marsh v. Lampert (1998), 129 Oltio App. 3d 685, 718 N.E.2d 997 ............................................. 13

Sharples.s v. Philadelphia (Pa. 1853), 21 Pa. 147 ......................................................................... 12

Tennant v. Sinclair Oil and Gas Co. (Wyo. 1960), 355 P.2d 887 ............................................... 12

YVasson v. Commr's (1892), 49 Ohio St. 622, 32 N.E. 472 .......................................................... 11

Statutes

R.C. 1.42 ......................................................................................................................................... 8

R.C. 1.47(A) .............................................................................................................................. 2, 11

ii

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R.C. 715.691 ................... ......... .................................... ........_.................. ............ 4, 7, 8, 9, 11, 13

R.C. 715.691(B) ............................................................................................................... 5, 8, 9,13

R.C. 715.691 (C) ............................................................................................................... 5, 8, 9, 13

R.C. 715.691(H) ................................................................................. 1, 2, 5, 7, 8, 9, 10, 11, 12, 13

R.C. 715.74(C)(1) ........................................................................................................................... 1

Other Authorities

1 Cooley, The Law of'I'axation (4th ed. 1924), p. 653, § 314 ...................................................... 12

4 Cooley, The Law ot'Taxation (4th ed. 1924), p. 3571, § 1817 .................................................. 12

Ohio Const, Art. XII, § 2 .............................................................................................................. 11

Ohio Const. Art. XII, § 5 .......................................................................................................... 2, 11

iii

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EXPLANATION OF WI3I' THIS IS A CASE OF PUBLIC OR GREAT GENERALINTEREST AND INVOLVES A SUBSTANTIAL CONSTITUTIONAL QUESTION

'1'his appeal is about protecting Ohio's taxpayers from any mimicipality that tries to

reduce its budget deficit by confiscating all or part of the income taxes levied by another local

government on businesses and employees that live and work outside tbe city. This case presents

a critical issue concerning the exercise of local taxation power by Ohio's cities, townships, and

otlier units of local govermnent: Whether the statutes allowing the ereation ot' joint economic

development zones (JEDZs) and joint economic developrnent districts (JEDDs) empower a

JEDZ or JEDD to levy an income tax and then transfer the collected taxes to a municipality to

use i'or exclusively municipal purposes unrelated fo the JEDZ or JEDD. By reviewing this case,

the Supreme Court can strengthen Ohio's historically and constitutionally conservative legal

framework concerning local governments' authority to levy and use income taxes.

More specifically, this case addresses the proper interpretation of the spending provision

in R.C. 715.691(H) governing the allowable uses of income taxes levied by a JEDZ's board of

directors. This provision states: "The income tax shall be used for the purposes of the zone and

for the purposes of the contracting municipal corporations pursuant to the contract." A nearly

identical provision is contained in R.C. 715.74(C)(1) for JEDDs.

Taxpayer-Appellants seek reversal or the Sixtli District Court of Appeals' holding that

the spending provision in R.C. 715.691(11) allows thc board of directors of a JEDZ to levy an

income tax on businesses and employees within the JEDZ with the aim of transferring the tax

proceeds to two cities to be used for purposes solely beneiitting the cities rather than the JEDZ.

The court of appeals failed to construe R.C. 715.691(H) in harmony with the other provisions of

the statute, and gave the spending provision an interpretation that is contrary to its plain meaning

and intent. And while Appellants do not claim that R.C. 715.691(1-1) is unconstitutional, there is

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a constitutional aspect to this case that is derived from the requirement that courts niust avoicl

adopting an interpretation that gives a stattite an unconstitutional effect. See R.C. 1.47(A). By

interpreting R.C. 715.691(1-I) as allowing a city to take income taxes levied by a JEDZ to pay for

impi-ovements and services that solely benefit the city rather than the JEDZ, the court of appeals

enabled cities to use the JEDZ statute unconstitutionally. See Friedlander v. Gorman (1933),

126 Ohio St. 163, 184 N.E. 530, paragraph one of the syllabus; Ohio Cosist. Art. XII, § 5. The

court of appeals rejected Appellants' proposed interpretation of R.C. 715.691(H) that requires

JEDZ income taxes to be used on1y for purposes that simuitaneously benefit the JEDZ and the

contracting municipalities -an interpretation that in no way infringes on the Ohio constitution.

The lower court's decision undermines core principles of Ohio's system of local taxation.

An essential attribute of a just government is that local taxes levied and collected by one tax

district cannot be applied for the benefit of another tax district, but may only be used for the

benefit of the levying tax district. Thus, a municipality's purposes must be accomplished by

municipal taxation, a township's purposes by township taxation, etc. This is part of the basic

social contract that makes paying taxes a civic obligation of every citizen. Using JEDZ taxes to

pay For improvements and services that solely benefit an adjacent city amounts to confiscating

property from the JEDZ's taxpayers and handing it over to the city's taxpayers. City residents

have less incentive to demand fiscal prudence from city officials if another tax district is paying

the city's bills. Such misuse and abuse of the power of local taxation is corrosive to our

democratic system of local government.

With many oP Ohio's cities experiencing severe budgetary crises, the court of appeals'

decision herein will open the flood-gates to cities' creation of new JEDZ's and JEDD's for the

purpose o1'subjecting businesses and employees in unincorporated areas to new income taxes to

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support city government, with no intention of providing any new public improvements or

services for these areas. A recent study showed that JEDZs/JEDDs are the niost comrnon f'orm

of inter-governinental collaboration being used by local governtnents in Ohio.' The City ot'

Toledo wants to increase its use of JEDZs/JEDDs in surrounding communities as a means of

generating additional revenues for the city tdirough tax-sharing deals with townships.2 Advocates

ot' municipal interests have urged the legislatively-created Ohio Commission on Local

Government Reform and Collaboration to propose new laws to allow "regional tax sharing" and

"pooling" local tax revenues within a region with the proceeds being °distributed to communities

based on their fiscal needs."3

The decrease ni municipal tax revenues due to the current "Great Recession" is driving

cities to look for ways to obtain a share of the tax revenues levied by other local governments as

an alternative to increasing city taxcs or cutting city services. But forcing another co nmunity's

taxpayers to pay the bills for the city next door is inherently wrong and confiscatory; a city's

bills should be paid for by the people who live and work in the city and receive the benefits the

'J. Hoornbeek and K. Macomber, Local Government Collaboration in Ohio: Are We Walking theWalk or Just Talking the Talk?, Kent State Univ. (Dec. 4, 2009), p. 4, located athttp://www.cpmraanuohio.edu/otaohio/commission/ota/Docunlents/WorkDoes/KentStateLocalGovernmentCollaborationinOhio.pdf <last visited March 5, 2010>.

'Toledo Revenues Soar From Economic Zones, The Toledo Blade, Feb. 12, 2008, located athttp://www.toledoblade.com/article/20080212/NEWS16/802120339 <last visited March 5,2010>.

'Sununary of Public Comments, Ohio Comm. on Local Govt. Reform and Collaboration (Oct.2009), p. 2, located at littp://www.cpmra.muohio.edu/otaohio/eommission/ota/Documents/'I'estimony/publicsunmiary_oct.pdf <last visited March 5, 2010>; and Summary of' PublicComments, Ohio Comm, on Local Govt. Reform and Collaboration (Dee. 2009), p. 2, located athttp://www.epmra.muohio.edu/otaohio/commission/ota/Documents/Testimony/publiesuinmary_nov.pdf <last visited March 5, 2010>.

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city provides. The Supreme Court should reinforce these basic principles of local taxation by

using this case to build on the legal foundation created in Friedlander, supra.

STATEMENT OF FACTS

The following (acts are set forth in the parties' joint stipulations of facts and exhibits. In

June 2002, the cities of Toledo and Maumee entered into a contract with Monclova Township to

fonn a.IEDZ pursuant to R.C. 715.691. The JEDZ's territory enconipasses several hundred acres

in Monclova Township, including the Briarfield Business Park that was developed and occupied

ten years before the JEDZ was created. Appellants are a business-owner and an employee in

Briarlield, who arc both subject to the 1.5% income tax levied by the JEDZ's board of directors.

The JEDZ contract provided for each of the contracting parties to receive one-third of the

net proceeds of a 1.5% income tax to be levied by the JEDZ board of directors on all business

proiits and employee wages in the JEDZ. In response to Appellants' objections, the cities and

township made minor modifications to the JEDZ contract, such as restructuring Monclova

Township's one-third distribution of JEDZ tax revenues into a contract payment of cune-third of

the JEDZ's income tax revenues in return for Monclova's provision in the JEDZ of "all usual

and customary governmental services offered by Monclova, stich as fire protection, medical

rescue and road maintenance service." 'I'he remaining two-thirds of the JEDZ income tax were

to be split 50/50 between Maumee and Toledo. The revised contract was submitted to the voters

of Monclova T'ownship for approval in the November 2002 general election and was rejected.

Appellees re-subinitted the JEDZ contract to the voters of Monclova Township in

November 2003, and it was approved. In April 2004, the contracting parties amended the

JEDZ's boundaries to remove two parcels where voters resided so that the JEDZ board of

directors could levy a 1.5% income tax without holding an election Lmder R.C. 715.691(H).

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Amazingly, the JEDZ contract includes provisions explicitly disclainiing any obligation

by the cities and township to provide any improvements, services or benefits for the JEDZ.

Section 3 of the JEDZ Contract states:

"Nothing contained herein shall be construed as obligating any party to provideany particular service, level of seivice, or fmancial commitment to the JEDZterritory, and such matters shall be left to the fizrther mutual agreement of the

parties."

And Section 9 of the JEDZ contract states:

"Nothing herein shall be construed as itnposing upon any pat1.y an obligation totmdertake and pay for improvements other than as the parties may subsequently

agree from time to time."

On their face, these provisions completely undermine the fundamental purpose for which the

General Asseinbly allows a JEDZ to be created in the first place. Specifically, R.C. 715.691(B)

and (C) require the cities and township to "enter into a contract whereby they agree to sliare in

the costs of impirovements for the area designated as a JEDZ," and to "set forth each party's

contribution to" the JEDZ.

The JEDZ board of directors employed the Maumee tax department to administer the

collection of the JEDZ's income tax. Between July 1, 2006, when collection commenced, and

December 31, 2007, Maumee collected $1,194,936.67 in JEDZ income taxes. After paying

approximately $75,000.00 to Maumee and Monclova Township for insurance, tax collection and

secretarial services, the remainiiig $1.12 mitlion of JEDZ taxes was distributed in one-thhd equal

shares to Maumec, 'I'oledo, and Monclova '1'ownship. Between Noveinber 2006 and February

2008, Maumee, Toledo and Monclova Township each received $372,252.83 of JEDZ income tax

fiinds distributed to them over six quarterly distributions. The distributed funds were paid into

the respective gencral funds of Maumee, Toledo, and Monclova Township.

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The JEDZ board of directors did not vote on distributing the JEDZ income tax proceeds

to the cities and township. Nor did the Board's minutes evidence any improvements, services or

benefits for the JEDZ that were provided by the cities or township to justify the quarterly

distributions. The Board never received an invoice or report from Maumee, Toledo or Monclova

Townsllip describing any iniprovements, services, or benefits being provided to the JEDZ. The

Board's February 15, 2007 minutes show tJie Board didn't see any reason to ask for invoices or

to approve the distributions because of their understanding that the JEDZ contract required the

automatic quarterly distribution of all of the JEDZ's tax funds to the cities and township

regardless of the Board's judgment whether the funds are being used appropriately.

"Payments to Monclova Township and distributions to Maumee and Toledo aremandated by the Contract, and separate authorization [for those payrnents) wouldnot be necessary. ... Kuns suggested that a directive be prepared for [MaumeeFinanee Director] Dave Hazard stating the Contract provides for distribution andhe can do so regularly witliout Resolution otherwise." (Joint Stipulations, April.28, 2008, Exhibit MM).

The JEDZ Board considers itself obligated by the JEDZ contract to ilistribute its tax revenues to

Mamnee, 7'oledo, and Monclova whether or not the cities and township provide any

in2provements, services or benefits to the JEDZ.

'I'he JEDZ contract provides that Maumee, Toledo, and Monclova each appoint three

persons to the nine-member JEDZ board of d'u•ectors. The JEDZ contract could last for 90 years.

It has an initial term of 30 years with two automatic 30 year renewal terms.

STATEMENT OF THE CASE

Taxpayer-Appellants' filed suit in March 2004 to invalidate and enjoin the JEDZ contract

and the JEDZ income tax. The common pleas court initially granted appellants' summary

judgment motion to invalidate the JEDZ contract on grounds the contract automatieally

terminated according to its own terms. The court of appeals reversed the lower court and

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remanded the case for ftirther proceedings. .Iankowski v. Monclova-Maumee-Toledo Joint Ec•on.

Dev. Zone (Lucas App.), 2005-Ohio-6652. The common pleas court subsequertly grapted

Appellees' summary judgment niotion on all of Appellants' remaining claims and dismissed the

complaint. The court of appeals affumed in part, and reversed in part, the lower court's decision.

Jankowski v. Monclova-Maumee-Toledo Joint Econ. Dev. Zone (Lucas App.), 2010-Ohio-181

(hereinafter referred to as Jankowski I1). 'hhe court of appeals agreed with the lower court that

R.C. 715.691(II) allows .IEDZ income taxes to be used by municipalities for purposes that are

unrelated to the JEDZ, and the JEDZ conh-act cloes not violate the terms and plnpose of R.C.

715.691. Id., ¶¶ 37-38, 58. The court of appeals reversed the lower court by invalidating the

JEDZ's agreement to pay one-third of JEDZ income taxes to the township. Id, ¶ 46. Appellants

only seek this Court's review of the court of appeals' erroneous determinations tliat: (a) R.C.

715.691(II) authorizes the distribution of JEDZ income taxes to the contracting cities to use for

exclusively municipal purposes unrelated to the JEDZ; and (b) the JEDZ contract does not

violate the terms and purposes of R.C. 715.691.

ARGUMENT IN SUPPORT OF PROPOSITION OF LAW

Proposition of Law No. 1: R.C. 715.691(H) does not authorize the use of income taxes formunicipal purposes that are unrelated to the joint economic development zone levying the

tax.

'I'he parties dispute the proper interpretation of the spending provision in R.C.

715.691(H) that states: "The income tax shall be used for the purposes of the zone and for the

purposes of the contracting municipal coiporations pursuant to the contract." The court of

appeals held this sentence authorizes the distribution of JEDZ income taxes to contracting

inunicipalities to provide improveinents and services that solely benefit the cities rather than the

JEDZ. Jankowski II, supra, ¶¶ 37-38. 'Che lower court's interpretation of the spending provision

of R.C. 715.691(H) was in error for three reasons:

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A. 1'he court did not read the language of the spending provision in the context of all

the provisions in R.C. 715.691 and, specifically, R.C. 715.691(B) and (C);

B. A literal reading of the conditions set forth in the spending provision requires

them to be read conjunetively rather than disjunctively, so that at a minirnuni, all

uses of JEDZ taxes must satisfy both conditions simultaneously; and

C. The lower court's interpretation of the spending provision allows JEDZ incoine

taxes to be expended in violation of the Ohio constitution, while Appellants'

narrower reading of the spending provision results in consistently constitutional

use of J ED'Z taxes.

A. In The Overall Context of R.C. 715.691, the Spending Provision in R.C.

715 691(II) Requires JEDZ Income Taxes To Be Used Solely For Puruoses

BenefittinIZ The JEI)Z.

The lower court's interpretation of the spending provision of R.C. 715.691(11) divorces

its meaning from the rest of R.C. 715.691. The statute sets forth the specific purposes of a JEDZ

contract in R.C. 715.691(B) and (C) as follows:

i. Sharing in the costs of nnprovements for an area located in one or more ofthe contracting parties that they designate as a,joint economic development zonefor the purpose of facilitating new or expanded growth for commercial orecononiic development in the state; and

ii. Identifying each contracting party's contribution to the joint eeouonlicdevelopment zone including the provision of services, money, or equipment.

These are the only purposes expressed in the statute. 'I'herefore, when reading the tinal

clause in the spending provision of R.C. 715.691(11) -- "... and for the purposes of the

contracting inuniczpal corporations pursuant lo the contract" - the "purposes" rel'erred to in

R.C. 715.691(H) must relate to the statutory puiposes set forth in R.C. 715.691(B) and (C) for

whiclr the cilies and township may enter into a JEDZ contract in the first place. R.C. 1.42;

Commerce & Industry Ins. Co. v. Toledo (1989), 45 Ohio St. 3d 96, 102, 543 N.E.2d 1188

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(words and phrases in a statute must be read in context of the whole statute). Read as a whole,

the JEDZ statute clearly emphasizes the provision of improvements, services and bene6ts for the

JEDZ. Nowhere does the statute indicate that one of its intended purposes was to provide a new

means of imposing municipal taxation on non-resident businesses, and non-resident employees

working outside the city, to pay for the general operation ol' city government.

Under Appellees' atid the court of appeals' interpretation of R.C. 715.691(H), all that is

necessary for the contracting cities to use all of the JEDZ's collceted income taxes to pay for

municipal benefits having no relationship whatsoever to the JEDZ, is to include language in the

JEDZ contract that authorizes that to occur, In other words, under the lower court's ruling, the

spending provision in R.C. 715.691(H) amounts to an invitation to cities to draft a JEDZ contract

that gratrts themselves the power to use JEDZ taxes for exclusively municipal purposes unrelated

to the JEDZ. If that's what the General Assembly intended, it didn't need to pass a JEDZ (or

JEDD) statate. It could have passed a statute allowing cities to directly impose city income taxes

on businesses and employees in the surrounding uniucorporated areas (although such a law still

would be unconstitutional for the reasons discussed below).

B. The Court of Appeals Erred By Reading The Conditions On The Use OfIEDZ Taxes In R C 715 691(3) Diciunetively Rather Than Coniunctively.

There are two conditions on the use of JEDZ taxes under R.C. 715.691(II). JEDZ taxes

shall be used: (a) for the purposes of the zone; "and" (b) for the purposes of the contracting

mruiicipal corporations pursuant to the contract. The court of appeals' construction of R.C.

715.691(H) approves the application of JEDZ taxes if either of these conditions is met. But the

statute clearly lists the conditions conjunctively, not disjunctively. By joining the conditions in

R.C. 715.691(H) with the conjunction "and," the General Assembly plainly intended that any use

of JEDZ taxes must meet both conditions simultaneously. See Colonial Mortg. Service Co. v.

9682787v1

Soulhard (1978), 56 Ohio St. 2d 347, 349, 384 N.E.2d 250 ("Because the two conditions are

joined by an `and,' meaning `in addition to,' both conditions must be niet").

It is easy to think of examples demonstrating why the Legislature would require

simultaneous compliance with both eonditions to spend JEDZ taxes. For instance, a JEDZ board

of directors may think it would be great for econonlic development to construct a convention

center in the JEDZ, but such a project probably would be harmful to the contracting municipality

if a convention center already existed within the city. Conversely, a contracting city might find it

useful to apply JEDZ taxes to construct an expansion of city hall, but such a project wouldn't

have any value to the JEDZ. By stating the spending conditions conjunctively, the General

Assenlbly wisely struck a balance that requires every use of JEDZ taxes to help both the JEDZ

and the contracting cities. The court of appeals' interpretation is contrary to the plain meaning

and intent of R.C. 715.691(II), and therefore nlust be reversed.

C. Courts Must Avoid Adopting a Statutory Construction That Allows TheStatute To Operate Unconstitutionally If There Is A Plausible Construction

That Allows The Statute To Comply Witlr The Constitution.

The court of appeals' and Appellees' construction of R.C. 715.691(H) is untenable

because it violates constitutional limitations on the exercise of local taxation powei:4 It is

° The court of appeals erroneously cteclined to address this argument on grounds that Appellants'amended complaint did not "seek a declaration" and because a companion statute was found

constitutional in Desenco, Inc. v. Akron (1999), 84 Ohio St.3d 535, 706 N.E.2d 323. Jankowski

II, ¶ 38, n.l. Paragraphs 83 and 84 of the Amended Complaint requested a declaration that theJEDZ Contract is contrary to R.C. 715.691 because: (a) the cities and township" do not intend toprovide new services or benefits to the JEDZ area, but instead created the JEDZ solely to extractJF,DZ income taxes for the benefit of the cities' and township's general funds"; and (b)"provisions of the JEDZ Contract regarding the maintenance and disbursement of JEDZ taxesrequire the unlawful transfer of JEDZ taxes to the cities and township." R.C. 1.47 (A) allowsAppellants to present a constitutional argument as part of a declaratory judgment claim raising aqucstion of statutory interpretation. And even a cursory examination of Desenco reveals it does

not remotely address the legal issues Appellants raise hereni.

10682787v1

presumed the General Assembly intended R.C. 715.691(H) to coniply with the Ohio constitution.

R.C. 1.47(A), In Friedlander v. Gorman (1932), 126 Ohio St. 163, 184 N.E. 530, the Supreme

Court invalidated the "distiibutive" feature of an intangibles tax law that authorized the use of

tax funds collected in one county to pay for the local obligations of local subdivisions in another

county. 'The Friedlander Court described the constitutionally prohibited ill thusly:

"1'he tax collected in Lucas County may be expended in Jefferson County for apurely local Jefferson county purpose. Toledo citizens under this law may bemade to pay the salaries of policemen in Steirbenville. In short, the citizens ofone city may be charged, under the provisions of this law, with part payment ofpurely local projects in another city, in which projects they are not in the slightestdegree interested, but for which they have been taxed wit.hout any representationwhatever."

Id., p. 169. 'I'he Friedlander Court agreed with the proposition that Ohio's constitution requires

an exclusively county purpose to be aceomplished by county taxation. Id., pp. 169-170. In

Wasson v. Comrnr's (1892), 49 Ohio St. 622, 635-37, 32 N.E. 472, the Court cited Ohio Coiist.

Art. XII, § 2 and the takings clause as prohibiting the General Assembly from authorizing taxes

that take the public burdens of one district and impose them on anotlier district. 'I'he court in In

re Petition for Transfer ofFzsnds (Montgomery App.), 52 Ohio App. 3d 1, 556 N.E.2d 191, held

a statute authorizing the transfer of fire district taxes to a township's general fund was

unconstitutional under Ohio Art. XII, §5.' Chief Justice Cooley explained the relevant

constitutional limits on local taxation as follows:

"A state purpose must be accomplished by state taxation, a county purpose bycounty taxation, and a public purpose for any inferior district by taxation of suehdistrict. This is not only just, but it is essential. To any extent that one nlan is

' The court in In re Petitionfor Transfer emphasized the same point being asserted by theAppellants in this case. "The residents oP the villages who vote for and receive benefit from thepayment of taxes irnposed by the special fire protection levy would receive no bene{it from theconstruction of a township building ... . We suggest that if the people of Perry T'ownsliip want topay for a central government building, they should vote for a levy to do so." In re Pelition for

Transfer, supra, p. 3.

11682787v1

compelled to pay in order to relieve others of a public burden properly restingupon them, his propei-ty is taken, as plainly and palpably as it would be ifappropriated to the payment of' debts or the discharge of obligations which theperson thus relieved by his payment mi.ght owe to private parties. `By taxation,' itis said in a leading case, `is measrt a certain mode of raising revenue for a publicpurpose in wluch the community that pays it has an interest. An act of thelegislature authorizing contributions to be levied for a mere private purpose, or fora purpose which though it be public, is one in which in which the people fromwhom they are exacted have no interest, would not be a law, but a sentencecommanding the periodical payment of certain sums by one portion or class ofpeople to another. "'

1 Cooley, The Law of Taxation (4"' ed. 1924), p. 653, § 314 (qrioting Sharpless v. Philadelphia

(Pa. 1853), 21 Pa. 147, 174); accord Manislee Larrriber Co. v. Twp. of Spr•ingfield (1892), 92

Mich. 277, 279, 52 N.W. 468; Amos v. Mathews (1930), 99 Fla. 1, 126 So. 308, 326; Tennant v.

Sinclair Oil and Gas Co. (Wyo. 1960), 355 P.2d 887; 4 Cooley, 'fhe Law of Taxation (4`h ed.

1924), p. 3571, § 1817 ("It is settled that local taxes collected by one tax district cannot be

applied for the benefit of another tax district.").

'1'he same constitutional defect invalidated by the Nr•iedlander Court is created by the

court of appeal's construction of R.C. 715.691(11) in this case to allow the distribution of JEDZ

incoine taxes to Maumee and Toledo for application to exclusively municipal purposes um-elated

to the JEDZ. Because it is possible to interpret R.C. 715.691(H) to comply with the Ohio

constitution by requiring all JEDZ taxes to be used for puiposes that benefit the JEDZ, the court

of appeals' statutory construction must be reversed, and the interpretation advocated by

Appellants must be adopted. Bishop v. Hybud Equip. Cnrp_ (Summit App. 1988), 42 Ohio App.

3d 55, 536 N.E.2d 694, paragraph one of syllabus (when a statute is susceptible of two meanings

-- one of whieh would make the statute unconstitutional and the other of which would make it

constitutional -- courts are bound to give the statute that constiuction which would uphold its

validity).

126a27a7vt

Proposition of Law No. 2: A contract to create a joint econoinic development zone under

R.C. 715.691 is invalid if the contract's provisions violate the express terms and purpose ofR.C. 715.691.

The essence of a JEDZ contract is the contracting entities' obligation to make

improvements to the JEDZ and to share in the costs of making those improvements. R.C.

715.691(B). Absent an enforceable obligation to provide and share in the cost of improvements

for the JEDZ, there is no JEDZ contract under R.C. 715.691. Additionally, R.C. 715.691(C)

requires lhe.IEDZ contract to set forth the contribution that each of the eontracting parties

commits to making to accomplish the improvetnents ref'erenced in R.C. 715.691.

In this case, the obvious purpose of the JEDZ contract was to create a slush fund for

Mauniee and T'oledo to use for their own purposes unrelated to the JEDZ, contrary to the

statutoril.y authorized purposes for creating a JEDZ under R.C. 715.691. In furtherauce of their

unlawful purpose, Maumee, Toledo and Monclova Township iticluded language in Sections 3

and 9 of the JEDZ contract explicitly disclaiming any obligation to provide improvements,

services or benefits for the JEDZ. These provisions completely ttndermine the fundamentat

purposes stated in R.C. 715.691(B) and (C) for creating a JEDZ in the first place. 'I'he cities' and

township's refusal to includc an enforceable conunitinent to provide improvements and

contributions within the JEDZ, and to specify how Appellees would share in the costs of'those

improvements, violates the express terms and the very essence of R.C. 715.691. It is well-settled

that a valid contract cannot be made if its purpose or perfomiance is contrary to statute. Marsh v.

Lampert (1998), 129 Ohio App. 3d 685, 687, 718 N.E.2d 997 (citing Bell v. Northern Ohio Tel.

Co. (1948), 149 Ohio St. 157, 158, 78 N.E.2d 42). Accordingly, the cotut of appeals erred in

upholding the validity of the JEDZ contract which was designed to re-direct JEDZ income taxes

to the cities and township witliout them providing any improvement, services, or benefits to the

JEDZ in return, contrary to the terms and purpose of R.C. 715.691.

13682787v1

CONCLUSION

For the reasons discussed above; this case involves matters of public and great general

interest and a substantial constitutional question. Appellants request this Court to accept

jurisdiction in this case so that the important issues presented will be i-eviewed on the inerits.

Respectfully Subinitted,

EASTMAN & SMITI-I LTD.

tAX ^Xm_. ^ ^1t,.^ hJ&C0737)Albin Bauer, II, Esq. (0061245)EASTMAN & SMITII LTD.One ScaGate, 24`h FloorP.O. Box 10032Toledo, Ohio 43699-0032Telephone: (419) 241-6000FaY? u`(419^ 247-1717, _. . _ . ,Email: abauer@eastniansmith.corn

Attorneys for Plaintiffs-AppellantsDavid D. Jankowski and Robert Barnhart

CERTIFICATE OF SERVICE

A copy of the foregoing Memorandum in Support of Jurisdiction of

Appellants David D. Jankowski, EtAI. was mailed this 314^- day of March, 2010, to Walter

J. Celley, Esq., Celley & Sanderson LLP, 27457 IIoliday Lane, Suite E, Perrysburg, OH 43551;

Sheilah H. McAdanis, Esq., Marsh McAdams Ltd., 204 W. Wayne Street, Maumee, OH 43537;

and to Adam W. Lou1r.Y, Esq., Department of Law, City of Toledo, One Government Center,

Suite 250, Toledo, OH 43604-2293., co-counsel to Defendants-Appellees,

-qt.{I/)7^Attorncy for Plaintiffs-AppellantsDavid D. Jaiikowski and Robert Barnhart

14682787v1

APPENDIX

HLFDCOURTOP APPFALS

2010 Jh.N 22 A 8: 0 3

CO u t,.oi^ 'I_t /.S COUR 1G^^ f;I_ _I1TLi,

CLLIi':'( ^?I'r;C^UitTJ

IN TIIE COURT OF APPEALS OF OHIOSIXTH APPELLATE DISTRICT

LUCASCOUNTY

David D. Jankowslci, et al. Court of Appeals No. L,-09-1130

Appellants Trial Court No. CI04-2400

V.

Monelova-Maumee-"I'oledo JointEconomic Development Zone Board ofDirectors, et al. DECISION AND JUDGMENT

Appellees Decided: JAN 2 B ZDiO

Albin Bauer, II, and Daniel W. Everson, for appellantsDavid D. Jankowslci and Robert Barnhart.

Adam W. Loukx, Acting Law Director, and Paul F. Syring,Senior Attorney, for appellees city of Toledo and Monclova-Mautnee-Toledo Joint Economic Development Zone Board of Directors;Sheilah H. McAda.ms, Law Director, for appellants city of Maumee andMonclova-Maumee-Toledo Joint Economic Development Zone Board ofDirectors; and Walter J. Celley, Solicitor, for appellees Board of Trusteesof Monclova Township and Monclova-Maumee-Toledo Joint EconomicDevelopment Zone Board of Directors.

^-JOURNAUZEDJAN 2 2 2Obq

SINGER, J.

{¶ 1.} Appellants appeal a summary judgment entered in the Lucas County Court

of Common Pleas against them and in favor of a Joint Economic Development Zone in a

suit challenging the legality of an income tax imposed upon employees and businesses

within the zone. For the reasons that follow, we affirm, in part, and reverse, in part.

{¶ 2} In 2003, the governing bodies of appellees, Monclova Township, city of

Maumee and city of Toledo, prodiiced a proposed contract for the creation of a Joint

Econoinic Development Zone ("JEDZ") for a commercial area lying generally west of

Interstate 475 and soutli of Salisbury Road in Monclova Township in Lucas County.

After Maumee and Toledo adopted the contract, the citizens of Monclova Township

approved it at the 2003 general election.

{$ 3} In 2004, the JEDZ board of trustees enacted a one and one-half percent

income tax on all businesses and individuals in the zone, effective in April 2004. In

March 2004, appellants, David Jankowski and Robert Barnhart, instituted a declaratory

judgment action to invalidate the tax and enjoin its collection.

(^[ 4) Appellants asserted that (1) since there were electors living in the JEDZ, an

income tax could not statutorily be imposed without their approval by vote or petition,

(2) the JEDZ contract terminated automatically when the JEDZ board failed to institute

an income tax withia 120 days of the contract's effcetive date, (3) the contract's

prohibition of annexation was unlawful, (4) a provision requiring the JEDZ to contract

with the township for governmental services was unlawful, (5) a contract for services

with the township for services that the township is already legally obligated to provide is

nothing more than an attempt to share income tax revenues with the township which is

not permitted in law.

{^ 5) The JEDZ board suspended the tax pending resolution of the legal issues.

In Apri12004, the JEDZ board amended the JEDZ contract to exclude from the zone the

two properties in the zone upon which there were residents. In May 2004, appellants

amended their complaint to allege that the JEDZ board's amendment excluding inhabited

residences from the zone was illegal.

{¶ 61 The trial court would eventually rule that the contract terminated by its own

terins when the JEDZ board failed to effect an income tax in the district within 120 days.

Appellees appealed this judgment and won reversal. .lankowski v. Monclova-Maunaee-

Toledo JEDZ, 6th Dist. No. L-05-1156, 2005-Ohio-6652, ¶ 28. We remanded the case to

the trial court for consideration of other issues found moot as the result of the initial

judgment. Id. at 1J 33.

{¶ 7) On remand, the matter was subnlitted to the court on cross-motions for

summary judgment with stipulated facts and exhibits. On consideration, the trial court

granted appellees' motion for summary judgment on all issues and denied appellants'.

{¶ 8} In a coinprehensive judgment, the court concluded that appellees' 2003

JEDZ agreenaent did not contravene the intent and purposes of R.C. 715.691, nothing in

R.C. 715.691 requires that income tax revenues be used exclusively in the JEDZ, the

3.

JEDZ board's contract with Monclova Township to provide governmental services in the

zone was lawful and the subsequent amendment of the 2003 JEDZ agreement was proper.

{I( 9} From this judgment, appellants now bring this appeal. Appellants set forth

the following three assignments of error:

{J(10} "First Assignment of Error:

{1(11} "The trial court erred in holding that a JEDZ income tax levied pursuant to

R.C. 715.691(H) may be distributed to one or more contracting municipalities for

expenditure of municipal purposes having no relationship or benefit to the JEDZ.

{¶ 121 "Second Assignment of Error:

{Iff 13} "The trial court eiTed in sustaining the validity of the contract between the

JEDZ and Monclova "Township required by paragraph 5 of the JEDZ contract.

{¶ 14} "Third Assignment of Error:

{¶ 15} "The trial court erred in declaring the JEDZ contract valid because the

essential provisions of the 2003 JEDZ contract violate the express terms and purpose of

R.C. 715.691."

{¶ 16} Appellate courts employ the same standard for summary judgment as trial

courts. Lorain Natl. Bank v. Saratoga Apts. (1989), 61 Ohio App.3d 127, 129. The

motion may be granted only when it is demonstrated:

{q[ 17} "* * * (1) that there is no genuine issue as to any material fact; (2) that the

moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can

come to but one conclusion, and that conclusion is adverse to the party against whom the

4.

motion for summary judgment is made, who is entitled to have the evidence construed

most strongly in his favor." I-Iarless v. Willis Day Warehousing Co. (1978), 54 Ohio

St2d 64, 67, Civ.R. 56(C).

111181 When seeking summary judgment, a party must specifically delineate the

basis upon which the motion is brought, Mitseff v. Wheeler (1988), 38 Ohio St.3d 112,

syllabus, and identify those portions of the record that detnonstrate the absence of a

genuine issue of material fact. Dresher v. Burt (1996), 75 Ohio St.3d 280, 293. Vd11en a

properly supported motion for summary judgment is made, an adverse party may not rest

on mere allegations or denials in the pleading, but must respond with specific facts

showing that there is a genuine issue of material fact. Civ.R. 56(E); Riley v. Montgomery

(1984), 11 Ohio St.3d 75, 79. A "material" fact is one which would affect the outcome of

the suit under the applicable substantive law. Russell v. Interim Personnel, Inc. (1999),

135 Ohio App.3d 301, 304; Needhanz v, Provident Bank (1996), 110 Ohio App.3d 817,

826, citing Anderson v. Liberty Lobby, bac. (1986), 477 U.S. 242, 248.

{4( 19} R.C. 715.691 provides an alternative tructure for the creation of a Joint

Economic Development Zone when one of ihe parties to the JEDZ contract does not levy

a municipal income tax. in material part, the statute provides:

{I[ 20} "(B) * * * Two or more municipal corporations or one or nlore townships

and one or more municipal corporations may enter into a contract whereby they agree to

share in the costs of improvements for an area or areas located in one or more of the

contracting parties that they designate as a joint economic development zone for the

5.

purpose of facilitating new or expanded growth for commercial or economic

development in the state. The contract and zone shall meet the requirements of divisions

(B) to (7) of this section.

{1[ 21} "(C) The contract shall set forth each contracting party's contribution to the

joint economic development zone. The contributions may be in any form that the

contracting parties agree to, and may include, but are not limited to, the provision of

scrvices, money, or equipment. The contract may be amended, renewed, or terminated

with the eonsent of the contracting parties. * * *

{¶ 22} "(D) Before the legislative authority of any of the contracting parties enacts

an ordinance or resolution approving a contract to designate a joint economic

developnlent zone, the legislative authority of each of the contracting parties shall hold a

public hearing concerning the contract and zone. * * *

111231 "(E) After the public hearings required under division (D) of this section

have been held, each contracting paity may enact an ordinance or resolution approving

the contract to designate a joint economic developrrient zone. * * * If any of the

contracting parties is a township *** the township or townships shall submit the

resolution to the electors.

f$ 24} "(F) * * *

{¶ 25} "If a majority of the electors of each contracting party voting on the issue

vote for the ordinance or resolution and contract, the ordinance or resolution shall

6.

become effective itnmediately and the contract shall go into effect immediately or in

accordance with its terms.

{¶26} "(G) (1) A board of directors shall govern each joitit economic development

zone * * *.

{¶ 27) "(3) The board is a public body for the purposes of [R.C. 121.22]. [R.C.

Chapter 2744] applies to the board and the zone.

{¶ 281 °(FI) The contract may grant tothe board of direetors appointed under

division (G) of this section the power to adopt a resolution to levy an income tax within

the zone. The income tax shall be used for the purposes of the zone and for the pttrpases

of the contracting municipal corporations pursuant to the contract. The income tax may

be levied in the zone based on income earned by persons working within the zone and on

the net profits of busitiesses located in the zone. The income tax is suUject to [R.C.

Chapter 718], except that a vote shall be required by the electors residing in the zone to

approve the rate of income tax unless a majority of the electors residing within the zone

* * * submit a petition to the board requesting that the election * * * not be held. If no

electors reside within the zone, then division (H)(3) of this section applies. The rate of the

income tax shall be no higher than the highest rate being levied by a municipal

corporation that is a party to the contract.

{j( 29) "(1) The board of directors may levy an income tax at a rate that is not

higher than the highest rate being levied by a municipal corporation that is a party to the

contract, provided that the rate of the income tax is first submitted to and approved by the

7.

electors of the zone ***. If the voters approve the levy of the income tax, the income tax

shall be in force for the full period of the contract establishing the zone. No election shall

be lield under this section if a majority of the electors residing within the zone,

deterinined as specified in division (H) of this section, submit a petition to that effect to

the board of directors. * * *

{9130} "(3) If no electors reside in the zone, no election for the approval or

rejection of an income tax shall be held under this section ***

{$ 31} "(4) The board of directors of a zone levying an income tax shall enter into

an agreement with one of the municipal corporations that is a party to the contract to

adininister, collect, and enforce the income tax on behalf of the zone. ***." (Emphasis

added.)

1. Tax Distribution

321 The JL+',DZ contract provides that the board enter into a contract with

Monclova Townskup to furnish witliin the zone all "usual and customary governmental

services." In compensation, the township is to be paid one-third of the net proceeds of

the income tax. The reinainder of the net proceeds is to be equally divided between

Maumee and Toledo. The parties have stipulated that, once the JEDZ began to collect

income taxes, the net proceeds were distributed with one-third of the net going to the

general funds of Maumee, Toledo and Monclova Townsliip.

{¶ 33} In their first assignment of error, appellants contend that R.C. 715.691(H)

permits the use of tax revenues from the JEDZ only for the benefit of the JEDZ. By

8.

depositing JEDZ tax receipts into the cities' general funds, appellants insist, these funds

may be used for purposes unrelated to the JEDZ.

{¶ 341 Appellees disagree, finding nothing in the language of the statute that

mandates that income tax revenues collected in the JEDZ be spent in or for the JEDZ.

Indeed, appellees maintain, such a tortured interpretation would render superfluous the

portion of R.C. 715.691(H) wliieh provides that "[t]he income tax shall be used * * * for

the purposes of the contracting municipal coiporations pursuant to the contract."

{11 351Taxing statutes require strict construction. Any doubt must be resolved in

favor of the citizen or property upon whoin the tax burden is to be imposed. Davis v.

Willoughby (1962), 173 Ohio St. 338, paragraph one of the syllabus. Nevertheless, a

cardinal rule of statutory construction directs that we look first to the language of the

statute to determine legislative intent. Where the language of the statute is plain and

unambiguous, any interpretive effort is at an end and the statute must be applied as

written. Provident Banlc v. Wood (1973), 36 Ohio St.2d 101, 105-106. In reading the

statute, we are directed to presume that the entire statute is intended to be effective and

each part has son2e import. R.C. 1.47(B), Ford Motor Co. v. Ohio Bur. Enapl. Serv.

(1991), 59 Ohio St.3d 188, 190.

{¶ 361 Appellants insist that R.C. 715.691(H) must be read in concert with R.C.

715.691(B) and (C). These sections, according to appellants, establish that the purpose of

the legislation is to facilitate new or expanded commercial and economic development

9.

and define the contribution of each JEDZ partner to the zone. Consequently, use of funds

froin the JEDZ should be restricted to the JEDZ.

{¶ 37} We find nothing in R.C. 715.691(B) or (C) that reflects a legislative intent

to restrict the use of the proceeds of a JEDZ income tax to improvements witliin the zone.

In our view, the only portion of R.C. 715.691 going to the use of the fiinds obtained from

such a tax is contained in section (H'): "The income tax shall be used for the purposes of

the zone and for the purposes of the contracting municipal corporations pursuant to the

contract."

{¶ 381 Had this pbrase concluded with the directive to use the tax receipts for

purposes of the zone, then appellants' construction of the statute would undoubtedly be

valid, Ilad the legislature intended to limit the use of the tax proceeds to the zone, it

could have stopped with that directive. With the second clause of that sentence, however,

it is clear that the legislature intended a greater breadth in the permissible use of these

funds. Revenues may be used for the purposes of the zone, the puiposes of the

contracting municipalities (as circumscribed by the terms of the JEDZ contract) or both.

As a matter of law, notlung in R.C. 715.691 prohibits the distribution of funds in the

manner to which appellants object. Accordingly, appellants' first assigmneiit of error is

not well-taken.'

lIn each of their assignments of en•or, appellants include an implied challenge to

the constitutionality of R.C. 715.619. As appellees point out, appellants' amendedcomplaint did not seek such a declaration, nor did appellants comply with R.C.

10.

11. Governmental Services Contract

{$ 39} In their second assignment of error, appellants complain that the JEDZ

contract with Monclova Township to provide governmental services within the JED7

should not be sustained because it is without eonsideration. According to appellants, the

township already has a legal duty to provide such services by virtue of the JEDZ being

within the township. Moreover, the township already lcvies property taxes on the

property witliin 11-ie JEDZ for purposes of providing such services. Absent some greater

contribution from the township, appellants contend, the payment authorized by the JEDZ

contract is nothing more than a thinly disguised unlawful distribution of income tax

revenues to the township.

{^ 40} The trial court rejected this argument, concluding that (1) R.C. 715.691(C)

authorizes the contracting parties to a JEDZ agreement to provide services to the zone

and does not preclude a township from receiving payment for those services, (2) a JEDZ

board is a "body corporate" and responsible for government.al activities witliin the zone,

(3) R.C. 9.60(B) and (C) authorize governmental entities to contract for fire protection

and emergency medical services, (4) R.C. 715.691(H) authorizes a JEDZ board to levy an

income tax within the zone and use its receipts for the puiposes of the zone, (5) such a tax

is constitutional, (6) absent a contract, the township would have no right or duty to

provide services within the zone, and (7) payment for the provision of usual and

2721.12(A). Moreover, a companion statute has been found constitutional. Desenco,

Inc. v. Akron. (1999), 84 Ohio St.3d 535.

11.

customary services is not a distribution of income taxes to the township, but a payment

"for the purposes of the zone."

11411 The parties stipulate that, well before the creation of the JEDZ, Monclova

Township had in place property tax levies for purposes of township road maintenance,

fire services, and emergency inedical services. It is also stipulated that the township

provides the same zoning services, fire protection and prevention services, emergency

inedical, and road maintenance services within the J.1;D'Z as it does for the remainder of

the township outside the zone.

{,j 42} The "governmental services" contract between the JEDZ and the township

provides that the township, "* ** shall furnish or cause to be furnished to the properties

included in the JEDZ territory, all usual and customary governmental services furnished

by Monclova to other comparable properties in Monclova, including: fire protection,

medical rescue, and road maintenance services." In return Monclova Township is to

receive one-third of the net tax revenues from the zone.

{¶ 43} The boundaries of a township are, for the most part, within the purview of

the county commissioners of the county in which the township is located. See R.C.

503.02-503.15. Even if a municipality is organized within the boundaries of a township,

the teiritory within the city Iirnits remains part of the township absent the exercise of a

statutory method to adjust the township boundaries. State ex rel. Halsey v. Ward (1867),

17 Ohio St. 543, paragraph one of the syllabus; Board of Twp. Trustees, Hudson Twp. v.

Larnbrix (1978), 60 Ohio App.2d 295, 291. An automatic absorption of township ten-itory

12.

into a municipality would require either express or implied statutory authority, which is

not found. State ex rel. Halsey at 546. Logically, the rule for municipalities should apply

to special districts or zones.

{^ 441 The parties have tiot directed our attention to, nor has our independent

study revealed, any statutory authority directing the automatic absorption of township

territory into a JEDZ on creation of the JEDZ. Absent such authority, we must conclude

that the teiritory encompassed in the It4onclova-Mauniee-Toledo JEDZ remains a part of

Monclova Township. As such, the occupiers of property within the zone are entitled to

the same governmental services provided elsewhere in Monclova Township. Moreover,

the Monclova Township Trustees have the same duty to provide usual and customary

governmental services in the JEDZ as they do elsewhere in the township.

{1145} As a result, the Trustees of Monclova Township have a pre-existing legal

duty to perform governmental services within the JEDZ, which are the san7e services that

they have contracted to provide to the JEDZ in return for compensation. "Performance of

a legal duty owed to a promisor which is neither doubtful nor the subject of honest

dispute is not consideration ***." Restatement of the Law 2d, Contracts (1979) 179,

Section 73. See, also, id. at 179-180, comments a and b. Consideration is an essential

element of any contract, id. at 51, Section 17; Kostelnik v. Helper, 96 Ohio St.3d 1, 2002-

Ohio-2985, at 1116, without which there is no contract. 3 Lord, Williston on Contracts

(4 Ed.2008) 176, Section 7:11.

13.

{$ 46} As a matter of law, Monclova Township has a duty to provide usual and

customary governmental services in the JEDZ. Since the contract between the township

and the JEDZ is prernised on the consideration of the township performing services it is

already Iegally obligated to provide, the contract fails for want of consideration.

Accordingly, to the extent that appellants complained that the trial court erred in

declaring the contract valid, their second assignmcnt of er-ror is well-taken. It is not well-

aken in any other respect.

{l( 471 It is iinportant to note that this does not invalidate the JEDZ income tax,

nor does it iinply that the contract was part of a schenie to improperly direct income tax

revenue to the township. Neither does it foreclose coinpensation to the township for

services above and beyond the ordinary which have been or will be provided to the

JEDZ.

III. 2003 JEDZ Contract

{¶ 481 In their remaining assignment of error, appellants maintain that the trial

court's declaration of the validity of the 2003 JEDZ contract was erroneous because the

contract violated the terms and purposes of R.C. 715.691. Appellants point to section

(B), noting that the language of that section grants authority to make a contract "to share

the costs of improvements" within the zone and mandates that "[t]he contract and zone

shall meet the requirements of divisions (B) to (J) of this section" (emphasis appellants').

Appellants suggest that these provisions are the essence of the statute.

14.

{¶ 491 Having defined what they believe to be the essence of the statute, appellants

compare the terms included in the 2003 JEDZ contract and find them wanting.

Appellants insist that sections 3 and 9 of the JEDZ eontract expressly disclaim any

specific obligation to make any specific iinprovements ox provide any specific services or

benefits for the zone. Appellants point to a paragraph in section 3 which states:

{^ 50} "Nothing contained hercin shall be construed as obligating any party to

provide any particular service, level of service, or financial cormnitment to the JEDZ

Territory, and such matters shall be left to the further agreement of the parties."

51} A paragraph in section 9 provides:

{¶ 521 "Nothing herein shall be eonstrued as imposing upon any party an

obligation to undertake and pay for improvements other than as the parties may

subsequently agree from time to time.°

{¶ 53} At best, appellants insist, these provisions eonstitute an agreement to make

a future unspecified, undefined agreement which falls short of the enforceable

commitinent to nlalce specific irnprovements contemplated by R.C. 715.691.

{¶ 54} Appellees respond that, while the 2003 JEDZ contract does not require

specific improvements or services, it certainly contemplates the parties providing benefits

and improveinents in the zone. Incorporated into the agreement is an Economic

Development Plan for the JEDZ. This plan, read in conjunction with the contract

agreement that the parties pay for and share the cost as may be mutually agreed, satisfies

the statutory requu•ements, appellees insist.

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{¶ 551 Moreover, appellees maintain, since the inception of the agreement, the

parties have expended, or conmlitted to expend, substantial sums for the benefit of the

zone. Monclova Township has hired an economic developrnent coordinator whose duties

include facilitating econoniic development in the zone. Toledo shared in the cost and

contributed right of way and utility easements for a major connector road within the zone.

Maumee has contributed substantial sums for an interstate interchange that will enhance

access to the zone. 'I'hese substantive acts, appellees assert, debunlc any inference that the

agreement memorialized in the 2003 JEDZ contract was illusory.

{¶ 561 As the trial court noted, the preamble to the 2003 JEDZ contract sets forth

the intention of the signatories to promote "cooperative regional development and job

creation * * * and [the] desire to facilitate new and expanded growth for commercial and

industrial development in the State ***." In furtherance of these goals, the parties,

tlirough the contract, "* ** set forth their mutual agreements with respect to the JEDZ

Territory, the sharing of costs of improvements in the JEDZ Territory [and] their

respective contributions to the 7ED"Z Territory ***."

{^ 57) Section 3 of the 2003 JEDZ contract incorporates by reference the

economic development plan for the ten•ilory. The plan defines "[t]he amount and nature

of the contribution of each contracting party to the development and operation of the

JEDZ * * *." The economic development plan details spceific improvement projects in

the JEDZ, including the installation of streets and utility services on land owned by the

city of T'oledo, storm drainage on Jerome Road, the installation of traffic lights and a new

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intcrchange at Salisbury Road and I-475. The plan enumerates a list of specific

improvements with the estimated completion date of each. The plan also calls for the

JEDZ Board to "promote, advertise, and publicize" the zone.

{^ 58) All of these projects clearly fall within the intent to promote commerce

articulated in R.C. 715.691. Moreover, since the completion dates of the proposed

improvements extend to a horizon as late as 2018, the parties' desire to defer the specific

financial ar-rangements is within the contemplation of the statute. Accordingly, the terms

of the 2003 JEDZ contract are consistent with the terins of its enabling legislation.

Appellants' final assignment of eff or is not well-taken.

{¶ 59) On consideration whereof, the judgment of the Lucas County Court of

Common Pleas is affirrned, in part, and reversed, in part. This matter is remanded to said

court for further consideration, consistent with this decision. It is ordered that the parties

share equally the court costs of this appeal, pursuant to App.R. 24.

JUDGMENT AFFIRMED, IN PART,AND REVERSED, IN PART.

A cei-tited copy of this entry shall constitute the mandate pursuant to App.R. 27. See,

also, 6th Dist.Loc.App.R. 4.

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Jankowski v. Monclova-Maumee-Toledo Joint Economic Dev. ZoneBd. of DirectorsC.A. No. L-09-1130

Peter M. Handworlc, J.

Mark L. Pietrykowski, J.

Arlene Sin er J,CONCUR.

This decision is subject to further editing by the Supreme Court ofOhio's Reporter of Decisions. Parties interested in viewing the final reported

version are advised to visit the Ohio Supreme Court's web site at:http://www.sconet.state.oh.us/rod/newpdf/?source=6. --

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