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For last 15 years, Rittman has collected .5% more income taxes from residents than was authorized

Refunding tax would 'bankrupt the city,' manager says
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Posted at 6:07 PM, Jan 23, 2023
and last updated 2023-01-23 18:14:08-05

RITTMAN, Ohio — Just off Main Street in downtown Rittman is a place with a story as sweet as its smell.

"I personally have been managing it for the past 10 years, but I have worked here since I was a child," said Jessica Parobechek. "My mother opened it about 36 years ago."

Parobechek runs Creative Images Florist. Her dad Joe helps too. The family business has seen the city's roughly 6,000 residents through good times and bad.

"It is a very heartfelt community where we all try to work together and do what we can for one another," said Parobechek.

Right now is one of those tougher times.

Parobechek is the moderator of the Rittman Talks Facebook page with almost 5,000 members who discuss everything happening in the community.

"A lot of people are talking about this right now; I would say about 90% of the comments," she said. "General feeling is anger, they're very upset."

Taxpayers in the city of Rittman, located in Medina and Wayne counties, recently got a letter from the city. It stated that Rittman has been collecting municipal income taxes at the rate of 1.5% when the authorized rate for the last 15 years was 1%.

The cause, they say, was a simple human error that occurred 27 years ago. They say that's when the sunset date for a previously passed tax ordinance was inadvertently omitted from the city's tax code and unknowingly allowed to continue.

In a letter to taxpayers, the city said it regrets and sincerely apologizes for the error that occurred in 1996.

"I think a lot of people feel betrayed that we weren't informed, and we're being told that despite the issue on their part there aren't going to be any potential refunds, is what we've been told," said Parobechek.

The city says they were shocked to find the error and have reported it to the Ohio Auditor of State and the firm that conducts the annual city audit.

They also say they've talked with the Regional Income Tax Agency, or RITA, and city municipal taxpayers will be assessed the correct rate of 1% for the tax year 2022.

RITA officials say this situation is unique.

However, the city says it won't be refunding residents the additional .5% income tax they've been paying since 2008, citing the statute of limitations under Ohio law and saying in a letter to residents that it would bankrupt the city.

In a letter to taxpayers, the city wrote, in part:

"You may be asking yourself, 'if I paid an extra 0.5% income tax for the last 15 years, why can’t I get it all back?' There are legal and practical reasons for this. Under Ohio law there is a one-year statute of limitations for recovering the payment of an unauthorized income tax, and significant procedural requirements that taxpayers must satisfy to obtain such a refund. The City is passing legislation to make sure that the proper rate is charged for taxpayers who will be filing returns for 2022 income, and to make the process to obtain refunds of unauthorized 2022 income taxes already paid (through withholding or estimates) as easy as possible, in fairness to City taxpayers. Practically, refunding 15 years’ worth of these taxes would bankrupt the City."

"It is hard to hear that if we make a mistake, you know that government is coming after us, but now that the government has made a mistake, they're wanting to wipe it away, and I do know that quite a few people are upset about that," said Parobechek.

The city manager declined an on-camera interview for this story but did send a lot of information on what happened, how it happened and how the city plans to now move forward.

She wrote, in part:

"In 1977, Rittman voters approved a 1.5% rate for 30 years by authorizing an additional 0.5%income tax that was to expire at the end of 2007. In 1996 voters approved changes to the City's tax code, which led to an update of the City's codified ordinances. When the new ordinances were published, the end date of the additional 0.5% income tax, December 31, 2007, was inadvertently omitted. Because tax ordinances frequently do not have end dates, the City and subsequent tax administrators reasonably relied upon the incorrectly updated ordinance with the unfortunate result being that since 2008, Rittman city income taxpayers have been taxed at the rate of 1.5% rather than 1%.

"On Monday, January 23, Rittman City Council will have the first reading of legislation to correct the tax rate and direct RITA to utilize a 1% rate to calculate income taxes beginning January 1, 2022. On January 30, City Council will hold a special meeting for a second reading on the legislation. We're encouraging city taxpayers to particularly attend that January 30 meeting, at 7 p.m., at the Recreation Center, 200 Saurer Street, Rittman, to have their questions addressed.

"We were shocked to find the error and have reported the issue to the Ohio Auditor of State and the firm that conducts the annual City audit. We have instructed the Regional Income Tax Agency (RITA), which administers our municipal income taxes, to quickly fix the problem. RITA has been extremely helpful and assures us that our city municipal taxpayers will be assessed the correct tax rate of 1% for tax year 2022 and moving forward.

"We want to make this as simple as possible for our taxpayers, so when Rittman taxpayers file their City tax return, their Rittman income tax rate will automatically be calculated at 1%, not 1.5%. Taxpayers who have already paid their 2022 municipal taxes at the 1.5% rate, or whose employers withheld the tax at the 1.5% rate, can request a refund by filing a Short Form 10A that was developed by RITA for Rittman taxpayers. That form is available at City Hall and on the City’s website.

"In addition to passing new legislation to correct the tax rate, Rittman is working with its auditor, finance department and law department to identify best practices and improved internal controls to help guard against this ever happening again.

"Although the additional 0.5% was not authorized, the money the City collected went only to essential City services provided by our Police, Fire/EMS, Public Health, Parks, Recreation, Administration, and more. The annual state audits, which we have passed throughout this period, ensured our tax money has been spent properly and that our internal controls meet state standards and best practices."

Click here to read the full news release from the city manager.

The city manager says it's a terrible situation and she's thankful their administration found the issue and will correct it moving forward.

However, Parobechek says it's that moving forward part that worries her — how to fix the broken trust, find a solution everyone feels good about, and keep Rittman moving forward.

"Small businesses that were the essential part of Rittman are coming back and we're so grateful that Rittman is coming alive again, and then to find out what's going on with this is such a deterrent I would think to people wanting to come into town. We're trying to succeed and it's hurtful to think that us getting back what we deserve would take away from the city."

Rittman City Council will meet Monday night at 7 p.m. to read corrective legislation and allow citizens their normal comment period.

They are also holding a special meeting on Jan. 30 where there will be a town-hall style Q-and-A with the community about the tax issue.

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