Friday, April 26, 2013



Timken Lobbyist Asks for Schuring Help
in Producing Municipal Income Tax Breaks
for CEO James W. Griffith & Others 

Schuring Momentarily Slipped in 
a Last Minute Amendment in Ohio's
Budget Bill to Exempt Millions of Dollars in
Executive Retirement Income
from City Income Taxes

Weighing the Impact
Schuring's Political Future

One week ago yesterday (April 18, 2013), the Republican controlled Ohio House of Representatives took exception to Republican Governor John Kasich and passed it own budget bill for fiscal years 2013 and 2014.

The main controversy between the House and Kasich was whether or not to provide for a Medicaid expansion for needy Ohioans under incentives from Obamacare.

The House opted out, over the governor's objection.

But that is not the only controversy.


It appears that moneyed Timken Company executives through Timken's lobbyist Robert J. Lapp have been working with Stark County state Representative Kirk Schuring (Republican - Jackson Township - the 48th Ohio House District) to get "fair" (Schuring's appellation) tax treatment for the millions they earn in company bonuses in terms of retirement benefits in relation to municipal income taxes.


The SCPR has endeavored to get a reaction from Lapp but he has failed to respond to e-mailed questions.


A question arises:  Was the flap over Medicaid expansion the perfect cover for Schuring to slip language into the budget bill at the last minute modifying Ohio Revised Code Sections 718.01 and 718.03 whereby the Timken executives and every other Ohio-based corporate honcho getting compensation in the form of retirement benefits would not have to pay municipal income taxes on those benefits going forward?

An extract from an email (circulating among members of the Ohio Association of Tax Administrators)  that the SCPR obtained a copy of Wedneday, summarizes proposed changes, to wit:  (confirmed by Representative Schuring to the SCPR)
A last minute addition to the budget bill exempts Supplemental Executive Retirement Plans from qualified wages.    Amendments are made to 718.01 definitions, and 718.03 exempts the SERP from qualifying wages.
The SCPR has learned that The Timken Company CEO James W. Griffith likely paid about $180,000 to the city of Canton in 2012 on an estimated $9.7 million in a bonus from Timken in the form of supplemental executive retirement benefits.

Moreover, The Report is told that Griffith et al, unlike the fabulously wealthy Warren Buffett and Microsoft mogul Bill Gates, bristle at paying taxes.

Apparently, executives of Ohio-based companies feel they are unfairly treated as participants in "traditional" retirement compensation plans under Ohio law as compared to other taxpayers who are already exempt from having their retirement income taxed by municipalities.

Yours truly understands that the Timken executive officer hierarchy through Lapp have been negotiating with Canton officials over the taxation of the Timken provided supplemental executive retirement payments.

Canton like many other if not most Ohio cities is strapped for revenues and has joined other municipalities in not going down without a fight on the hundreds of thousands of dollars, if not into the millions, that the cities could lose if the Schuring amendment becomes law.

When the political heat was applied to Schuring back on April 18th (reference:  passage of HB 59 - "the budget bill") by the Ohio Municipal League lobbyists, he backed down and withdrew the amendment for the time being.

It will come back according to what Schuring told the Stark County Political Report in a conversation Wednesday evening:  Either in the budget bill or in House Bill 5 which is a bill which, if passed, would significantly alter how municipal/village income taxes are processed in Ohio.

There is almost universal objection and resistance to HB 5 by Ohio's cities and villages through their association:  the Ohio Municipal League.

A case can be made that Republican legislators are not all that fond of Ohio's largest urban and ethnically diverse communities.

And Representative Schuring has had his own moments in that regard.

Readers of The Report will recall that Schuring caused an uproar back in 2008 (June 5th) in his campaign against Democrat John Boccieri (who won the election) to succeed Ralph Regula in Congress in referring in a campaign stop in Ashland, Ohio at a John McCain for President Rally to Canton thusly:
So the other thing I know is that Ashland County has a rich history and tradition of rallying around Republicans, and I was telling people earlier where I come from we could never have a rally like this in the center of Canton.  If we did we might be shot at, but not in Ashland and that's what makes you so great.  (emphasis added)
However, he has been the only Stark County member of the Ohio General Assembly to actually try to do something to help Canton and other Stark County cities, villages and townships lessen the impact of a dramatic drop off of State of Ohio local government funding over the last State of Ohio budgeting biennium (FY 2011-2012).

Schuring and Democratic Representative Stephen Slesnick of the 49th House District (state Senator Scott Oelslager [the 29th Ohio Senate District] told Canton City Council officials he was too busy]) met with Canton officials on March 28th (LINK to a prior SCPR blog) and on the following Tuesday Schuring introduced HB 115 (LINK to prior SCPR blog) which is designed to allow for some transitory relief as local governments get used to and adjust to having less state aid.

Christina Hagan (Republican - the 50th - Stark County's mostly rural district) did not respect Canton officials enough to reply to their request that she come to Canton Council and address the city's revenue crisis.

Here are the points that Schuring made to yours truly in that discussion mentioned above as the talk is tied to the substance of the amendment:
  • His amendment is designed to treat Supplemental Executive Retirement Plans (SERP) like all other "traditional" retirement plans and exempt them from municipal taxation,
  • He took the SERP language out of the budget bill (it had been part of an omnibus amendment package) so that it can be debated in the Ways and Means Committee.  He did so:
    • in deference to those who expressed concerns about the amendment on April 18th,
    • on the condition that the amendment receive a fair hearing in the House Ways and Means Committee,
    • and, with the understanding that once the amendment is thoroughly debated the consensus language will either become a part of HB 5 (which is doubtful because it appears that HB 5 is not in any condition to be voted out of committee anytime soon), or other legislation,
  • He is pushing the amendment so as:
    • to attract the best and brightest executives to Ohio,
      • he compared the Ohio SERP situation to professional sports free agency saying that if there were some impediment to Ohio based professional sports teams from going out and getting free agents, then Ohio teams would not be able to compete
      • he says:
        • that eliminating local taxes on SERP benefits is a critical factor in attracting the best free enterprise executives from the midst of a worldwide market is essential to Ohio,
        • these are the folks "who will guide the ship and make sure that Ohio's top businesses are growing,"
    • to achieve basic tax fairness.   He wants SERPs to be treated like any other Ohio-based retirement plan which are not - in contrast to SERPs - subject to municipal taxation,
While Representative Schuring would not specifically identify Timken lobbyist Robert J. Lapp as a person who contacted him relative to promoting the amendment, the SCPR has information to the effect that it was indeed Lapp who got this proposed legislation rolling.

Continuing the trek through the SCPR's Wednesday chat with Schuring, here are points he made on how he became the point man for advancing the amendment:
  • he said The Timken Company is a vibrant part of our local economy and Ohio's economy and whether or not Lapp was part of the group lobbying for the exemption has no bearing on his driving the amendment forward,
  • again, while not specifically identifying Lapp, he did admit that Timken was among those lobbying him for the change to the taxation of SERP,
  • he held himself up as not catering to the concerns of the rich and insisting that he treats everybody alike whether poor or wealthy,
  • he offered to provide the SCPR with specific accounts showing that he has throughout his legislative career consistently helped middle and lower income constituents as evidence that he is not toadying up to the rich and powerful on the SERP issue,
With respect to Canton and its revenue interests in the light of his proposed amendment to ORC 718.01 and 718.03, he had this to say:
  • Canton is more than welcome to come to the table and discuss with him and legislators who staff the Ways and Means Committee their concerns,
  • Canton officials have to know how important The Timken Company is to the well-being of Canton and that they need to support moves to keep Timken being "a happy corporate citizen,"
    • Canton officials need to meet with Timken officials (a meeting he would gladly participate in) so that the city and the company can reach an accord on the matter,
  • ORC Sections 718.01 and .03 as they currently stand are an impediment to companies like Timken to recruit top level executives,
  • Stark County-based companies other than Timken have not been a part of the discussion on SERP with him but that companies across Ohio have been part of the discussion,
  • He understands that some will think that he is the captive of The Timken Company but he insisted that such is not true.  He emphasized that he takes each and every contact seriously and deals with them attentively with constituent input no matter what their economic/financial status is and no matter what their political persuasion is.
One might think that it is inconsistent to on the one hand, seek to help struggling urban area of Ohio (reference:  HB 115) while at the same time, "apparently" undermining them with his amendment to ORC Sections 718.01 and 03.

Schuring says that there is no inconsistency.

He says that if the Timkens of Ohio do well, then economic growth will take care of local government financial woes.


It was indeed an interesting conversation for yours truly to have with Representative Schuring.

More important will be what the Timken executives and Canton city officials think.

For it is folks like these who determine whether or not a Representative Schuring remains a viable political and government official.

The SCPR thinks Schuring took a huge political risk in taking the amendment on.

Undoubtedly, the flap has to be embarrassing to the multimillionaires who run the internationally respected and renowned Timken Company to possibly be thought of by the public as folks who begrudge local governments of 2% (more or less) of millions of dollars in tax revenues.

And it has to be ouchy for Canton officials too.

A disaffection on the part of Timken's managers with Canton government over a matter like the Schuring amendment could have dire long term consequences for a city that seems to be on the rebound from the ravages of The Great Recession which took hold in September, 2008.

For Representative Schuring, it could be either a political feast or famine; if not defeat in the November, 2014 elections.

If he can get his amendment in its final form accepted by the likes of the Ohio Municipal League and the likes of Timken Company officials, then he could become a rising star within the Republican dominated Ohio House.  The Republicans currently are near a veto proof majority and likely will achieve supermajority status in coming weeks as the debate on the outcome of the 98th House District election contest is being concluded in the House.

As we all know, Republican-legislators-in-general across the country, both at the federal and state levels, are bananas for tax cuts notwithstanding what they do to undermine governments' abilities to provide services demanded by their respective constituents.  

To boot, the higher income one has, the more joyous they seem to be in achieving tax cuts.

As a matter of political philosophy, Republicans want to starve the beast called government.  For those government services that survive, they must be super efficient.

A successful amendment effort by Schuring would likely put him in the Ohio House Hall of Fame as an blue ribbon tax cutter and thereby to be trusted as being on the team in the Republican quest to make government more efficient and to cut government at all levels where possible.

Moreover, he has been in the Ohio Legislature since 1995 and certainly has the longevity and the experience to be one of the institution's prime movers and shakers.

On the other hand, he risks incurring the ire of both:
  • the cash-strapped-urban areas officials of Ohio local government who will be hurt by his initiative, and 
  • the executive types who will benefit from his proposed legislation.
Local governments stand to lose millions upon millions; the company bigs stand to be placed in the glare of the public spotlight for their seeming greediness.

If his initiative turns sour, it could be that both interests demand Schuring's political scalp.

Representative Schuring is on the spot.

Is he up to the challenge?

No comments: