A centralized local income tax collection by the state would cause cities and villages to lose out on money and be an inconvenience to taxpayers, municipal finance officials say.

About 100 Ohio city and village councils, including some from Butler County, have passed resolutions asking the state of Ohio not to go to a centralized income tax collection.

City finance officials with Butler County’s three largest municipalities — Hamilton, Middletown and Fairfield — all say they don’t trust the accuracy of the state to administer a statewide collection of municipal income tax, and the local municipalities “can do it better.”

Over the past few months, there have been state-level discussions about establishing a centralized local income tax collection. The idea would create uniformity with the income tax collection — mainly for the benefit of businesses with locations in multiple jurisdictions — by the state. That money would then be distributed back to the taxing districts.

And if these discussions come to fruition and the local tax collection is done by the state, Mike McDulin, Hamilton’s Commissioner of Taxation, said, “Customer service will go down for sure.”

“Response time expected by our citizens will be longer and not acceptable,” he said. “Many communities are combining functionalities without adding staff. As you combine functions, the level of service can be affected. The goal is to improve efficiencies without affecting customer service.”

McDulin and the finance directors in Middletown and Fairfield said the state cannot collect local income taxes more accurately and efficiently.

“Since when has the state been more accountable to the taxpayers than the local governments?” said Fairfield Finance Director Mary Hopton. “You can go to city hall and talk to someone.”

Hopton said the state administration is “trying to get their cut of our dollars” and accounting for the municipal income tax “is not so simple and clear as they think.”

Middletown Finance Director Russ Carolus said cities and villages are the best watchdogs of local money.

“We know we can control our money. People like to control their own destinies,” he said. “How do you judge if they’re doing an adequate job? How do you know if they are doing a good job or a bad job? I can measure that with my own people.”

The lack of control of local money also worries others around the state, said Ohio Municipal League spokesman Kent Scarrett. “Municipal income tax collection is a $4 billion pot of money,” Scarrett said, “and if the state would gain control of such a large pot of money from our communities, there could be a redistribution of money. Certainly we would have no control of that.”

Just some of the issues the local finance administrators say would be a problem include the different tax laws and rates among the municipalities; city zip codes in the townships (which are not subject to local income taxes); joint economic development districts; and properties that straddle the borders of two taxing districts.

Middletown City Manager Judy Gilleland said while a regional approach “is not a bad idea,” a centralized local income tax collection could weaken a city’s autonomy.

“I understand that it can be very burdensome for businesses to work with multiple jurisdictions throughout the state of Ohio, and no doubt there are several hundred entities that have their own methods and laws for tax collection throughout the state,” she said. “This is a home rule issue because on one hand because cities are permitted to create their own laws when it comes to municipal income tax and collection.”

Ohio Department of Taxation spokesman Gary Gudmundson said collective income tax collection isn’t a new concept.

“It was mentioned in a tax study in 2003 that it would be desirable for development, and that it would streamline the collection of this tax for taxpayers which can get to cumbersome as a business, particular businesses, operating in multiple jurisdictions,” he said.

“When (the Gov. John Kasich) administration came into office, there was a lot of encouraging going on that the state should look at centralizing the administration of the municipal income tax.”

In its biennial budget passed in July, the state committed to a reduction of upwards of 50 percent of the local government fund — which is local money being collected by the state and redistributed back to cities, villages and townships — and the elimination of the estate tax.

Hopton said if the state pools the income tax money, with all the other issues she feels the state isn’t considering, it’s “a very realistic possibility” that it could end up like the local government fund.

“Whenever you get a single, large pot of money, it’s easier to take away a chuck of it, rather than have smaller pots,” she said. Middletown, Hamilton and Fairfield have each collected about $20 million in local income taxes in the past three years, and that trend is anticipated for 2012.

While state officials say the idea is only in the discussion stage, Scarrett said that is when local municipal taxing jurisdictions need to speak up.

“Our communities got wacked in the budget. We were told by finance committee chairman, it would be a 17 percent cut in the local government fund and a phase out of the estate tax, but wouldn’t be immediate,” Scarrett said.

Scarett, and the local finance officials, say they believe state legislation is eminent, but Rep. Pete Beck, R-Mason, said there have been no bills or legislation — “just interested parties meeting, that’s all.”

“There’s been some preliminary discussion about all this,” Beck said, calling it “more of a conversation item.”

He said since the Ohio Tax Commissioner Joseph Testa spoke about the idea of centralized income tax collection, organizations and municipal tax administrators have discussed the items.

“Anytime you talk about change, people react to change and different ideas,” he said.

But if anything is done, local municipalities will have a chance to voice their opinions because Beck said “you need to bring people around the table.”

Scarett said the time for input is now, in the discussion phase.

“We can’t sit back and say, ‘We’ll it’s just discussion.’ That train is going to be really heard to stop,” he said.