Euclid City School District has filed a lawsuit against the city of Euclid, claiming the city is keeping more of a shared income tax than was originally agreed to.
The school district says it’s lost out on $1 million a year since 2019, when the city allegedly started cutting into the school district’s share of the tax, due to tax credits residents are taking when they work outside the city limits, the school district said in a release issued in early January.
"The city is depriving our students of educational opportunities that the district’s fair share of the income tax provides," Gabrielle Kelly, president of the Euclid Schools Board of Education said in a statement.
Euclid Mayor Kirsten Holzheimer Gail said in a statement Thursday that the city had actually been distributing more to Euclid schools than had been outlined in an initial agreement between the city and the school district based on a "incorrect formula," which was changed in 2019.
"The 1994 Shared Agreement leaves a lot to interpretation, it does not address the (commuter) tax credit, and did not anticipate future changes to income tax rates or credits," she said. "The city believes the shared income tax is of benefit to both the City and Schools, and believes the tax credit should apply to both the City and Schools. This is the root of our disagreement."
The initial agreement between the school district and city says that of the 2.85% income tax, approved by voters in 1994, the district would receive .47% of the tax. The district says that agreement also includes a provision that that amount never be reduced.
The district in its statement said the suit comes only after "years of trying to resolve this matter while the city declined to collaborate or in many cases even respond."
"And even though, over just the past few months, the city met with Euclid Schools to outline its position and even offered to resume mediation, after years of fruitlessly trying to resolve this matter, we believe we must move forward with this legal action," Kelly said.
Kelly in the statement explained that the tax credits for people who live in Euclid but work outside the city are reducing the overall taxes the city gets.
"For example, a Euclid resident working in Mayfield is subject to Mayfield’s 2% municipal income tax," Kelly said. "That 2% is credited against Euclid’s 2.85% municipal income tax. So, the city of Euclid collects just .85% from the Mayfield-based worker.
But she says the city's own tax code specifies that those tax credits "should not reduce the .47% municipal tax collected by the city for school district purposes."
Holzheimer Gail wrote in her statement that it's "unfortunate that resources are now being spent in the courtroom instead of supporting vital city services and educating our students," but said she hoped for a quick resolution.
"I believe that strong schools are vital to a strong city," she said. "The relationship between the City of Euclid and Euclid City Schools is a partnership- one that’s important to me, and important to the future of our City."
