OHIO LEGISLATIVE SERVICE COMMISSION

Office of Research Legislative Budget

www.lsc.ohio.gov and Drafting Office

H.B. 687
Final Fiscal Note &
134th General Assembly Local Impact Statement
Click here for H.B. 687’s Bill Analysis

Primary Sponsor: Rep. Oelslager

Local Impact Statement Procedure Required: No
Edward M. Millane, Fiscal Supervisor

Highlights
Capital appropriations
 The bill makes capital appropriations totaling $3.51 billion for the FY 2023-FY 2024
biennium.
 The bill requires the Director of Budget and Management to make transfers of up to
$1.50 billion from the GRF to bond funds during the FY 2023-FY 2024 biennium to support
capital appropriations and permits the Office of Budget and Management (OBM) Director
to make additional transfers unless disapproved by either the Speaker of the House of
Representatives or the President of the Senate. Using the GRF instead of bonds would
decrease the state’s spending on debt service for several years.
Operating appropriations
 The bill contains new operating appropriations of approximately $1.21 billion for FY 2022.
This includes GRF appropriations totaling $805.0 million and State Fiscal Recovery Fund
(Fund 5CV3) appropriations totaling $401.2 million. The bill reappropriates the unexpended
unencumbered balance of these appropriations at the end of FY 2022 for FY 2023.
 In particular, the bill includes $600.0 million in GRF for onshoring incentive grants,
$95.0 million in GRF for local roads and $110.0 million in GRF for state roads,
$101.2 million in Fund 5CV3 for local water and sewer projects, and $300.0 million in
Fund 5CV3 for water reclamation project grants.
Megaproject tax incentives
 The bill modifies certain tax incentives and creates new tax incentives related to
“megaprojects” by semiconductor manufacturers that could decrease state revenue by
hundreds of millions of dollars across several fiscal years, depending on the level of
investments by the semiconductor business and its suppliers in Ohio.
June 10, 2022
Office of Research and Drafting LSC Legislative Budget Office

Detailed Analysis
Capital appropriations
The bill makes capital appropriations totaling $3.51 billion for the FY 2023-FY 2024
biennium. LBO’s Capital Item Analysis1 provides summary reports and detailed information on
capital appropriations.
GRF transfers to support capital appropriations
The bill requires the Director of Budget and Management to transfer up to $1.50 billion
from the General Revenue Fund (GRF) to the various bond funds that support the bill’s capital
appropriations as well as the capital reappropriations in H.B. 597 of the 134th General Assembly.
These transfers can be made throughout the FY 2023-FY 2024 biennium if the Director
determines that the GRF cash balance is sufficient. The bill permits the Director to transfer
additional cash above the $1.50 billion, if neither the Speaker of the House of Representatives
nor the President of the Senate disapprove of such transfers within seven calendar days of
receiving notice from the Director itemizing the proposed transfers. The disapproval must be in
writing. The Director must notify the Speaker and the President in writing within seven calendar
days of making any transfer authorized under this provision of the bill.
The use of cash in the GRF to fund capital projects instead of issuing bonds will decrease
the state’s expenditures on debt service for several years. Financing $1.50 billion in capital
projects in FY 2022 using cash may decrease debt service expenses by about $57.0 million during
the FY 2023-FY 2024 biennium. Those savings would continue in future years.2
Operating appropriations
The bill contains a combination of GRF and State Fiscal Recovery Fund (Fund 5CV3)
appropriations totaling approximately $1.21 billion in FY 2022. If all the funding is not distributed
in FY 2022, the bill allows for any remaining amount to be carried forward and used in FY 2023.
These appropriations are detailed in the following table.

Table 1. Operating Appropriations for the Department of Development

and Department of Transportation
Fund Appropriation Line Item Amount ($ in millions)
Department of Development
GRF 195459, Ohio Onshoring Incentive $600.0
GRF 195456, Local Roads $95.0
5CV3 195457, Local Water and Sewer $101.2

1 See LBO’s Capital Item Analysis (PDF) which is available on LSC’s website: lsc.ohio.gov/Budget Central.
2 Total reduction in interest payments over the next 20 years could exceed $1 billion, depending on
assumed 20-year bond issuance at 4.5% annual coupon rate. Please note different assumptions on bond
issuance, terms, and interest rates would yield differing savings.
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Table 1. Operating Appropriations for the Department of Development

and Department of Transportation

Fund Appropriation Line Item Amount ($ in millions)

5CV3 1956D4, Water Reclamation Project $300.0
Department of Transportation
GRF 775471, State Road Improvements $110.0
Total $1,206.2

Grants issued under two of these line items – GRF line item 195459, Ohio Onshoring
Incentive, and Fund 5CV3 line item 1956D4, Water Reclamation Project – may be subject to
clawbacks under the terms of grant agreements between the Department of Development and
a megaproject operator. This would allow the Department to recoup portions or all of the grant
amounts awarded if agreed-upon job creation, payroll, or capital investment goals are not
achieved.
Megaproject tax incentives
The bill modifies tax incentives applicable to a specified “megaproject” enterprise that
manufactures semiconductors and related suppliers. It also creates new commercial activity tax
(CAT) and sales tax expenditures for those businesses. (In continuing law, a megaproject is a
large-scale development that meets certain investment or payroll thresholds.) Those provisions
will decrease state revenues by hundreds of millions of dollars across several fiscal years,
depending on the level of investments by the semiconductor business and its suppliers in Ohio.
Under codified law, the fiscal loss would be shared by the GRF (96.68%), the Local
Government Fund (LGF, 1.66%), and the Public Library Fund (PLF, 1.66%). Funds deposited into
the LGF and PLF are distributed to counties, municipalities, townships, and public libraries
according to statutory formulas and decisions by county budget commissions. Decreases in CAT
receipts would also affect the GRF (which receives 85% of CAT receipts), the School District
Tangible Property Tax Replacement Fund (Fund 7047, 13%), and the Local Government Tangible
Property Tax Replacement Fund (Fund 7081, 2%). Provisions that reduce state sales tax revenue
would also reduce permissive county and transit authority sales taxes, as those taxes share the
state sales tax base.
In particular, the bill expands the special tax incentives for businesses involved with a
megaproject to apply to a business that intends to build a semiconductor manufacturing facility
in Ohio, and its qualified suppliers. The bill modifies the definition of a “megaproject operator”
to include a business that (1) is headquartered in the U.S., (2) spends at least 50% of its research
and development budget in the U.S., and (3) intends to build a semiconductor manufacturing
facility in Ohio. Note that the business must meet existing megaproject requirements relating to
payroll or investment.3 The bill also expands the definition of a “megaproject supplier” to include

3 Under continuing law, a megaproject operator must compensate project employees at an average hourly

wage of at least 300% of the federal minimum wage and make at least $1 billion in fixed-asset investments

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a supplier to a business described above, if the supplier’s products are subject to substantial
manufacturing, assembly, or processing in Ohio. However, the supplier may, but does not have
to, meet existing megaproject requirements relating to investment and payroll.
The bill extends eligibility for a megaproject Job Creation Tax Credit (JCTC) to both the
megaproject operator or the supplier for a JCTC for a term of up to 30 years (as authorized under
continuing law for any megaproject), but if the supplier does not meet existing law’s investment
and payroll requirements, its JCTC term may not exceed 15 years.
A provision in the bill extends existing authority for counties and municipalities to enter
into a community reinvestment area (CRA) property tax exemption agreement with respect to a
megaproject to the above businesses. Under continuing law, the term of the CRA is 30 years,
though the bill limits this term to 15 years for a supplier that does not meet existing law’s JCTC
investment and payroll requirements.
New CAT and sales tax incentives for a semiconductor megaproject
The bill authorizes a new CAT incentive that would exempt receipts from the sale of new
capital equipment that will be used at a semiconductor megaproject site and that, per item, costs
more than $100 million.
The bill also provides for the following new sales and use tax exemptions. It expands an
existing sales tax exemption for qualified research and development (R&D) equipment to include
any items used primarily by a megaproject operator to perform R&D at a semiconductor
megaproject site. It allows an exemption for building and construction materials that will be
incorporated into a manufacturing or research and development facility at a semiconductor
megaproject site. Another provision in the bill allows a sales tax exemption for certain items used
in a manufacturing process at a semiconductor megaproject site.
Clawback provision
The bill requires that, if a semiconductor megaproject operator fails to meet the terms of
its JCTC agreement, the Tax Credit Authority may require it to make a recoupment payment that
can equal up to the amount of tax revenue loss to the state from the CAT and sales tax exemptions
described above and the CAT exemption for any megaproject supplier. The bill states that the bill’s
new or modified CAT and sales and use tax exemptions apply on and after January 1, 2022.
Changes to existing law governing all megaproject operators and
suppliers
The bill requires a megaproject operator to submit an economic impact report to the
Director of Development each year, detailing their purchasing, construction, and employment
activity. The bill also requires the Director of Development to issue a certificate to megaproject
operators and suppliers annually, certifying that the business continues to qualify for the JCTC.

and create at least $75 million in employee payroll. A megaproject supplier, a business that sells tangible
property to a megaproject operator, is required to make at least $100 million in fixed-asset investments,
create at least $10 million in employee payroll, and maintain at least $10 million in employee payroll over
the term of its job creation tax credit. Other requirements apply to megaproject operators and suppliers.
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(Continuing law also requires the Director to issue an annual certificate certifying that the JCTC
recipient is in compliance with their agreement.)
The bill states that megaproject changes apply on and after the bill’s effective date with
respect to all megaproject agreements, including those entered into before the bill’s effective
date, so long as the bill supports the actions taken by such agreements.
Capital reappropriation adjustments
The bill redirects funding for several reappropriations in H.B. 597 of the 134 th General
Assembly, as shown in the table below. Overall, no increase in appropriation results from these
adjustments. The bill also amends Section 223.15 of H.B. 597 to eliminate a $15,000 earmark for
the Lorain Pier Planning Project. Under H.B. 597, this project would have been supported by the
Parks and Recreation Improvement Fund (Fund 7035) which receives proceeds from the sale of
bonds. This project will instead be supported by the GRF under appropriations made in H.B. 338
of the 134th General Assembly.

Table 2. H.B. 597 Capital Reappropriations Appropriation Line Item (ALI)

and Earmark Adjustments Summary

Current Proposed
Agency Fund ALI ALI/Earmark Name
Amount Amount

DDD 7033 C59064 Heinzerling Community Facilities $350,000 $0

DNR 7035 C725E2 Lakefront Pedestrian Bridge $3,500,000 $0

DNR 7035 C725E2 City of Cleveland-Lakefront Access Project $1,500,000 $0

DNR 7035 C725E2 Downtown Cleveland Lakefront Access $0 $5,000,000

Project

DNR 7035 C725E2 Clear Creek Bike Path Connector $0 $250,000

DNR 7035 C725E2 Warren County Sports Park $0 $1,000,000

DPS 7026 C76061 Warren County Drug Taskforce Headquarters $500,000 $0

DRC 7027 C50100 Warren County Jail Interceptor Center $750,000 $0

FCC 7030 C23072 Madisonville Arts Center of Hamilton County $36,000 $0

FCC 7030 C230BB Golf Manor Volunteer Park Outdoor $45,000 $0

Amphitheater

FCC 7030 C230FM Nancy & David Wolf Holocaust & $0 $56,000
Humanity Center

FCC 7030 C230FM Evendale Cultural Arts Center $0 $25,000

MHA 7033 C58001 Heinzerling Community Facilities $0 $350,000

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Finally, the bill renames several H.B. 597 reappropriation projects. These changes are as
follows:
 DPS Fund 7026 line item C76076, Ohio Task Force One (OH-TF1) Warehouse, with an
appropriation of $50,000, is renamed Ohio Task Force One (OH-TF1) Training Center;
 DNR Fund 7035 line item C725E2, Local Parks, Recreation, and Conservation Projects, with
an earmark of $500,000 for Massillon Reservoir Park Splash Pad is renamed Massillon
Park Splash Pad;
 DNR Fund 7035 line item C725E2, Local Parks, Recreation, and Conservation Projects, with
an earmark of $40,000 for Rittman Youth Football Field is renamed Rittman Splash Pad;
 FCC Fund 7030 line item C230FM, Cultural and Sports Facilities, with an earmark of
$64,000 for Burnison Barn is renamed Hardin County Historical Society Improvements;
and
 MHA Fund 7033 line item C58001, Community Assistance Projects, with an earmark of
$4,500,000 for Maryhaven-Comprehensive Addiction Center is renamed Comprehensive
Addiction Center.
Ohio Facilities Construction Commission (OFCC) provisions
The bill makes several changes to the way OFCC administers or manages state agency and
school facilities construction projects. Generally, OFCC may experience reduced administrative
workload or increased flexibility in their administrative responsibilities as a result of these
changes. These changes include the following:
 Increases the project cost limit for which OFCC may permit certain state agencies to
administer a capital facilities project from $1.5 million to $3.0 million.
 Extends, from one year to two years, the timeframe within which OFCC may reimburse a
school district for any amount spent on an eligible project under the Expedited Local
Partnership Program (ELPP)4 that is more than its required local share as determined after
the basic project cost is recalculated when the district becomes eligible for the Classroom
Facilities Assistance Program (CFAP), OFCC’s main school facilities assistance program.
 Eliminates the requirement that OFCC certify to the Director of Budget and Management
how it allocated the amounts credited to the Capital Donations Fund (Fund 5A10) from
investment earnings during the preceding quarter of the fiscal year.

4 ELPP is designed to give districts not yet eligible for participation in CFAP the opportunity to spend local
resources on portions of their project. When the district becomes eligible for CFAP, the money spent by
the district is credited against the local share of the entire master facilities plan, which is recalculated by
OFCC at the time of CFAP eligibility. If the amount a school district already spent under ELPP is more than
the local share under the new basic project cost, OFCC may, under current law, reimburse the school
district, within one year, for the difference between the new local share calculation and the amount locally
expended, provided that the total amount OFCC spends on a project does not exceed the state’s portion
of the recalculated basic project cost.
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Professional design services or design-build services

Public authorities may experience increased flexibility and cost savings in their
construction delivery methods for being exempt from certain continuing law requirements for
contracts for professional design or design-build services if those contracts are $25,000 or less.
Under current law, a public authority contracting for professional design services with an
estimated fee of less than $50,000 is exempt from the bidding, evaluation, and ranking
requirements that otherwise would apply, provided that it meets both of the following
conditions: (1) the respective public authority selects a single design professional or firm from
among those that have submitted a current statement of qualifications, based on the public
authority’s determination that the selected design professional or firm is the most qualified to
provide the required professional design services, and (2) the public authority and the selected
design professional or firm comply with certain requirements related to the negotiation of a
contract. The bill eliminates the conditions required for a public authority to waive the bidding,
evaluation, and ranking requirements to contract for professional design services or design-build
services if the estimated fee is $25,000 or less, but retains them for a project with an estimated
fee of more than $25,000 but less than $50,000.
Notification for in-house services on design-build projects
The bill eliminates the requirement that a public authority notify OFCC before it uses its
own employee as the architect or engineer for a design-build project. To the extent that a public
authority uses its own employees as architects or engineers for design-build projects, it may
decrease its administrative workload by no longer having to report this information to OFCC.
AGO debt collections and recovery management system
The bill:
 Authorizes the Attorney General (AGO) to acquire and implement a secure, end-to-end
collections and recovery management system that is designed to collect and recover
more debt, control costs, and stay compliant with state rules and federal regulations;
 Permits AGO to enter into lease-purchase agreements to finance, or refinance, the system
and provides that lease payments are to be made from the Attorney General Claims Fund
(Fund 4190); and
 Requires the Director of Budget and Management, at request of the AGO, to arrange for
the issuance of obligations of not more than $25 million to finance the system.
Transfer from the Clean Ohio Revitalization Fund to the Service
Station Cleanup Fund
During the FY 2023-FY 2024 biennium, the bill allows the OBM Director, on request of the
Director of Development, to transfer up to the remaining unobligated cash balance from the
Clean Ohio Revitalization Fund (Fund 7003) to the Service Station Cleanup Fund (Fund 7100) as
needed to award grants under the Abandoned Gas Station Cleanup Grant. This grant provides
funding to assess and clean up former gas and service stations with documented petroleum
releases. As of mid-May 2022, the unobligated cash balance in Fund 7003 is nearly $14.0 million.

HB0687EN/lb

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