Local communities are mourning the loss of the estate tax, which raised millions of dollars annually and had its last full year of collection in 2012.

Kettering, Centerville, Washington Twp. and Oakwood collected roughly $9 million combined each year via this tax, and have spent the last 18 months adjusting to this loss and that of other state cuts by multiple means — including decreasing spending and staffing, reducing support to community organizations, increasing taxes and raising fees to residents.

“When you have a general fund of between $15 million and $16 million, taking $2 million from that is huge,” Centerville City Manager Greg Horn said. “We can’t continue to take these kinds of hits.”

However, the biggest changes likely lie ahead, since each of these municipalities use estate tax funding to pay for capital improvements and to support their general funds.

Projects such as the Hithergreen Center in Washington Twp., public works buildings in Centerville and Oakwood, and the Kettering Government Center are just some of the projects funded by estate taxes in the past.

“Estate tax revenues have gone into every road we’ve resurfaced, every building we have renovated and repaired,” Kettering City Manager Mark Schwieterman said. “Beginning in 2014 and 2015, we’re looking at making reductions to the general fund because we’re still going to have capital projects we will need to pay for.”

The Ohio estate tax was abolished in Gov. John Kasich’s 2011 budget bill, and became effective Jan. 1. Last year was the final full year of collection, but municipalities will get some funds in 2013 and a possible trickle in 2014, depending on whether there are extended probates.

“When we heard that the cut was going to happen, we began to make changes,” said Jesse Lightle, Washington Twp. administrator. “We’ll continue to have to address not having estate tax dollars. It’s an ongoing thing, and it will have long-term impacts.”

The tax applied to Ohio estates valued at more than $338,333, which the Ohio Department of Taxation reported was about 7 percent of the estates in Ohio. Since the repeal of the state tax, those estates now keep those funds. There still is a federal estate tax, but it only applies to estates valued at $5.1 million or more.

In 2010, the most recent data provided by the state , local governments across Ohio earned about $231 million from the estate tax. In Montgomery, Greene, Warren and Miami counties, that tax provided about $15.2 million in 2010.

The cities of Kettering and Oakwood have each collected an average of $3 million a year in estate tax revenues over the past decade. Centerville and Washington Twp. averaged closer to between $1.3 million and $1.5 million in that same time span.

The proportional impact of this loss for these communities is the greatest for Oakwood, where the tax has provided about 20 percent of the city’s revenue. In response to the impending estate tax losses, the city has enacted several budget cuts and fee increases, and has placed a 3.75-mill property tax levy on the May ballot.

The levy would raise slightly more than $1 million each year for Oakwood, and help maintain current services. If that passes, the city will probably institute a reduction in its municipal income tax credit in 2014 to fill the rest of the void left by the tax’s demise.

In Centerville and Washington Twp., a hotel tax was implemented in December that is expected to evenutally raise an estimated $125,000 per year for the township and up to $50,000 annually for the city. Those municipalities also slashed funding to several community organizations in the last year and a half.

“We’ve cut support by 50 percent to Americana, Hithergreen, the (Centerville-Washington Twp.) Historical Society, the Dayton Development Coalition, the South Metro Chamber of Commerce,” Horn said. “Several positions haven’t been filled, and we’ve pushed the replacement of equipment vehicles back. We’re continuing to cut back in every place we can.”

Finance Director Steven Hinshaw said the average estate tax earnings provided about 10 percent to 12 percent of Centerville’s annual revenues. Lightle said estate tax funds traditionally made up 6 percent of Washington Twp.’s total revenues, and 43 percent of its general fund revenues.

The fraction of loss is smaller for Kettering, which has more than five times the population of Oakwood and had revenues of $75 million in 2012. The estate tax comprised roughly 3 percent of Kettering’s overall revenues, and about 25 percent of its capital improvement budget.

Kettering earned $1.9 million in 2012 and $5.7 million in 2011 via estate tax revenues. Schwieterman said the relatively low earnings from 2012 were not due to the law change, but to the fluctuating nature of the tax.

That unpredictability has been most palpable in Elizabeth Twp. The Miami County township received $16.1 million in 1999 and $20.7 million in 2002 in estate tax revenues, both linked to the estate of Yellow Pages magnate John W. Berry.

That immense revenue is in stark contrast to other years – 2003, 2006 and 2009, for example – in which Elizabeth Twp. received no estate tax revenue.

Kettering officials said, like the other municipalities, the loss of the tax revenue already is being felt. The city has a capital improvements budget of $8.4 million for 2013, and anticipates transferring $5.8 million from the general fund to support that budget.

Schwieterman said the $1 million the city expects to receive from the last of the estate tax funds also will go toward that budget. In previous years, the city would have had an additional $2 million from the estate tax to put into that fund, thus reducing the transfer from the general fund.

“Kettering is dipping into its reserve funds to make up the difference in 2013,” Schwieterman said.

Horn added that cutting spending likely will prove insufficient in addressing the loss of these millions over time, and there will be a need to find more ways of generating revenue to stem the estate tax deficiency.

“I just don’t think it’s going to be possible to grow our way out of this,” Horn said.