One city’s financial solution may be a county’s financial downfall.
Somerset Mayor Eddie Girdler has a plan to implement the city’s own occupational tax — something that the third-class city is legally authorized to do — in order to resolve funding issues for entities such as Somerset-Pulaski County EMS.
“The city must implement its own occupational tax,” Girdler sad. “ ... With the new simple application (of the city’s own occupational tax), this is an effort to correct the problems and move forward for both the county and the city.”
But that leaves questions as to whether the county will be able to operate without its full occupational revenue, which makes up 20 percent of that entity’s budget.
“It would cripple us,” said Pulaski County Treasurer Joan Isaacs.
A 1995 agreement drawn up between the county and city currently outlines how the county and city fund Pulaski County 911 and EMS. As per the agreement, the county took over operations and funding for 911, while the city was identified as the “overseer” of EMS.
The problem is in the funding, Girdler said. Girdler said changes in reimbursement regulations for Medicare, Medicaid and private insurance has kept EMS from being able to collect on those bills fully from coverage providers. That leaves the remainder in the hands of the private customer, many of whom can’t or won’t pay their accounts.
The result is a $970,000 shortfall for the 2011-2012 fiscal year. That had to be written off as a loss by the city.
The 1995 agreement states that EMS will receive additional funding from the occupational tax fund “in the event of unanticipated and/or unbudgeted expenditures and/or in the event of unanticipated revenue shortfalls.” EMS currently receives around 13 percent “off the top” of the occupational tax revenue.
Girdler said meetings with the county about the funding issue hasn’t turned out much as far as additional funding from the county’s side.
Staring down the possibility of providing that amount yearly to ensure EMS can still operate, Girdler said during a city council workshop meeting Monday that something needs to be done.
“This is a very serious situation,” Girdler said.
The city’s own occupational tax could be a solution to that problem, Girdler said. City officials estimate that anywhere from 55 percent to 65 percent of the total occupational tax revenue comes from employers within the city limits. Isaacs said that number could be as high as 75 percent.
“It’s according to location,” Isaacs said.
Should the county decide to structure its own occupational tax, it would be able to claim revenue from all employers located within the city limits. That would mean many of the local schools, Lake Cumberland Regional Hospital, Oakwood, and even the county itself (as its main offices are located in the old courthouse in downtown Somerset) would see the allotted 1 percent of employees’ pay go to the city and not the county. Along with that, employers also pay around 1 percent of their net profit into the occupational tax. That would go to the city as well for those employers located in the city limits.
“I don’t know what we’d do,” Isaacs said. “I really don’t.”
The occupational tax was established in the 80s to aid a struggling county government. Isaacs said that revenue has been the county’s “saving grace.”
Currently, the occupational tax is divided among a number of entities that affect the county and city both.
Along with EMS, three other entities receive funding “off the top,” or from the gross profit of the tax. The Lake Cumberland Regional Airport receives around 2 percent, and 13 percent goes to Pulaski County 911, and around 5 percent goes to the Pulaski County Detention Center.
After a percentage of gross profits are handed out, other entities are given a percentage of the net profits of the tax.
20 percent of that revenue goes into the county’s general fund, 20 percent goes to the Somerset-Pulaski County Development Foundation, 30 percent goes into the county road fund, and the remaining 30 percent is divided among the five incorporated cities — Somerset, Science Hill, Eubank, Burnside and Ferguson — by per capita.
A City of Somerset occupational tax would no doubt make big waves in the current occupational tax structure, but Girdler said it’s the “simplest solution” for the city.
“It will absolutely improve the relationship of all the groups if each agency does its own occupational tax,” Girdler said.
Girdler said he hopes the county and city could sit down after the occupational tax is restructured and hammer out new inter-local agreements that would determine who funds what.
“There’s no additional dollars involved at all,” Girdler said. “It makes it a lot simpler, a lot easier ... this is the best way to do it.”
Girdler said the city can’t afford to write off nearly a million dollars yearly for EMS — a necessary service and one that shouldn’t be cut back, Girdler said.
“My objective is to maintain the outstanding quality of service of EMS, no matter how we do it,” Girdler said.
And even if questions of service cuts come up, Girdler said he doesn’t have the authority — nor does he want it — to make a decision like that.
“I just don’t feel comfortable making that decision,” Girdler said. “That’s just not my place to do so.
“Do you not provide services to people?” Girdler asked. “I won’t make that decision.”
Girdler and county officials hope to meet today to discuss the issue.
“It’s a huge problem, and it’s not going to get any better,” Girdler said.
Isaacs, who worked in the county’s occupational tax department for several years under former treasurer Arlene Young before taking over as treasurer last year, emphasized that a new occupational tax structure would do significant damage to the county’s budget.
But she said she’ll do her best to adjust the county’s budget around those changes should they come about.
“I’d hate to see it (the occupational tax restructuring) happen,” Isaacs said. “But if it does come about, we’ll do .. the best we can with it.”
A message left with Pulaski County Judge-executive Barty Bullock by a reporter seeking a comment on the issue was not returned by press time Tuesday.