Commonwealth Journal

March 9, 2013

Magistrates concerned about new tax structure

Commonwealth Journal

Somerset —  

A new occupational tax structure that would have the City of Somerset claiming a larger portion of the revenue has Pulaski County officials concerned about who will ultimately feel the effects.
“I think our goal is to be fair with everybody and do what’s best for the people in the county and not a select group of people, whether that be in the city or the county,” said Pulaski County Judge-executive Barty Bullock during a special-called Pulaski County Fiscal Court meeting on Friday.
The county and city entered into an agreement recently that would establish a new occupational tax system – much of which funds a large portion of county government’s budget – after the city announced that they were dealing with a funding shortfall with Somerset-Pulaski County EMS.
Somerset Mayor Eddie Girdler announced in January that the shortfall was more than $700,000 and that soon grew to around $1 million, according to Girdler. The city then approached county officials, asking that the county cover that shortfall as per a 1995 inter-local agreement that had established the funding structure for EMS.
The agreement appointed the city as “overseer” of EMS, with the city funding whatever part of the EMS budget left over after occupational tax money was applied. Pulaski County Treasurer Joan Isaacs has said EMS currently receives around $1.2 million yearly from the occupational tax revenue.
But in the event of a shortfall, the responsibility moves back to the county, according to the agreement. Girdler had suggested the city would move forward with claiming its portion of the occupational tax as a means to cover any shortfalls in the future.
“Originally, he (Mayor Girdler) was going to take 100 percent of the occupational tax generated in the city,” Bullock said Friday.
The city’s chunk of the total occupational tax pie has been estimated to be around 75 percent. A hit that significant to the county’s revenue would cripple it, according to county officials.
“We’re sitting up here today struggling to make ends meet for everybody in the county,” said Fourth District Magistrate Glenn Maxey. “ ... It’s going to be really hard for us to make ends meet.”
Twenty percent of the county’s general fund comes from the occupational tax, which was established in 1987 as a way to bring additional revenue to a chronically underfunded county government. Isaacs has said the county collected around $9 million during the last fiscal year, which ended in June.
As of right now, the county funds a number of entities through the occupational tax. Lake Cumberland Regional Airport, Somerset-Pulaski
County EMS, the Pulaski County Detention Center and Pulaski County 911 all receive funding from the gross revenue of the county’s occupational tax, or “off the top.”
The airport receives around 2 percent, EMS gets 13 percent, the detention center gets about 5.5 percent, and 911 receives 13 percent.
After a percentage of gross profits are handed out, other entities are given a percentage of the net profits of the tax.
Twenty 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 — per capita.
“We take that occupational tax in and we divvy it out where it’s needed the most,” said Maxey.
The city recently heard a first reading of an ordinance that would allow them to collect their own tax against the county. That wouldn’t mean new taxes for anyone. It would mean that the city would claim a larger portion of the occupational tax than it had received in the past.
The city is expected to hear the second reading of the ordinance this week.
“ … It’s going to be felt everywhere,” said Maxey.
The magistrates expressed concern that the new structure will leave the county reeling, even if the city doesn’t claim its full portion of the occupational tax.
“That tax is our only revenue source,” said First District Magistrate Jason Turpen.
Fifth District Magistrate Mike Strunk agreed.
“We don’t have a gas company or water company or sewer company to make us money,” Strunk said.
The City of Somerset currently receives revenue through its ownership of a pipeline built during the 1970s to eastern Kentucky gas fields, along with a gas pipeline to a Texas Eastern terminal in Casey County that crosses two interstate pipelines.
The city also provides treated water to water providers throughout the county.
“I don’t know how we would afford to keep those services going without that money because that’s sort of our life blood,” said Bullock.
Strunk and Turpen pointed out that even though a majority of the occupational tax revenue is generated within the city, a majority of city employees also live in the county and benefit from the county’s services such as road upkeep.
“You’ve got 11,000 people that live in the city of Somerset who have everything they need and you’ll have (56,000)  people who live in the county who’s going to have to do without,” said Strunk.
The magistrates also wondered aloud whether the city will claim its full portion of the occupational tax eventually.
“There’s nothing then saying the city can’t still come back ... and take it all,” Bullock said.