Commonwealth Journal

February 8, 2013

County, city agree to 60-40 split of tax money

By CHRIS HARRIS, CJ Staff Writer
Commonwealth Journal

Somerset —  

A 60-40 split.
That is perhaps the key detail of the agreement reached by the City of Somerset and Pulaski County governments on how to restructure the occupational tax distribution and help the city pay for EMS services.
Based on quarterly reports, occupational tax revenues will be adjusted so that the county receives about 60 percent of the revenue and the city 40 percent.
“With the agreement that we’ve reached, in the end, the majority still remains with the county,” said Somerset Mayor Eddie Girdler. “They will do certain services, and we will do certain services. We think it’s very fair, very reasonable, and hopefully will give us a little bit additional dollars for the EMS system.”
Somerset City Hall released specific terms of the agreement after Girdler allowed the city council a chance to review them. Both the council and Pulaski County Fiscal Court will have to approve the agreement before it’s finalized, but officials from both sides have expressed optimism about getting a deal done and settling a potentially contentious issue.
Last month, Girdler began talking about the possibility of implementing the city’s own occupational tax in order to resolve funding issues for entities such as Somerset-Pulaski EMS, the ambulance service that responds to health needs throughout the county. 
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. 
County officials, however, worried that the city’s plans for the occupational tax could “cripple” their own ability to fund public services, since the tax revenue garnered from employers at a rate of 1 percent makes up about 20 percent of the county’s total budget. 
Occupational taxes paid by city entities represent a large chunk of the total amount. City officials have estimated that anywhere from 55 percent to 65 percent of the total occupational tax revenue comes from employers within the city limits, while county officials said that number could be as high as 75 percent. Had the city been able to take amount for themselves, county officials feared the worst would be possible.
“That would have been disastrous to county government had the city done that,” Pulaski Judge-Executive Barty Bullock told the Commonwealth Journal recently. “Thankfully, we came together with the mayor and city council, and members of the fiscal court and myself, and our treasurer and their finance folks, and I think we’ve got a solution worked out to make sure everyone’s taken care of without having to devastate anyone.”
The city needed the money for EMS urgently. Medicare and private insurance coverage led to many EMS bills being unpaid, resulting in a loss around $970,000 on the city’s checkbooks by the close of the 2011-2012 fiscal year, which ended in June. The city council advanced $1.3 million in January to help cover the shortfall, and part of the agreement with the county entails refunding the city about $1 million to help cover that, through June 30. Still, arrangements must be made with an eye to the future.
The new agreement details that the county will maintain exclusive operation and financing of the 911 dispatch system, while the city will continue to handle EMS, even though it operates throughout the county.
There will be no increase in the occupational tax rate, and no worker or business paying any additional fees. What will change is that Somerset will enact an occupational tax rate that, under the agreement, will be an offset against the amount to be generated by the county occupational tax. The expected rate for the city’s occupational tax will be .006.
“‘Offset’ means that if (the county taxed at) 1 percent and we did six-tenths percent, without the offset, you’d be paying 1.6 percent,” said Girdler, who explained that the numbers will be adjusted every fiscal quarter to reflect the 60/40 split. “In order not to do that, to not increase the cost to workers or anything else, the amount on that six-tenths we collect will be an offset with those people working against the county, so therefore the worker will pay only 1 percent.
“Even if we generate, say, 10 million and the county’s getting 60 percent of that, the city theoretically would get $6 million and the county would only get $4 million,” he continued. “Because we’re willing to work with the county in the future, it’s actually reversed. We’re giving them more money than they would be entitled to provide the services, and we’ll take the 40 percent.”
Added Girdler, “The county is still going to come out pretty good. They will not be harmed.”
Girdler estimated that the total occupational tax revenue likely comes out to about $9.5 million annually. Of that, the county could expect to get about $5.7 million and the city $3.8 million. Previously, the city had only been getting about $1.2 million to operate EMS; “We think it will take about $1.6 million to sufficiently operate it,” said Girdler.
Beyond that, the additional money will allow the city a little bit more financial flexibility for other projects. Girdler said that “there will be some changes made” in relation to that extra revenue influx.
“The beauty of this plan is that it puts both the city and the county operating the way it should be,” he said. “They have different functions and different services they want to do, and we have different functions and services. We provide all the utilities; they provide none.
“If it (the plan) does go through, it will allow the county to make its own decisions relative to what they want to fund and put the city in a position to be able to leverage these dollars on the types of bonds and the types of programs we’re having to do for the county and the city,” he added.
Girdler said to expect a transition process over the next few years but the agreement will ultimately foster a “strong working relationship” with county government, as long as it’s passed by both the city council and fiscal court.
“For too long, this process has not worked; it’s been very inefficient,” said Girdler. “This will allow each of us to make our own decisions for the people we have to serve. We’re still a part of the county. We (as city entities) pay a huge amount of taxes. We want to be a part of that, and I think ... in the end, it will be good for all of us.”