Commonwealth Journal

April 19, 2014

Bill puts freeze on occupational tax funds

by Chris Harris
Commonwealth Journal

Somerset — An addition to the late-passed Kentucky Transportation Cabinet budget contains an Easter egg of sorts that could have a substantial impact on Pulaski County — although Somerset’s mayor is downplaying it.

Approved on Tuesday night in the Kentucky General Assembly, one of the last items to be passed before the end of the 2014 session, the budget for the upcoming fiscal year contains language that throws another wrinkle into what was an ongoing struggle last year between local city and county governments over the sharing of occupational tax revenue.

Contained in the text of the much-ballyhooed two-year road plan are the following sequential passages:

“... (T)he provisions of this section shall apply as follows from the effect date of this Act through June 30, 2016:

“Any set-off or credit of city license fees against county license fees that exists between a city and county as of the effective date of this Act, shall remain in effect as it is on the effective date of this Act;

“The provisions of subsection (7) of KRS 68.197 shall not apply to a city and county unless both the city and county have levied and are collecting license fees on the effective date of this Act;

“Any agreement between a city and county related to the sharing of revenues from a license feed that is in effect on the effect date of this Act shall remain in effect, regardless of whether the agreement, but its terms, was set to expire prior to June 30, 2016.”

KRS (Kentucky Revised Statutes) 68.197 deals with license fees in counties of 30,000 population or more, for which Pulaski qualifies; subsection, and contains language referring to an occupational license fee, which also refers to the occupational tax that has been the subject of debate between local government entities. Subsection (7) states that persons who pay a county license fee and a fee to a city contained in the county shall be allowed to credit their city license fee against their county license fee.

This language in the 2014-16 budget for the Transportation Cabinet was supported heavily by Sen. Chris Girdler, the Pulaski County native who represents this county, Boyle and Lincoln Counties in Frankfort. And according to him, it had a lot to do with last year’s local occupational tax controversy.

“Without question, (the local situation) was a catalyst for pushing for and being supportive of this legislation,” said Sen. Girdler. “I definitely worked hard to see it through to fruition.”

As Girdler put it, the language “freezes the status quo” and gives the state time to work out a more significant overhaul of the occupational tax structure in communities across the state. The plan is to address that issue more thoroughly in next year’s legislative session, he said.

“A city cannot come in and take part of a county’s occupational tax,” he said of the current state of things. “If a city wants to institute and vote for its own separate occupational tax, if that’s something they choose to do, so be it, but don’t come in and try to take what the county has instituted away from them.”

Throughout 2013, the City of Somerset and Pulaski County Government were locked in a back-and-forth debate over the city’s stated plans to consider taking a substantial chunk of the revenue the county makes on its 5.1 percent tax on business payrolls. In October 2013, the situation exploded when the issue of a merged city-county government (an idea advanced by the Somerset-Pulaski County United group, with which Sen. Girdler worked closely) was brought up. Somerset Mayor Eddie Girdler said that there would be “no negotiation” with the county government, which helped fund SPCU’s study into the possibility of a merger. Meanwhile, county officials worried that the city taking so much of the occupational tax would “cripple” the service they was able to provide their citizens.

In November, things calmed down when Somerset Budget Director Jimmy Hogg said that the city has never intended to take as big a slice of the occupational pie as many may think, and that the city has only moved forward with claiming 60 percent of the tax revenue generated within the city limits. Pulaski County Treasurer Joan Isaacs said she could “at least sleep at night with those numbers,” effectively creating a détente between the two sides (the city sought the money to help fund EMS services, after complaining that the county had not offered sufficient help in figuring those numbers out).

Under the agreement that was in place up until the passage of this new transportation budget, Somerset would be able to take 60 percent of the occupational tax revenue come the start of July of this year. That’s why pushing the date back to give the state legislature time to tinker with state policy on occupational license fees is considered a “freeze” by Sen. Girdler.

The city now receives $1.4 million from the county for EMS operations, a number decided by the two entities earlier this year after the two disagreed over funding sources for EMS in the face of budget cuts and rising costs.  Somerset currently also claims an additional $1.4 million, as a city located within the county, which brings its yearly total to around $2.8 million, including the county’s additional EMS funds.

Sen. Girdler said that the headline-making conflict between city and county governments cast a bad reputation on the area, particularly with potential entrepreneurs that might have been looking to move into the area.

“The perception (was seen as a problem) not only by me, but a lot of people in this community and business leaders, and people looking to move to this community,” said Sen. Girdler. “... It’s time to put petty politics and local turf wars aside and work together, and in freezing this, I hope that’s something that will help do so.”

And what if Sen. Girdler faces a backlash from the city government, given that Mayor Girdler reacted strongly to those associated with SPCU in the wake of news regarding their plans to study a united city-county government?

“If that’s the case, so be it,” said the state senator. “I’ve done what I feel is the right thing to do for my community. I cannot sit idly by and watch our county form of government be threatened and consistently have that hanging over their head.

“If the people of Somerset and Pulaski County wanted a state senator who was going to sit on their hands and simply go to Frankfort and vote ‘yes’ and ‘no’ on issues, they’ve got the wrong guy,” he added. “I’m very passionate about this community. ... At the end of the day, we have to promote unity and work together, because we’re all in this together.”

Asked whether he felt the city was likely to go ahead and take the money, Sen. Girdler said, “It has been threatened. It has been inferred. I think every term has been used other than actually going ahead and doing it.”

Mayor Girdler had little response when asked about the transportation budget’s language regarding occupational taxes, initially stating, “No comment.”

He did, however, say that it referred strongly to a similar case in Knox County and Corbin elsewhere in the state, calling them “the primary driving force” behind the freeze, and downplayed its impact on his own city.

“Let’s just say that any impact of the transportation bill may not have any effect on Somerset,” said Mayor Girdler. “We have reviewed the situation and as of today, the language in the transportation bill does not affect what the city intends to do in the future.

“We will continue to abide by the language through June 30,” he added. “However, after July 1, we will be looking at a different scenario.”