The following was provided courtesy of Robert Weber, Legislative Research Commission
FRANKFORT-It took around $150 million to revitalize Owensboro’s waterfront, says the
city’s mayor Tom Watson. But paying for the project under the city’s existing tax
structure wasn’t easy.
No new city revenue stream was available for the project at the start, said Watson,
pushing the city seek other funding sources including some federal funds. Having
more local tax options-including the option to levy a restaurant tax, which
Owensboro cannot levy under current Kentucky law-would help cities like his build
their infrastructure and be more competitive, he told the Interim Joint Committee on
Local Government today.
Kentucky is one of only a handful of states that does not give cities or counties
authority to level a local option sales tax, although proposals have been considered
in recent legislative sessions.
“We think we have as much understanding as anybody of what our community can
tolerate, of what they’d be interested in,” Watson told the committee. “I’m not a
tax-and-spend guy, I promise you … and this is just an option. We’d like to have
some control and some say in what happens.”
Joining Watson before the committee was Kentucky League of Cities (KLC) President
and Sadieville Mayor Claude Christensen, who said his response to local tax reform
is “yes, please.” With only 332 residents, Sadieville doesn’t have much tax revenue.
And it’s not alone: Most of Kentucky’s cities, or 52 percent, have fewer than 1,000
residents, said Christensen.
Another issue raised was city-county revenue-sharing. Watson said he would like to
see more on that front, although Committee Co-chair Rep. Michael Meredith,
R-Brownsville, cautioned against General Assembly involvement in such situations.
“I think it’s a city-by-city, county-by-county kind of situation that probably we
don’t, as a General Assembly, need to step into because it is really a case-by-case
basis,” said Meredith.
Committee Co-chair Sen. Joe Bowen, R-Owensboro, said the issues affecting Owensboro
and Sadieville affect cities all across Kentucky. He mentioned the 2014 General
Assembly changed the way cities are classified under state law, with all cities now
falling under two classifications – first-class (Louisville) and Home Rule (all
other cities)-instead of the previous six. The change removed what KLC has called
the “restrictions and red tape” of the old classification system to help all cities
while safeguarding certain privileges the old system gave smaller cities.
“It’s an economy of scale,” said Bowen.
Still, Watson and Christensen see room for improvement. Owensboro is still
prohibited from levying a restaurant tax. Only cities classified as fourth or fifth
class cities as of January 2014 can do that. And Sadieville, a former sixth-class
city, is limited in its ability to raise revenue as well, specifically occupational
tax, said Christensen.
“I can’t levy an occupational tax in Sadieville. By statute, I’m prohibited from
doing that,” said Christensen. “So we’re limited.”
Christensen said he wants to partner with the General Assembly as both a small-town
mayor and KLC President to level and improve the local tax structure.
“So if your question today for me, at least, is what we need in small towns, we need
you to trust us. We have adding machines and calculators, we have smart people, we
have capable people to manage money,” said Christensen. “We need flexibility.”
Meredith reassured the mayors that providing more local flexibility is part of
discussions at the state legislative level, including discussions relating to local
taxation.
“Hopefully we can move those forward,” he said.