Finance committee asks mayor to set target for city’s new revenue needs

Councilman Bobby Simpson makes a point during Thursday evening’s meeting of the Bardstown City Council’s finance committee.

By JIM BROOKS
Nelson County Gazette / WBRT Radio

Thursday, July 7, 2016, 11:40 p.m. — The Bardstown City Council’s finance committee met Thursday evening to talk about ways to bring in more revenue to fund the city’s general fund — though it became apparent that the question to answer first how much new revenue is needed.

At the city council’s last meeting Councilman Fred Hagan pointed to the utility projects the city’s public works department is planning in the next few years. He warned that the city budget’s continued use of utility revenues to pay general fund expenses — police, fire protection, street repairs, etc. — will take needed utility funds needed to fund these planned improvements.

Larry Hamilton, the city’s public works director, discusses future utility project funding at Thursday’s Bardstown City Council finance committee meeting.

The city budget has become increasingly dependent on the combined utility fund revenues to pay for general fund expenses. Tracy Hudson, the city’s chief financial officer, told the committee that if no new revenues are created, the city will need to cash out a $3 million utility operating fund certificate of deposit to help cover expenses.

It was evident that some committee members were hesitant to talk about raising existing taxes — or creating new ones.

Mayor John Royalty said he believed some members of the council who are seeking re-election were afraid to talk about raising taxes in an election year.

As the city continues to grow, its infrastructure must be maintained, he said, adding that he wasn’t comfortable with putting off needed utility upgrade projects. The new full-time fire department is an added expense, and the city’s growing needs and its expenses must be funded too, he explained. The council must consider the city’s short-term and long-term funding.

“The city has changed since the time I was on the council, and you as a council will need to change too,” he said.

Committee chairman Roland Williams said that he historically has been opposed to raising people’s taxes.

“But if you show me there’s a need, then I’m going to give it some thought,” he said. “I’m not going to tax just to be taxing, but if it is something that we clearly need to do, then let’s talk about it.”

The committee briefly reviewed the four ways the city can increase its revenue, and the amount of revenue possible.

PROPERTY TAXES. Hudson said a 4 percent increase it property tax revenue would net the city an extra $80,000 in the next fiscal year.

Finance committee members refer to printed spreadsheets during a discussion of new revenue sources at Thursday’s meeting of the Bardstown City Council finance committee.

OCCUPATIONAL TAX. Raising the occupational license tax from 1/2 of one percent to 3/4 of one percent will bring in an estimated $1.1 million in additional annual revenue.

UTILITY FRANCHISE TAX. This is a 3 percent tax that would be charged those who use non-city utilities inside the city limits like LG&E gas, KU or Salt River electric. The cities of Bloomfield and Fairfield have a 3 percent utility franchise tax. If enacted in Bardstown, it will raise an estimated $250,000 annually.

INSURANCE PREMIUM TAX. This would be a tax paid on insurance premiums inside the city limits. The city could exempt certain types of insurance, like health insurance. Citing last year’s figures, a 7 percent insurance premium tax would bring in just over $900,000 in new revenue.

Councilman Fred Hagan asked the mayor if he could determine how much new annual revenue the city expects to need. Once the needs are determined and the costs figured, the council could have a target for new revenue. Hagan said he would like to be able to explain to taxpayers how much new revenue is needed and why it is needed.

He said the council can “mix and match” the four revenue options to come up with sufficient funds to meet the need. Due to the proposed infrastructure projects, he suggested the city eliminate its use of utility revenues to fund the general fund and allow the utilities to use the funds for their own projects.

Councilman Bobby Simpson disagreed with Hagan and suggested the council needs to control spending instead of looking for new sources of revenue.

After additional discussion, Royalty said he will direct the staff to come up with figures that will represent the needed increase revenue to adequately fund needed projects, and bring those figures back to a future city council working session so the entire council can review them.

“I know we can’t do it all in one year, but you have to prepare for what’s coming down the road,” he said.

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