Council debates occupational tax but can’t agree on what action to take

Bardstown Mayor John Royalty leads the swearing-in ceremony for Officer Robert Michael Monroe, the newest member of the city police department. Click to enlarge.

By JIM BROOKS
Nelson County Gazette / WBRT Radio

Tuesday, Aug. 9, 2016 — After reaching what appeared to be a consensus at its working session last week, the Bardstown City Council spent time Tuesday night discussing a possible occupational tax increase. In the end, the council could not agree on exactly what action to take.

The three options before the council included: a). not changing the occupational tax rate; b). raising it 50 percent, from .5 to .75 percent; or c). doubling the tax to 1 percent of earned income.

REVENUE PROJECTIONS. Raising the rate to .75 percent would generate $1.1 million in new tax revenue, Chief Financial Officer Tracy Hudson told the council. Raising to to a full one percent would double that to $2.2 million.

Councilman Fred Hagan had led the occupational tax hike discussion at last week’s working session and explained that his rationale behind a tax increase the revenue is needed to keep from draining the city utility reserve funds.

The last several city budgets have required the transfer greater amounts of money from the utility reserve funds to the general fund to pay for things like roads, sidewalks, police and fire protection. If the council does not act to create new revenue, the city utilities will eventually lack sufficient funds to complete planned projects, and could be forced to cash out some of its investments.

Councilman Roland Williams and City Attorney Tim Butler talk prior to the start of Tuesday night’s council meeting.

An increase to .75 percent is a way to reduce the need to pull money from the utility reserves and allow that fund a chance to rebuild to sufficient levels.

Councilwoman Kecia Copeland said she could support an increase to 1 cent in order to avoid leaving work undone for the next council to do.

“I spoke with the CFO and some other accountants and there was a consensus that this is pretty much putting a band-aid on it, because we’re going to bleed,” Copeland said. “There’s just not enough revenue there.”

If the occupational tax is increased now, the rate would be effective Jan. 1, 2017. It will be June 2018 before the city can collect a full year of the new revenue.

Councilman Bobby Simpson advocated for spending less. “We need to manage the people’s money,” Simpson said. “If we raise it this year and we raise the budget next year, when’s it going to stop? Control the spending, that’s my answer.”

Councilman Francis Lydian agreed that he would not support raising the occupational tax.

Copeland noted the occupational tax rate hasn’t changed since the tax was enacted 12 years ago. She called for the council to conduct a forum to let the public know why an increase is needed.

“Clearly this didn’t start today, and it didn’t stop two months ago,” she said. “I don’t want to raise someone’s taxes but we’re at the point that in two years we won’t be able to pay our bills. We have a responsibility to the community to make sure we’re functioning.

“We have to let the people know why this is being done. We should not be afraid to have a forum where we answer questions, or let them know what is going on,” she said.

Councilman Bill Buckman supported raising the rate to 1 percent, citing the fact that the city’s expenses continue to increase — and will continue to do so.

Hagan suggested the .75 percent rate and let the next or a future council adjust the rate in the future if it deems it necessary.

LACK OF CONSENSUS. At the end of the discussion, the council was split evenly on the three options: Councilmen Roland Williams and Hagan supported raising the rate to .75 percent; Copeland and Buckman supported raising the rate to 1 percent; and Simpson and Lydian did not want any tax increase.

The council will address the occupational tax rate at its Aug. 23, 2016 meeting.

PROPERTY TAX RATE. The council did make a decision in regard to the city’s property tax rate.

Councilwoman Kecia Copeland advocated for a public forum to let the public understand why the city council is considering an increase in the occupational tax. “We should not be afraid to have a forum where we answer questions, or let them know what is going on,” she said.

The council had three choices. It could leave the tax rate the same; it could pass the compensating rate, which is the rate that generates approximately the same tax revenue as last year’s tax rate; or it could raise the tax to generate a 4 percent revenue increase.

Due to the increase in property assessments in the city, the compensating tax rate would mean cutting the tax rates from 18.2 cents per $100 value to 17.8 cents per $100 value for real estate and from 19.12 cents to 18.78 cents per $100 of personal property. The tax on motor vehicles and water craft remains the same at .24 cents per $100 value.

Councilmen Fred Hagan and Bill Buckman spoke in favor of adopting the 4 percent revenue increase, given the city’s financial situation and the need to build revenue.

The city has historically been adopting the compensating rate, Tracey Hudson, chief financial officer told the council.

After discussing the matter, the council voted 5-1 to leave the tax rate the same. Doing so will generate almost as much new tax revenue as adopting the 4 percent revenue increase — $63,000 vs. $71,000.

The council passed the measure on first reading, and due to the fact the rate amounts to a tax revenue increase, a public hearing will be required prior to the tax rate’s final adoption.

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