Councilman suggests adding sunset clause back to occupational tax measure

By JIM BROOKS
Nelson County Gazette

Tuesday, June 21, 2011, 11:28 p.m. – A special working session of the Bardstown City Council Tuesday evening brought the council back to an idea that had been panned just a week earlier – a sunset clause for proposed revenue enhancements to the city occupational tax ordinance.

Councilman Fred Hagan (click photo to enlarge).

Councilman Fred Hagan told the council he gave the idea reconsideration after fielding calls and e-mails about the council’s vote to OK changes that will double the city’s revenue from its occupational tax.

Many of the questions asked him to explain why the city needed to double revenue and what it planned to do with it, he explained. He said his answers included items the city could use the money for – which included street repairs and improving fire protection.

“That’s when I heard what I was saying,” he explained, “And I realized I couldn’t say with certainty that ‘This is what we’re going to do’ [with the money].”

Hagan said he believes there needs to be more planning in order to tell taxpayers where their contributions are going.

The city has for years depended on utility fund profits to help fund the city’s general fund. Hagan noted that while the budget discussion has mentioned reducing this, there’s been no policy set or rule established as to why the practice can’t continue, nor is there a definite plan to curtail it.

Hagan said better planning would improve the budget process by having the needs better identified prior to setting the budget next year.

Hagan proposed that the council consider a new occupational tax ordinance that would include a one-year sunset clause. With better planning, the council will know where the needs are in city government; by next year the council will also have more information about the occupational tax’s increased revenue as well as the impact of the annexations at the end of this year.

“We’ll know what adjustments we need to make when the budgeting process comes around next year,” he said. Hagan said he could support a one-year sunset clause because it would only impact the current council and would avoid imposing on a future one.

Hagan suggested that the council consider an occupational tax as approved last week with one change – adding back a $75,000 cap on taxable income and a one-year sunset clause.

“We’ll know more [next year] about how much revenue its bringing in, and I don’t have a problem with making us look at it again in a year to see if there are changes needed,” he said.

The changes he proposed would not impact the budget the council gave initial approval to last week. There’s time to consider changes to the occupational tax ordinance since any changes will not go into effect until Jan. 1, 2012.

Bardstown Mayor Bill Sheckles

“It kinda splits the baby,” Hagan said of his proposal.

Mayor Bill Sheckles applauded Hagan for his suggestion of incorporating more planning based on needs of each department in city government, though he defended his call for more revenue for the general fund.

“We can’t spend money until get money,” Sheckles explained. The mayor also said he didn’t think putting the $75,000 cap back on would be a good move.

Hagan said his proposal doesn’t reduce the revenue from the occupational tax in terms of what is budgeted. The sunset clause would simply require the council to come back to revisit the occupational tax at a time when they have more information about the occupational tax revenue, the needs within city government and the impact of the annexation that will take place at the end of this year.

The sunset clause would allay some of the fears of constituents who worry that once in place the occupational tax would never go away, he said.

Councilman Tommy Reed said he would give Hagan’s proposal some thought. While Councilman Roland Williams withheld commenting about specifics, he noted he had previously expressed his interest in a sunset clause for the occupational tax.

Councilman Bobby Simpson said he didn’t understand why the city didn’t want to spend the profits from the utilities it operates.

“If we’re not going to spend that money, let’s take that money and use it to lower our rates,” he said.

Sheckles explained he didn’t want the city’s general fund to be dependent on money transferred from the utility profits. The city has transferred about $500,000 each year to help fund the general fund, which pays for fire and police protection, street repairs, recreation and other parts of city government that do not generate revenue.

The new occupational tax is expected to bring in $1.6 million, roughly double the revenue now being received. Simpson asked what the city would do with the money it usually takes from utilities if the occupational tax revenue increases by $800,000.

Sheckles said he would like to put some of the revenue into the city’s reserve funds. If the utilities’ profits stay in those accounts, the city might be able to lower utility rates or avoid rate hikes, he said. The money could also be used to pay down its debt on the water treatment plant improvements and the sewer treatment plant.

The council will meet at 7 p.m. Tuesday, July 28, 2011, for a second reading on the 2011-12 budget and to consider proposed changes to the city occupational tax.

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