Council OKs revised occupational tax; mayor protests measure as ‘unfair’
Bardstown Mayor Bill Sheckles gestures while making a point during the discussion about proposed changes to the occupational tax. The mayor called the measure -- which removes moves the cap on taxable income from $75,000 to $100,000, "unfair." Click image to enlarge.
By JIM BROOKS
Nelson County Gazette
Wednesday, June 29, 2011, 1:30 a.m. (UPDATED 2:30 p.m. with memo regarding sunset clause) – The Bardstown City Council scrapped the occupational tax ordinance it approved two weeks ago, and after substantial discussion and negotiation, crafted a new ordinance that drew sharp criticism from Mayor Bill Sheckles.
The council approved first reading of an occupational tax ordinance that removes the exemption for the first $15,000 of income and raises the existing cap of $75,000 to $100,000 of income. The tax applies to all individuals who work inside the corporate city limits of Bardstown.
THE TAX THEY SCRAPPED. The occupational tax the council approved two weeks ago removed the cap and the $15,000 exemption; the tax would apply to the first dollar earned. The measure was predicted to at least double the city’s current occupational tax revenue, from about $800,000 to $1.6 million.
Tom Donan, city attorney, discussed the viability of a sunset clause for a city ordinance related to the occupational tax.
Councilman Fred Hagan, who made the motion in support of the tax two weeks ago followed through on last week’s promise and withdrew his support at Tuesday night’s meeting. His change of heart took place after he was asked about the uses the city had for the new tax revenue and he found himself giving answers where the money “might be used” or “could be used.”
CITY ATTORNEY: NO SUNSET PROVISION. Hagan’s suggestion at last week’s working session of introducing a sunset clause with a revised occupational tax ordinance hit a roadblock when City Attorney Tom Donan said it wasn’t allowed.
Hagan wanted to craft an ordinance that would drop the exemption on the first $15,000 of income for one year and leave the cap at $75,000. If the council did not take action to extend or change the occupational tax ordinance in one year, it would revert back to its original provisions.
Click to read City Attorney Tom Donan's memo to the council regarding the legality of a sunset clause.
Donan explained that cities are created by state statute, and his interpretation of the statute is a sunset clause would not be allowed in an ordinance. An ordinance by definition is supposed to be permanent, he explained.
“We have to go by the language given to us by the legislature,” Donan told the council. There’s nothing that prevents the council from going back and changing the ordinance on its own in one year, he said.
OCCUPATIONAL TAX DISCUSSION. Hagan made a motion for a new occupational tax ordinance that dropped the under-$15,000 exemption while leaving the $75,000 cap in place. The measure would generate revenue to adequately fund the proposed 2011-12 budget and give the council time to start long-range planning in time for next year’s budget.
With Hagan’s motion on the floor, Councilman Tommy Reed agreed that the occupational tax needed to be reviewed in one year, if not by ordinance, then by agreement of the council to do so.
“I’m still not convinced what we’re going to spend the money on,” Hagan said of the plans for the additional tax revenue. “We should take a year, do the long-term planning, so when we come back next year we’ll have a better handle on what where its going to be spent.”
Councilman Fred Hagan discusses the need for long-range planning and evaluating the need for revenue in terms of the occupational tax. Click image to enlarge.
The council questioned Mike Abell, chief financial officer, about the impact of leaving the $75,000 cap on the occupational tax for another year.
The fiscal year 2011-12 budget isn’t dependent on removing the cap, Abell explained. Next year’s budget is dependent on about $350,000 in additional tax revenue, an amount that “will just barely cover the budget,” Sheckles said.
Sheckles warned the council against leaving a cap on the occupational tax.
“I think it would go against the general public’s view of the council if you leave the cap on,” Sheckles said. “The average working person out there doesn’t think it’s right for a person who is making $15,000 a year to be taxed the same as someone making $150,000 a year. They think if they’re going to pay the tax, then everyone should pay their fair share.
“If you’re going to be fair about it then let’s be fair about it,” he said. “That’s the feedback I’m getting from the general population, and I tend to agree.”
“I understand the fairness of this, but I think we need to get a better handle on the expenses and the needs,” Hagan said.
Councilman Francis Lydian. Click to enlarge.
Sheckles’ frustration was evident as he explained that if the cap on the occupational tax isn’t removed, there won’t be any revenue with which the council can plan to spend.
He explained that dropping both the exemption and the cap were simply good business. “If you have the opportunity to do this [with the occupational tax], and it’s not something that’s going to be a tremendous burden on the people who want the services we have … I don’t see that the original proposal is that much of a burden.”
Councilman Francis Lydian said removing the cap on the occupational tax was a matter of fairness, and that those who make more money should pay more in taxes.
Councilman Roland Williams said he was hearing concerns from constituents about the city’s use for the additional occupational tax revenue.
“Nobody said this job was easy – or popular,” Sheckles told Williams, adding that they were all elected to represent the people of the town and “to do the right thing for the right reason.”
With Hagan’s motion thoroughly discussed, Reed, who said he did so in the spirit of compromise, answered Sheckles’ call for a second. The subsequent vote was a 3-3 tie, with Reed, Williams and Hagan voting in favor, and Lydian, Buckman and Simpson voting against the measure.
Sheckles’ “no” vote broke the tie, killing the measure.
Councilman Roland Williams casts the fourth vote needed to OK first reading on the occupational tax ordinance at the Tuesday, June 28, 2011 city council meeting. Click image to enlarge.
COMPROMISE GARNERS NEEDED VOTE. Hagan immediately took the floor to offer a new occupational tax ordinance that would raise the cap but not eliminate it. “It doesn’t matter what that number is in order to get four people to vote for it,” he said. “We need to have an ordinance and we need to have some compromises to get there.”
Councilman Joe Buckman said in the interest of compromise, he could support setting the cap at $100,000. Lydian suggested $250,000.
“Here’s the thing, if you take the cap off, you’ll still be here next year,” Sheckles said. “By then you’ll have an idea of where you stand and what you’ll want to do next year.”
Sheckles plea to remove the cap failed to find much support. Hagan made a motion to drop the exemption on the first $15,000 of income and to raise the cap to $100,000. The rate of ½ of one percent would remain the same.
The vote was – by this writer’s tally, another 3-3 tie, with Buckman, Hagan and Reed voting in favor and Lydian, Williams and Simpson against.
Councilmen Tommy Reed, left, and Roland Williams talk during discussions about the proposed occupational tax. Click image to enlarge.
When Sheckles polled the councilmembers individually, Williams hesitated, asking Hagan if he would consider withdrawing his motion. Hagan said he didn’t believe he could since it was being voted on. After several moments of thought, Williams cast his vote as the fourth “aye” vote needed for passage of first reading of the ordinance.
With the occupational tax approved by a 4-2 vote, Sheckles told the council “if you think you’ve been getting phone calls [about the occupational tax], you’re really going to get them now.
“It’s the duty of the council to pass ordinances and approve budgets,” Sheckles noted. “As a footnote, I want to say that as mayor I don’t think its fair for a person who makes $15,000 to pay the same amount of money, in proportion, as a person who makes $200,000.”
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