New tax = new jail?

“Does the community want a jail, or do they want us to continue operating the best we can and barely surviving?”

That was the question posed by McCreary County Judge Executive Doug Stephens Thursday night as he outlined his plan for the possibility of building a new jail in the county, which would entail imposing a new tax on the populace.

The plan, which was requested by the Fiscal Court during budget discussions last month, would call for an insurance premium tax imposed to help offset the estimated $1.985 million annual cost if such an endeavor were to be implemented.

Judge Stephens opened discussion during the Fiscal Court meeting by noting more than a third of Kentucky counties currently operate without a jail – with Grant County being the latest to close their facility just this past week.

He stated McCreary County’s current situation, with transports having to go to Leslie County, were a result of overcrowding in other local facilities, but he claims he was told by Wayne County officials that the overcrowding in that facility would soon lessen and enable them to take county prisoners once again soon.

With that said, the Judge laid out his plan to build a new jail.

To start, Judge Stephens presented a breakdown of actual costs associated with jail and transport operations for the past five years.

In the last full year of operation prior to the closure midway through the fiscal year in 2013, the McCreary County Detention Center had an actual cost of operation of just over $872, 000 with a revenue of nearly $370,000 – thus costing the General Fund over $502,000.

Over the next four years that cost has been higher, reaching a peak of $928,000 for 2014-15 and dropping to $774,126 this past year.

Before the jail closed, those costs were offset, in part, by income received mainly for housing state prisoners. Since the closure, that revenue went away, leaving the county with the full costs of operations.

One option, Stephens said, would be to repair the old jail and bring it up to modern standards. That, he believed, would be nearly impossible with the structural failings apparent in the old building.

That option was not favorable, he said.

“That is part of our history in the past and we need to move forward,” he said.

The other would be to build a new jail.

From his research Stephens said he estimated such a new facility would cost probably between 8 to 10 million dollars.

Judge Stephens stated he contacted the Kentucky Association of Counties to obtain a debt analysis to see how much debt the county can afford, which turned out to be only $9 million.

If the County were to borrow the $9 million to construct a new facility, the debt service with a 20-year payout on the loan would cost the county approximately $535,000 per year.

With an estimated $700,000 per year in personnel costs and an additional $750,000 per year in operations costs, Stephens estimated the annual cost to build and operate a jail would be nearly $2 million per year – about 2.5 times the latest amount spent on housing and transports.

Stephens noted the County can barely keep operations going as it is with the current way things are operating, so the only way to build a new jail would be to bring in more money.

Noting he would not advocate increasing the occupational tax, the only option – he believed – would be to impose an insurance premium tax.

Such a tax would impose a 7 percent fee on new insurance policies written in the County for one year. People with existing policies would not be affected.

Using an estimated revenue of $1 million per year from the tax Stephens said it would go toward offsetting the annual costs of the jail. The tax could not be imposed until July of next year, giving the citizens of McCreary a year to consider the option.

Even with the estimated insurance tax revenue factored in, annual operations would still cost about $860,000 per year if no other revenue stream was brought in.

That cost could be lowered if state inmates were housed locally, which there is no guarantee – Stephens cautioned. If an average of 25 state inmates are housed in a year, an additional $286,000 in revenue could be realized.

In the best-case scenario – 50 state inmates per year – an additional $572,000 could be brought in, bringing the annual cost to the county down to only $288,000 annually.

Again, he noted, it would be another year before an insurance tax could be imposed, giving the public time to consider the possibility and voice their opinion.

Magistrate Roger Phillips questioned the Judge’s estimate on revenues from the tax, noting he had been informed the Wayne County Fiscal Court has a similar tax, but the rate is 5 percent and they only collect about $742,000 per year with a larger population.

Stephens responded he received his information directly from the Kentucky Department of Insurance and believed it was accurate.

Phillips championed looking at fixing the old jail, noting spending $2 million would be a lot easier on the tax payers than $10 million.

Citizen Pat Ball stated she felt the insurance tax would be another unfair burden on working people of the county.

It was stated the tax would only be assessed on new policies written, not existing coverage, and would cover home owners, rental and car insurance – something everyone who drives is required to have.

Phillips informed the audience there were only three ways the Fiscal Court could raise revenue: by raising the property tax, which would only bring in about an extra $100,000 per year, raising the Occupational Tax or by imposing the insurance tax.

Jailer Jessie Hatfield said whatever the court decides to do, it better happen quick. He noted that his transport staff is traveling hundreds of miles to bring prisoners to jail, and bad weather would soon be here.

The Jailer also hinted that he believed the main problem behind the issue was a lack of timely payment to local jails, causing them to turn away our prisoners.

“We have to find a way to pay these jails on time,” Hatfield said, adding he feels the jails don’t want to deal with McCreary County because they know they will have to wait for payment.

Judge Stephens claimed that no jail bill had gone past two months over due.

Magistrate Duston Baird cautioned that the County should explore all possible options before making a decision, stating he didn’t want to pass the burden down to future generations.

Magistrate Phillips asked the citizens to contact their representatives in the State Legislature to urge them to pass a law allowing for a Local Option Sales Tax.

Such a law would allow the voters of a county or city to vote on an extra sales tax to go toward a one-time project, such as a jail.

That legislation did not pass in the current legislative cycle, but has gained support from several groups, including the Kentucky Chamber of Commerce.

Judge Stephens closed discussion by noting he felt his plan was “the most fair we can do,” and asked the people to seriously consider his proposal, or bring him ideas of other ways to do it.

“If you come up with an idea we can do, that is totally fair, I’d be glad to listen to you,” he said.