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2017: The Year of the Tax

Photo by Greg Bird
Protesters marched in front of the Courthouse in January to show their opposition to the possibility of an insurance tax being levied by the Fiscal Court. Judge Executive Doug Stephens addressed the large crowd after the Fiscal Court meeting to answer questions about the need for increasing revenue.

By Greg Bird

2017 ended with a Tax Reform bill being signed into law by President Trump, which promises lower taxes for many. Taxes were a national story for many months in 2017, but in McCreary County it seemed like taxes were the number one story of the entire year as five new taxes were either proposed or passed in the last 12 months.
The tax discussion began as early as January when McCreary County Judge Executive Doug Stephens dropped a bombshell on the Fiscal Court that the County could be facing a $350,000 budget deficit by the end of the fiscal year.
Higher than anticipated inmate housing costs was cited as the primary reason behind the expected shortfall, but other factors such as increased costs in payroll and lack of economic growth played a role as well. With no definitive plan to forestall the deficit, and a real possibility of the State taking over local finances, the Fiscal Court was forced to consider options to raise revenue – none of which sat well with local citizens.
With the legal requirement of ending the fiscal year with a balanced budget, the Fiscal Court could either increase taxes or shut down non-essential services, such as EMS and 911 – neither prospect particularly pleasing to anyone.
One possibility was implementing a tax on insurance policies, estimated to bring in more than $1 million annually.
The idea was bitterly opposed, with citizens protesting outside and filling the courthouse prior to a special-called Fiscal Court meeting on the issue – setting the stage for more disgruntled citizens making their voices heard at public meetings throughout the year.

At that meeting representatives from the Department of Local Government were on hand and told the Fiscal Court that the current budget, along with the possible deficit, was “unsustainable” and officials would be forced to either raise revenues, shut down all non-essential functions or face the prospect of the State taking over local finances.
The insurance tax proposal went nowhere, as any revenues generated by the tax would come too late to have any impact on the projected deficit, and the Fiscal Court looked elsewhere.
With the budget shortfall still looming the Fiscal Court took two actions in April with an eye toward generating the needed additional revenue through an increase in the Occupational Tax and the implementation of a Business License ordinance.
The .5 percent increase in the wages and earnings tax is expected to raise an additional $500,000 each year, which is to be dedicated directly to the Jail Fund, helping to offset the cost of prisoner housing. That revenue frees up nearly half a million dollars in the General Fund to be used to cover other expenses and costs, but does little to aid the economy of McCreary County.
The Business License was touted as a means to better collect the Occupational Tax by requiring all local businesses to register with the tax office and display a certificate indicating to customers that they comply with the local law. While not necessarily a revenue-generating move in itself, the idea is – through enforcement – the license would facilitate more efficient tax collection overall.
However, to date there has been no indication that any legal actions have been taken, or citations issued against non-compliant businesses.
By the close of the Fiscal Year in June the Fiscal Court passed a “more realistic” budget for the coming year, keeping most line items the same, but increasing costs for prisoner housing to better reflect actual costs from the previous year.
The “deficit,” as first announced in January, had vanished by that time, as additional revenue from the increased Occupational Tax and a more than $200,000 Payment in Lieu of Taxes payment from the Federal Government allowed the Court to pay off all debts by the close of the fiscal year (except for long-term debts, such as loan and lease payments.)
Halfway through the current fiscal year, it looks like the County Budget is on track to stay in the black.
But two other taxes were implemented this past year, both out of the Fiscal Court’s prerogative (at least at the start in one instance.)
In April the public learned that the McCreary County Board of Education planned to implement a “nickel tax,” increasing the levy on personal property by about five cents. The revenues generated, school officials said, would be augmented by a 3 to 1 match from the state, and would generate about $1 million a year for the District. The funding would be dedicated to repairing old roofs at the high school and Pine Knot Primary School, as well as constructing a new wing at McCreary Middle.
The repairs and additional construction were part of a larger plan by the District to consolidate the two schools in Pine Knot, and move sixth grade classes to the middle school in order to accommodate additional room for a full-time preschool program.
Opposition to the tax quickly mounted after a terse public hearing on the tax where no school District official spoke and allocated only two minutes of speaking time to any who wished to share their opinion on the tax.
After the School Board approved the tax a challenge quickly arose as a local group collected signatures on a petition calling for a recall vote on the levy. More than enough names were collected and a public referendum was held on August 8 to decide the matter.
Despite a strong push from the School District to justify the need for the tax, a definitive “no” was heard from the voters of McCreary County as the tax was defeated by a 3-1 margin.
In September taxes were again a major topic of discussion as it was learned the McCreary County Extension Board, a Special Purpose Government Entity (SPGE) had established a 3.95 cent per $100 of assessed value in February that was to be implemented on the tax rolls.
PVA Bruce Lominac tried to forestall the tax by obtaining an injunction in order to allow the Fiscal Court to dissolve the Board, thus eliminating the levy, but his action was in vain as the Court did not believe they had the authority to disband the Board without a just cause.
The tax went in to effect, nearly quadrupling the Extension Service’s once meager budget to almost $200,000 annually.
In the coming weeks the Fiscal Court learned they did, in fact, have the power to eliminate the Board, and in December took the first steps to do so, as the Extension Board fought to justify the tax.
As the year ended the tax was still in place and Judge Executive Doug Stephens (who is a member of the Extension Board) said he hoped to reach a compromise between the Fiscal Court and the Board to keep the SPGE in place, with a lower tax rate.
Of course there were other news stories in McCreary County over the past year.


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