The Richmond Register

Local News

November 29, 2012

Auditor against taking tax power from districts

LOUISVILLE — LOUISVILLE – Some state lawmakers indicated this week that they want special taxing districts to get approval of tax rates from fiscal courts, but that might not be the best idea, according to the man who started the conversation about Kentucky’s myriad special tax districts.

State Auditor of Public Accounts Adam Edelen reviewed the system of taxing districts set up to fund libraries, water and sewer districts, conservation districts, fire departments and other public services and found more than 1,200 of them spending more than $2.7 billion annually with little oversight.

More troubling, Edelen says, the districts operate without any real accountability, essentially forming “a ghost government.”

His review and report recommends making those districts issue uniform reports to the state Department of Local Government, make them subject to audit by his office, require them to submit information to the auditor’s office for publication on a public website, and make them subject to the ethics codes of their local county governments.

Edelen made all those points Wednesday to the General Assembly’s Local Government committee, but some lawmakers want to go farther and give fiscal courts the power to set the tax rates of those special taxing districts.

“Wouldn’t you agree that any tax for any district should have to be approved by the local governing body?” Rep. Stan Lee, R-Lexington, asked Edelen.

“No sir, I wouldn’t,” Edelen said. “I think that’s good in theory but it breaks down in practice.”

Sen. John Schickel, R-Union, agreed with Lee, saying such taxing districts now represent taxation without representation.

Most of the districts, however, were established by the local governments who saw the need for a service but wanted to avoid the public unhappiness over increased taxes. And most of the governing boards of those districts are appointed by local governments – though not all.

Other districts, such as some libraries, were established by petition or voter referendum. It’s unclear if the legislature can change the rules for those established by referenda.

But in Pulaski County there is already a petition drive to dissolve the local library board.

The library is paying off a 20-year bond for a building, and even if the board is dissolved, the tax will remain in place until the bond is paid off.

Sen. Damon Thayer, R-Georgetown, who chairs the Local Government Committee, said he will sponsor legislation which reflects Edelen’s recommendations but he also said he expects other lawmakers to offer amendments to give the taxing power back to fiscal courts.

Later Wednesday, House Speaker Greg Stumbo, D-Prestonsburg, told county officials at the Kentucky Association of Counties meeting in Louisville that he will sponsor a bill incorporating Edelen’s recommendations without stripping the districts of the power to tax.

“I don’t think you want the responsibility of placing a tax for a volunteer fire department or library,” he told the officials.

Not everyone agreed.

Whitley County Judge/Executive Pat White said fiscal courts get blamed for those taxes by local taxpayers, but the have no control over setting the tax rates.

Warren County Judge/Executive Mike Buchanon agreed.

“When the rate goes up, we get the blame for it, so why shouldn’t we have some say in setting the rate?” Buchanon asked.

Others aren’t so sure.

Greg Wilson, Metcalfe County Judge/Executive, said he doesn’t think his magistrates want the responsibility. “I don’t think they want that back in their hands,” he said.

Greenup County Judge/Executive Bobby Carpenter and Rowan County Judge/Executive Jim Nickell agreed, both noting that most of theirs are well managed and most of the money is collected by the health department or local library, neither of which their counties want to manage.

Carpenter said that as long as the special taxing districts keep adequate records and submit those to the appropriate authorities, such as budgets and periodic audits, he doesn’t see a problem with the present system.

One of Edelen’s findings was that many districts failed to submit budgets to fiscal courts as they are required to do or undergo regular audits.

Edelen listed several of those in his original report and on the first day or so of the public website his office established. But some of those entries were incorrect.

Various special taxing districts in Barren, LaRue, Madison and Wayne counties were listed as non-compliant in some form or another when in fact those districts were up to date on all reporting requirements.

Edelen said Wednesday those problems “were all taken care of in the first 48 hours,” but it’s caused some disgruntlement and confusion with some health departments, extension and conservation districts.

Nickell said he’s not heard so many complaints about the districts as he has from the districts about the survey Edelen conducted.

“All I’ve heard is complaints from the people who had to fill out the forms,” Nickell said.

Stumbo and Edelen were expected to hold a Thursday press conference to announce his sponsorship of the measure which he will make House Bill 1, usually reserved for the Speaker’s top legislative priority.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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