The Richmond Register

March 12, 2013

Special taxing districts bill passes both chambers

By Ronnie Ellis
CNHI News Service

FRANKFORT — FRANKFORT — It’s a bit different than the original proposal, but the Kentucky General Assembly Tuesday night was poised to pass a bill to provide greater oversight to special taxing districts.

The compromise measure would require “special-purpose governmental entities,” the new designation for special taxing districts, would have to report any increase in taxes or fees directly to the local government, usually fiscal courts.

But it would not give those local governments the power to approve, revise or veto any such increase as Sen. Damon Thayer, R-Georgetown, wished.

The Senate passed the compromise version 38-0 just before 6 p.m. and the House followed suit minutes later, passing it 98-0.

The original bill, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, was the result of a review by state Auditor Adam Edelen of the taxing districts.

Stumbo’s measure required special taxing districts to submit financial information to the Department of Local Government which would then post that information on a website available for public review.

Boards of the districts also would have to comply with the local county’s ethics code and any district which failed to submit the required financial information would be subject to a full audit by Edelen’s office with the cost borne by the taxing district.

When that bill reached the Senate, Thayer added one more requirement: any tax or fee increase could be vetoed by the local government.

Stumbo and Edelen opposed the change, saying they didn’t want to interfere with the governance of the districts, many of which were created by fiscal courts to provide services which county governments can’t afford to support from their general funds.

Senate Minority Leader R.J. Palmer, D-Winchester, offered a compromise solution which Thayer accepted: require the districts to conduct a public hearing at the site of the local government’s meeting place and conduct that meeting immediately before that legislative body’s meeting prior to any increase in taxes of fees.

The “entities” would have to make a written report to the city government or fiscal court and make a public presentation explaining the increase.

The city government or fiscal court would have to publish an advance announcement of those meetings.

Palmer and Thayer were members of the conference committee which agreed to the change.

“It was clear we didn’t have the votes,” to allow local governments a veto, Thayer said in explaining why he went along.

But he also made clear he saw the compromise as a “first step,” and he intends to pursue special taxing district “reform 2.0” in the 2014 General Assembly. Thayer has for years wanted any such taxes or fees approved by elected local representatives. But Edelen, the House and Palmer wouldn’t agree to that.

“In essence what we did was to say we are not comfortable giving fiscal courts complete governance over our special districts,” Palmer said. “But we do think they can communicate better.”

Palmer pointed out current law already requires public meetings when those districts increase taxes.

“I think those special districts are already sharing that information,” Palmer said. “We’re just changing how they share the information.”

The law will apply to any special arm of government which has taxing or fee powers and is not a department of the local government. That includes volunteer fire departments, many water and sewer districts, libraries — some of which have no taxing power but were nevertheless included — and even municipal utilities which have separate boards from city or county legislative bodies.

Edelen was pleased with the compromise.

He called the compromise a “very good bill” which will provide a “better system of oversight and accountability from those who provide services for (the public) and spend their taxes and fees.”

Most of the districts were formed by the very governments to which they must now report, often because the local government didn’t have the funds to pay for services demanded by their constituents.

Some contend if the taxing districts were made parts of local government it would adversely affect the local government’s bond ratings and might place them in violation of HB 44.

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.