The third meeting of the Interim Joint Committee on Local Government was held on Thursday, October 3, 2002, at 10:00 AM, at the Marriott RiverCenter Hotel in Covington, Kentucky. Senator Albert Robinson and Representative Steve Riggs, Co-Chairs, jointly chaired the meeting. Senator Robinson called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Albert Robinson, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Alice Kerr and Johnny Ray Turner; Representatives Adrian Arnold, Scott Brinkman, Jim Callahan, Ron Crimm, Mike Denham, Jon Draud, J. R. Gray, Charlie Hoffman, Stan Lee, Reginald Meeks, Arnold Simpson, Roger Thomas, and Jim Wayne.
Guests: Senator Jack Westwood, Erlanger; Senator Katie Stine, Fort Thomas; Senator Dick Roeding, Lakeside Park; Sylvia Lovely, Neil Hackworth, Bill Thielen, Bert May, Phil Huddleston, and Jerry Deaton, Kentucky League of Cities; Mayor Tom Holocher, City of Fort Mitchell; Mayor Bill Nighbert, City of Williamsburg; Steve Gregory, Department for Local Government; John Mays and Jack Couch, Kentucky Council of Area Development Districts; Mayor Thomas Guidugli, Phil Ciafardini, and Patricia Wingo, City of Newport; Barry Rosenberg, Steiner and Associates; Jane Smith, City of Sparta; Mayor Susan Barto, City of Lyndon; Mayor David Cartmell and City Manager Dennis Redmon, City of Maysville; Mayor Sandy Jones and H. Eugene Harmon, City of Bowling Green; Kathi Marshall, Governor’s Office for Policy and Management; Mayor Tommy Kimbro, City of Clinton; Mayor Chuck Melville and Jim Herman, City of Southgate; Mayor Stacia Peyton, City Dawson Springs; Mayor Glenn Caldwell, City of Williamstown; Mayor Lynn Jones, Calvert City; Mayor Fred Siegelman, City of Versailles; Bill Taylor and Jim Larimore, City of Greensburg; Betty Abrams, City of Calhoun; Bobby Hudson and Tom Hardesty, City of Shelbyville; Mayor Bob Howard, City of Whitesville; Mayor Charles Honeycutt, City of Glasgow; and Steve Zea, West Kentucky Corporation.
LRC Staff: Jamie Franklin, Donna Gaines, Mark Mitchell, Joe Pinczewski-Lee, Donna Holiday, Ann Morse, Craig Maffet, and Cheryl Walters.
Upon the motion of Representative Gray, seconded by Representative Callahan, the minutes of the September 25, 2002 meeting were approved.
Representative Riggs announced that the meeting was being held in conjunction with the Kentucky League of Cities’ (KLC) annual convention. He thanked KLC for inviting the Committee to meet during their convention.
Senator Robinson welcomed everyone to the meeting and recognized Senator Jack Westwood, who is from the Northern Kentucky area, for some remarks. Senator Westwood welcomed the Committee to Covington. He said he was pleased that the Committee and KLC were meeting in his district. Senator Westwood pointed out members of the Committee who were from Northern Kentucky: Representatives Simpson, Callahan, and Draud.
Representative Riggs introduced Ms. Sylvia Lovely, Executive Director and CEO of the League, for opening remarks. Ms. Lovely also welcomed the Committee to KLC’s convention. She first introduced city officials and KLC staff. Ms. Lovely told the Committee about convention events and gave background information about the League and their role.
Representative Riggs stated that the next item of business was discussion of 2003 legislative platforms. He first introduced Mr. John Mays, Chairman of the Kentucky Area Development District Directors, and Mr. Jack Couch, Kentucky Council of Area Development Districts. Mr. Mays began by welcoming the Committee and telling them that the purpose of Kentucky’s 15 area development districts was to respond to the local needs in providing programs and services to local governments. He then referred to Mr. Couch for their legislative platform presentation.
Mr. Couch thanked the Committee for the opportunity to discuss funding that is critical to local units of government in terms of project development and technical assistance. He said his focus, specifically, will be on the Joint Funding Administration (JFA) and the Area Development Fund (ADF), both programs that are components of the Department for Local Government’s (DLG) budget.
Mr. Couch told the Committee that as a result of the General Assembly and the Administration, the ADDs entered the past biennium with $2.5 million in state funds to support the JFA program and $2 million in ADF. He added that as a reflection of Commissioner Lassiter’s outstanding support, DLG’s budget request reflected those amounts for the current biennium. Mr. Couch noted that the current spending plan reflects only $2.425 million in JFA and approximately $830,500 in ADF for the fiscal year. While the ADDs definitely appreciated this support, he stated that they had hoped that a JFA allocation of $2.9 million would be possible, and at least a continuation budget of $2 million in ADF each year of the biennium. Mr. Couch explained that this increase would address two issues: an adjustment for several past years of essentially static funding levels in JFA, and increasing the public administration and management capabilities of all 15 ADDs. He noted that JFA funding ensures that local units of government have necessary staff support and technical assistance for public administration and economic development projects. Mr. Couch added that the funding provides both a match for federal funds and additional state support for ADD operations.
Mr. Couch concluded by saying that the ADF program is of vital importance to local units of governments. He said it is a showpiece of intergovernmental cooperation and is without comparison in its ability to leverage other public monies. Mr. Couch told the Committee that if possible, an additional $2 million in ADF each year will enable a large number of rural projects to proceed, and likely leverage an additional $72 million of other funds over the biennium.
Representative Riggs next introduced Mayor Tom Holocher, outgoing president of KLC and mayor of Fort Mitchell; Mayor Bill Nighbert, incoming president of KLC and mayor of Williamsburg; and Mr. Neil Hackworth, Deputy Director of KLC. Mayor Holocher began by saying that cities believe in home rule. He told the Committee to keep in mind that unfunded mandates are a problem to cities. Mayor Holocher also stated that cities should be allowed to grow, especially by annexation. He noted that it is hard to expand services to urban areas without the ability to annex.
Mayor Nighbert told the Committee that local government is the most efficient government. He said they will be strong advocates in voicing their issues of concern to the General Assembly and raise the perception of what mayors do.
Mr. Hackworth told the Committee that cities need resources for revenue growth. He said cities need help in funding public safety needs. Mr. Hackworth stated that there are also issues relating to health insurance for local officials and the impact of requiring city employees to participate in the state health plan.
Mr. Hackworth next referred to a court decision that threw out a wet/dry vote in the City of Corinth. Mr. Hackworth stated that the League was concerned about this because the court said the law only applied to fourth class cities.
Mr. Hackworth stated that because of the Louisville/Jefferson County merger, the League is concerned how the merger and charter county statutes are written. He explained that the League is not opposed to merger, but is concerned how merger takes place especially the appointment of members to the study commission for areas considering the charter county form of government. Mr. Hackworth noted that this is not an issue for the 2003 session, but will be one in the future.
Representative Riggs asked if the League planned on addressing the insurance premium tax collection process for the 2003 session. Mr. Hackworth said the League will remain interested in finding a more simplified process, but resistance during past sessions has caused them to put that issue on the back burner. He noted that the League will continue to work with their members, counties, and the Department of Insurance.
Representative Callahan stated that he agreed about unfunded mandates. He also stated that insurance premium taxes are a critical asset to cities’ budgets and that we have to be careful. Representative Callahan asked Mr. Hackworth if the League stands ready to assist the legislature to help state and local governments seek additional revenues. Mr. Hackworth told Representative Callahan that the League stands ready to help. He noted that cities are traditionally a lower level of taxation than the counties.
Regarding the issue of annexation, Representative Wayne stated that there has been a six percent increase in growth in the state. He said we need to have better planning and land use planning needs to be established statewide. Representative Wayne commented that municipal leaders need to stand behind the League.
Representative Wayne told Mr. Hackworth that he hoped the League would consider city employees joining the state health insurance plan if it can be proved that it would save the cities money.
Regarding planning and zoning, Senator Robinson commented that the state should give tools to the local governments who should have local options. He noted that one size does not fit all.
Senator Robinson stated that he misses revenue sharing. He said the state needs to give local governments the ability to raise their own revenues.
Regarding the collection of insurance premium taxes, Representative Lee asked what types of lines of coverage are cities able to tax and at what rates. Mr. Hackworth replied that the rates are not set by state law, they are set by local governments when they set the tax. Realistically, he stated that the highest level is right around ten percent, but most cities are between three and five percent. Mr. Hackworth said the tax can be put on all lines of coverage, but there are some limitations in the health insurance area and in workers’ compensation.
Representative Lee also asked what the League’s position was on whether the League would support legislation that would lower state taxes and allow cities to raise their own taxes. Mr. Hackworth replied that they would certainly want to know what the legislation said before saying they could support it, but it would be better if we had more local taxation.
Representative Meeks asked Mr. Hackworth to explain the five-mile boundary that was taken out of the annexation law. Mr. Hackworth explained that there was a provision in the law that if a city had subdivision regulations in place, and development occurred outside of the city, that had planning and zoning, then those subdivision regulations would apply to those developments within five miles. That was eliminated in the statutes, so now a subdivision can be built right next to the city, which can have chicken coops in the backyard, for example. Representative Meeks asked if the League would like to see that provision added back into the law. Mr. Hackworth said if it was added back into the law it would give cities some protection beyond their boundaries.
Representative Thomas asked whether requiring local entities to raise revenue instead of relying on state revenues might not hurt cities who have no ability to generate revenue. Mr. Hackworth replied that some of the smaller cities are struggling to get by and get things done. He said they do not have adequate revenues and there is probably no tax they can put into place to create adequate revenues. Mr. Hackworth stated that the League wants to do whatever they can to see that they survive. He added that there will continue to be a need for programs to help these small cities.
Representative Arnold commented that at one time it was easy to identify city, county, and state issues. He said now, as we are growing, with the economy and the services that need to be provided, cities and counties really need to work together and the legislation should be fair for everyone. Representative Arnold stated that we need to focus on serving the people.
Representative Riggs next introduced Mr. Steve Gregory, General Counsel for the Department for Local Government (DLG). Mr. Gregory told the Committee that an issue of concern for the Department is interlocal agreements. He said special districts should be brought under the authority of DLG in this area. Mr. Gregory added that the statutory definition of a special districts needs to be expanded as to who falls under “public agency.”
Regarding filings by cities that are incorporating, Mr. Gregory stated that the Department needs full information from cities that are incorporating. For example, we need to know under what type of government the city is operating. He said the Department would like to receive the same information that the Secretary of State receives.
Mr. Gregory said a correction needs to be made in the statutes that relates to the drafting and publication of ordinances. He explained that the statute reads “under the supervision of an attorney” one place, and “by an attorney” in another place. He said it should only read “under the supervision.”
Regarding counties, Mr. Gregory stated that DLG should be allowed to hold its budget workshops during an election year. He noted that currently, the Department has to take a break from holding the workshops during an election year.
Mr. Gregory told the Committee that another provision in the statutes needs to be amended that requires certification of tax rates by DLG to counties by June 30.
Lastly, Mr. Gregory stated that the County Debt Commission should be done away with because it is a duplicative administrative process in state government. He said appeals should be allowed to go directly to the Circuit Court.
The last item of business was a presentation regarding economic development and tourism efforts in the Northern Kentucky area. Representative Riggs introduced Mr. Phil Ciafardini, City Manager for the City of Newport, Mr. Barry Rosenberg, developer and vice-president of Steiner and Associates, and Ms. Jane Smith, City Clerk/Treasurer for the City of Sparta.
Mr. Ciafardini began by telling the Committee that the City of Newport is a great story from an economic development standpoint. He said they have fostered relationships and partnerships for the last 20 years. Mr. Ciafardini noted that there really has not been any bigger partner than the Commonwealth of Kentucky in working through the various state programs and federal pass through programs that the state offers and provides. He pointed out that Newport is a shining example of taking good state and federal programs to leverage those monies and not only help revitalize a city, in terms of the physical or the aesthetics of a community, but instill pride in a community and also raise a lot of new dollars that the state and local communities would not otherwise have. Mr. Ciafardini said they participate in dozens of state programs that are offered, and are excited about leveraging those dollars even further. The state is investing in a community and receiving a lot of state tax dollars in return. He noted that one of the biggest tax credit programs that the state has put together is the tourism sales tax credit program that was put together in 1996.
Mr. Ciafardini then referred to Mr. Rosenberg, who has been significant in the success of Newport in the last few years and is the developer of not only the Newport Aquarium, but Newport on the Levy. He noted that the sales tax incentive program was one of the keys to entice Mr. Rosenberg to come to Kentucky.
Mr. Rosenberg told the Committee that in working in the state of Kentucky, his company has enjoyed a public/private partnership. He noted that one of the reasons they chose to put their project, specifically starting with the aquarium, in Newport, Kentucky, was because of the city, and being able to work with the city officials. Mr. Rosenberg said the city was very responsive to their needs. He explained that if you look at the cities of Covington or Newport, you are looking at cities that are relatively small with small budgets, yet they have been able to put together projects like the RiverCenter Hotel, the Newport Aquarium, and Newport on the Levy. Mr. Rosenberg pointed out that between the Aquarium and Newport on the Levy, there is over a $200 million investment in development.
Mr. Rosenberg also said that the Kentucky legislature should be applauded because Kentucky is the first state, that he is aware of, to pass a tourism sales tax credit. He noted that it has been interesting, because since this project has been put into place, he has been contacted by people in other states about it. Mr. Rosenberg said what is really innovative, particularly in a time when you are in a tight budget situation, is the tax credit is a self-generating tax incentive program. He mentioned that from the sales tax credit they received, they were able to recoup a certain amount of their project costs based on the sales that they create and the sales tax credits that they create. So, Mr. Rosenberg pointed out that they are not tapping into other resources, but are really taking advantage of new resources that are being created as part of this program. He said that as a developer, these types of things are very important.
Mr. Rosenberg noted that the Newport Aquarium has been opened for three years and has consistently generated over three million annual admissions during that time frame. He said Newport on the Levy, which has been opened less than a year, probably generates over five million visitors annually to the Northern Kentucky area. Using the Aquarium, as an example, Mr. Rosenberg stated that over 75% of its consumers are coming from outside the state of Kentucky, and looking at Newport on the Levy, over 60% of people coming to it are coming from outside the state of Kentucky. He added that not only are these places self-generating tax credits, but these are dollars that are coming into the state and into the City of Newport from all together outside markets. Mr. Rosenberg stated that it is a sign of something that is very successful.
Ms. Smith told the Committee that things were not such a success story in her town. She said the City of Sparta has the Kentucky Speedway. She said it is not in the city limits, but that they have to provide services for it, such as police and fire protection. Ms. Smith noted that Sparta is a very small, sixth class city, with a population of less than 200 people. She pointed out that they haven’t received any help, and she was representing Sparta to ask for help for a little city to keep from going under by trying to protect and serve a multi-million dollar speedway. Ms. Smith told the Committee that Sparta applied to become a fifth class city, but they were not successful. She said their businesses are dying because the Speedway blocks off their roads and blocks their businesses during races. Ms. Smith stressed that they cannot survive under these circumstances. She added that the developers never came to them as a city so that they could work together.
Representative Denham first recognized the city manager of Maysville, Mr. Dennis Redmon and the Mayor of Maysville, David Cartmell who were in attendance from his district. He then asked what is the biggest obstacle to economic development that developers face daily. Mr. Rosenberg stated that the biggest obstacle that they face is working with the cities, which sometimes can also become the biggest attribute. He noted that they will not try to develop a project if they don’t feel that they have a strong relationship with the local community.
Representative Denham stated that he is seeing that there is going to be more Spartas in Kentucky and something is going to have to be done to assist these small communities in some way.
Representative Riggs announced that the Committee had been invited to a luncheon and a tour of economic development projects in the City of Newport.
There being no further business, the meeting was adjourned at 12:15 p.m.