The third meeting of the Interim Joint Committee on Local Government was held on Wednesday, October 22, 2003, at 10:00 AM, in Room 149 of the Capitol Annex. Representative Steve Riggs, Chair, 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 Charlie Borders, Julie Denton, Ernie Harris, Alice Kerr, and Johnny Ray Turner; Representatives John Adams, Adrian Arnold, Scott Brinkman, James Comer, Ron Crimm, Mike Denham, Ted "Teddy" Edmonds, Derrick Graham, Charlie Hoffman, Stan Lee, Marie Rader, Arnold Simpson, Roger Thomas, and Ken Upchurch.
Guests: Representative Jim Bruce; Commissioner Jody Lassiter and Steve Gregory, Department for Local Government; Mayor Karen Cunningham, City of Madisonville; Sylvia Lovely, Bert May, Joe Ewalt, and Jerry Deaton, Kentucky League of Cities; Jack Couch, Kentucky Council of Area Development Districts; John Mays, Northern Kentucky Area Development District; Mayor Tom Guduigli, City of Newport; Mayor Bob Hunt, Cave City; Jamey Gay, Danville City Commissioner; Jack Scriber, KIPDA Area Development District; and Wendell Lawrence, Lincoln Trail Area Development District.
LRC Staff: Jamie Franklin, Donna Gaines, Mark Mitchell, Joe Pinczewski-Lee, Alice Carter, Paula Payne, Donna Holiday, Tim Firkins, and Cheryl Walters.
Upon the motion of Representative Thomas, seconded by Representative Brinkman, the minutes of the September 24, 2003 meeting were approved.
Representative Riggs announced that the purpose of the meeting was to discuss the 2004 legislative proposals of various special interest groups. He first asked the local officials who were present in the audience to introduce themselves. Representative Riggs then recognized Senator Robinson for comments.
Senator Robinson invited members of the audience to the Interim Joint Committee on State Government’s meeting which was to be held later in the day. He said there would be many items that may be of interest to them. Senator Robinson noted that the dilemma of the retirement system would be one of the items discussed. He stated that cities and counties should work together for the citizens’ best interest, instead of competing against each other.
Representative Riggs next introduced Ms. Sylvia Lovely, Executive Director and CEO of the Kentucky League of Cities (KLC). Ms. Lovely stated that she agreed with Senator Robinson and believes very strongly that cities want what is best for the Commonwealth.
Ms. Lovely gave the committee background information about the League and their role. She told the committee that KLC had 370 member cities and a staff of 80. Ms. Lovely then introduced Mayor Karen Cunningham, newly elected president of the League, to address the committee.
Mayor Cunningham thanked the House Local Government Committee for meeting during KLC’s annual convention. She stated that KLC’s legislative committee had a proactive role in the issues that need to be addressed. Mayor Cunningham told the committee that the League provides invaluable services to their cities, one of which is lobbying before the General Assembly. She then introduced Jerry Deaton and Bert May, KLC staff, to more specifically discuss the League’s 2004 legislative platform.
Mr. Deaton stated that the economy has affected cities just like the state and federal government. He noted that cities need flexibility to raise money on their own without having to come to Frankfort. Mr. Deaton then told the committee that most cities’ money is going for police and firefighters’ salaries and benefits, which have doubled. He said annexation has become difficult for cities to accomplish because of the legal costs. Mr. Deaton next noted that the homestead exemption is a problem for many cities in that it is decreasing their tax receipts from property tax. He also said unfunded mandates and compliance with the Americans with Disabilities Act is costly. Mr. Deaton also noted daily personnel expenses, planning and zoning administration, and health insurance as other large fiscal items for cities.
Mr. May told the committee that KLC would support state-wide tax reform if it included all local governments. But, since he did not see that happening, Mr. May stated that KLC was proposing that cities of the first through third class and urban-counties be given the ability to levy a restaurant tax. He said this is a much needed tool for cities. Mr. May noted that currently, only cities of the fourth and fifth classes can levy a restaurant tax. He added that 17 out of 218 cities now levy the restaurant tax. Mr. May also pointed out that currently, 100 percent of the collected restaurant tax goes to tourism. He said the League would like that to be changed to 75 percent being used by cities for quality of life issues and the other 25 percent going to tourism. Mr. May noted that tourism is the third largest industry in the state.
Representative Arnold asked if he was correct in saying counties do not have the authority to levy a restaurant tax now. Mr. May replied that was correct. He added that they have no problem adding counties if there is a credit applied. Representative Arnold also asked if a county had a restaurant in the city, would that help the cities. Mr. May said yes, the city and county could work together.
Representative Edmonds asked what the homestead exemption cost was to the City of Irvine. Mr. Deaton told Representative Edmonds that approximately 200 homes in the City of Irvine qualify for the homestead exemption which costs the city approximately $20,000.
Representative Hoffman asked what KLC’s position was regarding impact fees being a valuable tool for cities to help with fire, police, streets, etc. Mr. May stated that there are cities which use development fees for water systems. Representative Hoffman asked if the League has discussed the use of impact fees. Mr. May said they have not discussed it because impact fees can be used now but have to be put into a separate account for specific uses.
Representative Riggs commented that the tourism industry has been silent on the issue of levying a restaurant tax. He said the tourism industry needs to be an advocate for the restaurant tax. Mr. May stated that some in that industry see this as an erosion of revenue on their part. He said the League sees it as a help to them.
Representative Upchurch asked how many cities this will affect. Mr. Deaton answered that there would be 36 cities affected. He added that now, cities cannot use the money from the restaurant tax for general fund purposes because it has to be turned over to tourism. He said it doesn’t seem worth it to many of the eligible 218 cities to enact it if they cannot keep any of the money.
Representative Adams asked if the League had information on how many counties have joint city/county planning and zoning commissions, and if so, would they provide that information to the committee. Mr. May said the League did have that information and would provide it to the committee.
Representative Graham asked what the position was of the mayors of Lexington and Louisville on the restaurant tax. Mr. Deaton stated that both mayors want this tax as an option. Mr. Ron Wolfe, representing Louisville/Jefferson County Metro Government, told the committee that they are just asking to have the restaurant tax as an option because their current options are drying up. He said whether it is enacted or not will be left up the council.
Representative Graham also asked if Lexington had already had the restaurant tax, would the state have had to contribute to the expansion of Rupp Arena. Mr. May replied no.
Senator Denton commented that she had received lots of calls from citizens, including restaurant owners, that are against the restaurant tax. She said they perceive this as a “tax on families.”
Representative Brinkman asked if passing a restaurant tax would have an impact on the how the SEEK formula is calculated. Mr. May stated that he sees no relation to SEEK but will check into it.
Senator Borders commented that some cities like Russell and Ashland have multiple taxes levied and surpluses in their bank accounts. He said the financial opportunities are already there, so how many taxes can we ask the citizens to pay.
Senator Robinson commented that he has also been receiving calls in opposition to the restaurant tax. He wondered how many cities and counties were taking advantage of HB 44. Senator Robinson stated that very few go beyond the 4 percent and recall, but can.
Next, Mr. May told the committee that KLC was also proposing a $20 fee be added to court costs for the replacement of the base court revenue that cities lost. He said they proposed $2 would go to assist prosecutors in under-serviced areas, and $18 would be distributed to individual communities based on population and number of trained police officers. Mr. May noted that they had looked at the seven surrounding states whose average is over $279 in court costs. He said the increase they were proposing would still make Kentucky low compared to them.
Mr. May then introduced Mayor Tom Guduigli of Newport, to discuss the creation of a state historic reinvestment program. Mayor Guduigli told the committee that the program would reduce a property owner’s tax liability. He said property owners would receive a tax credit for expenditures made on rehabilitating national registered historic properties. Based on studies of other states that have this program, Mayor Guduigli stated that the program would bring money into the state.
Senator Robinson introduced Commissioner Jody Lassiter of the Department for Local Government (DLG), to present DLG’s 2004 legislative proposals. Commissioner Lassiter told the committee that DLG will be supportive of legislation coming from the Task Force on Inter-County Cooperation. He said the legislation will clarify that the Department will have initial jurisdiction of review when any party of an interlocal agreement is a city, county, charter county government, urban-county government, consolidated local government, or special district.
Commissioner Lassiter stated that DLG will propose housekeeping legislation for the following areas: 1) strengthen the advisory council for the County Officials Training Program and eliminate city membership on the council; 2) strengthen budget training to local officials annually. He said currently, DLG cannot provide budget training during election years; 3) require a newly created city government to provide information to DLG when it is formed; 4) permit city ordinances to be prepared under the supervision of an attorney rather than only allowing attorneys to prepare them; and 5) require city annexation maps showing city boundaries to be provided.
Commissioner Lassiter told the committee that DLG is also looking at the current formula for the coal severance fund distribution.
Regarding the Homeland Security Act, Representative Brinkman commented that he was concerned about how the $34 billion was allocated to communities. He asked Commissioner Lassiter if DLG was involved in the distribution of that money. Commissioner Lassiter replied that DLG did not have decision-making authority nor were they at the table when funds were distributed. He stated that the Department of Military Affairs was the agency involved. Representative Brinkman stated that out of the $34 billion, Louisville received less than 30%. He noted that Louisville, being the state’s largest city, would most likely be a target for terrorism. Representative Brinkman said that the money was not allocated fairly.
Representative Denton wondered what the criteria was for receiving the Homeland Security Act money. She suggested that LRC look into the whole matter and report back to the committee.
Before continuing with the discussion of 2004 legislative proposals, Representative Riggs asked Senator Kerr, Co-Chair of the Task Force on Inter-County Cooperation, to present the Task Force’s final report. Senator Kerr stated that SB 133 of the 2003 Regular Session formed the Task Force on Inter-County Cooperation. She said the Task Force was composed of legislators, city and county officials, and representatives of the executive branch. Senator Kerr told the committee that the purpose of the Task Force was to look at ways to encourage local governments to enter into more interlocal agreements. She noted that the Task Force heard testimony from the Department for Local Government, Kentucky League of Cities, Kentucky Association of Counties, Kentucky Council of Area Development Districts, firefighters, and the Kentucky Infrastructure Authority. Senator Kerr also said that the Task Force recommended the following actions: (1) transfer the review responsibilities of special district and consolidated local government interlocal agreements from the Attorney General’s office to the DLG; (2) modify KRS 65.260 to clarify that DLG has initial jurisdiction of review when any party of an interlocal agreement is a city, county, charter county government, urban-county government, consolidated local government, or special district; (3) require DLG to create a log of interlocal agreements that includes the parties to the agreement and standardized agreement topics, and require notification to DLG of the termination of existing agreements; (4) create, through DLG, a publication for local governments to use when forming interlocal agreements; (5) encourage DLG to conduct a single financial study of interlocal agreements that examines the benefits of agreements between cities and counties, counties and counties and cities and cities, after which studies would be performed by DLG as requested by the General Assembly; (6) encourage KLC, KACo, KCADD, and DLG to expand the promotion of interlocal agreements through educating local elected officials and publishing literature; (7) provide, through statute, a simple way for a local government to dissolve an existing special district when it is determined that its services can be better provided through an interlocal agreement; and (8) establish a state program of financial incentives for local governments that enter into interlocal agreements, specifically, the Transportation Cabinet’s inter-county local agreement fund should be continued. She concluded by telling the members that the final report of the Task Force was submitted and approved by the LRC on October 1.
Representative Riggs lastly introduced Mr. Jack Couch, Executive Director of the Kentucky Council of Area Development Districts (KCADD), and Mr. John Mays, Chairman of the Kentucky Association of District Directors, to present KCADD’s 2004 legislative proposals.
Mr. Couch told the committee that the role of the ADD’s has always been to improve the quality of life in cities and counties. As examples of that, he noted that KCADD has just finished completely mapping all state and local roads in Kentucky with the help of GIS. Regarding the usage of Homeland Security monies, Mr. Couch stated that KCADD has gathered data on the awards issued for federal and state government use. He also noted that all but two ADDs have completed local disaster mitigation plans through FEMA.
Mr. Mays told the committee that the Kentucky Association of District Directors would be finalizing their recommendations in a few weeks, which included: 1) expanding the state’s funding of the homecare program for seniors; 2) continuing the support of the Area Development Fund; and 3) continuing support of the ADD’s.
Representative Comer asked Mr. Couch if the ADD’s were having problems with independent industrial recruiters or if any ADD employees work for or as industrial recruiters. Mr. Couch replied no, that he was not aware of any. Representative Comer commented that industrial recruiters need to disclose if they work for more than one area or governmental unit. He stated that he has prefiled legislation to require state registration and disclosure to employers of other employment by these individuals.
Representative Thomas asked Representative Comer if his legislation required the licensing of recruiters. Representative Comer replied they only have to be licensed if they are recruiting for multiple counties and businesses.
There being no further business, the meeting was adjourned at 12:10.