The first meeting of the Interim Joint Committee on Local Government was held on Thursday, June 11, 2009, at 10:30 AM, in Room 131 of the Gateway Community and Technical College, Boone Campus, in Florence, Kentucky. Senator Damon Thayer, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Damon Thayer, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Julian M. Carroll, Ernie Harris, Dan Kelly, John Schickel, Elizabeth Tori, Johnny Ray Turner, and Ed Worley; Representatives Scott W. Brinkman, Mike Denham, Ted Edmonds, Brent Housman, Dennis Keene, Adam Koenig, Tom McKee, David Osborne, Arnold Simpson, Kevin Sinnette, and Ancel Smith.
Guests: Senate President David Williams; former State Representative Jon Draud, Ed Hughes and Laura Kroeger, Gateway Community and Technical College; Michael Bennett and Dan Chapman, Department of Housing, Buildings, and Construction; Dave Schroeder and Lois Schultz, Kenton County Library District; Jeff Eger, Amanda Waters, Jamie Holtzapfel, Mike Apgar, Northern Kentucky Sanitation District No. 1; Rick Messingschlager, Independence Fire District; Kenny Brown, Florence; Donnie Snow, All-Rite Ready Mix of Florence; J. R. Roth, Campbell County League of Kentucky Property Owners; Sue Puffenberger, Covington Watershed Council; Owen Nichols and Shawn Carroll, North Key Community Care; Natalie Bradley, Boone County Family Court; Susan Nimersheim, Grant County Public Library; Marc Muench, Florence Fire/EMS; Michelle Ratliff, Walton Fire; Chris Gibson and Jeff Rensing, Enterprise Rent-a-Car; Greg Buckler, Northern Kentucky Firefighters; Jeff Poheman, Alexandria Fire District; Craig Bohman and Lisa Cooper, Northern Kentucky Area Development District; Frank Sommerkapp, City of Crestview Hills; Richard Harrison, Northern Kentucky Water District; Stephen Frite, Boone County resident; Barb Schempt, Covington; John Vissman, Northern Kentucky University; and J.D. Chaney, Bert May, and Tony Gates, Kentucky League of Cities.
LRC Staff: Mark Mitchell, Joe Pinczewski-Lee, John Ryan, Kris Shera, Becky Barnes, and Cheryl Walters.
Senator Thayer welcomed everyone to the meeting. He then recognized Dr. Ed Hughes, President of Gateway Community and Technical College. Dr. Hughes welcomed the committee to Northern Kentucky and thanked the entire legislature for their support. Senator Thayer thanked Dr. Hughes for hosting the committee’s meeting.
The first item of business was review of Kentucky Administrative Regulation 815 KAR 25:060, licensing of manufactured home retailers. Senator Thayer recognized Mr. Michael Bennett, Staff Attorney, and Dan Chapman, with the Department of Housing, Buildings, and Construction, to explain the regulation. Mr. Bennett told the committee that the amendment removes the limited license for brokers and the limited license for lenders that the Department in its current administration believed it did not have statutory authority to regulate.
Senator Thayer referred members to a letter in their folders from the Kentucky Manufactured Housing Institute in support of the amendment.
Representative Riggs asked if this amendment affected the retail license. Mr. Bennett replied no, that it did not.
Senator Carroll asked what the public purpose for the limited license was. Mr. Chapman stated that state law requires each entity selling more than one manufactured home in a 12 month period to have a license. He said only three brokers’ licenses have been issued and only one limited license had been issued.
Senator Thayer asked Representative Keene if he had any reaction to the regulation. Representative Keene replied that he thought the office was doing a fine job.
The other order of business was discussion of special district taxing authority relating to SB 72 of the 2009 Regular Session. Senator Thayer explained that he sponsored SB 72 and that it would require rate and fee increases by special taxing districts be approved by the fiscal court. He noted that he will prefile the bill again for the 2010 Session. Senator Thayer stated that there was not enough time during the 2009 session to have a public hearing on this issue and that he promised there would be one during the interim. He said the public hearing was the purpose of today’s meeting.
Senator Thayer first introduced Mr. Dave Schroeder, Director of the Kenton County Library District and Mrs. Lois Schultz, President of the Kenton County Library District Board of Directors, to address the committee.
Mr. Schroeder first gave members some history on libraries. He explained that property tax revenues are limited by 1979 House Bill 44, which allows a public referendum on any property tax rate calculated to produce more than a 4 percent increase in revenue. Mr. Schroeder stated that most Kentucky libraries were established as special taxing districts and are subject to HB 44. He noted that the current law allows for a modest increase each year to meet growing demand in services, to provide adequate salaries and benefits and to fund participation in the state retirement plan. Mr. Schroeder told the committee that Kentucky public libraries receive very little funds from the state. He added that the overwhelming majority of their funds are from local property taxes. Mr. Schroeder pointed out that last year, the Kentucky Department for Libraries and Archives experienced a 20 percent cut in funding which required cuts in state aid to libraries.
Mr. Schroeder explained that the cost per person for library materials each year in Kentucky public libraries is $3.79. He said despite these limitations, Kentucky public libraries continue to serve a growing patron base, check out more materials, and provide educational and cultural programming for thousands of Kentuckians.
Mrs. Schultz told the committee that the current system is working. She stated that library boards work on a very high level of professionalism. Mrs. Schultz noted that members of library boards are appointed by their respective fiscal courts. She added that library boards operate under open records and open meetings laws. Mrs. Schultz stated that public hearings are held before the tax rate is set and notices are published in the media. She said that taxpayers do have input in the process.
Mr. Schroeder concluded by saying that the Kentucky Public Library Association’s legislative committee has strong reservations concerning SB 72. He said SB 72 will place additional burdens on local fiscal courts and as a result, the fiscal court members will need considerable education to make informed decisions. Mr. Schroeder pointed out that library officials fear that SB 72 will limit funding increases and place libraries in precarious financial situations. He added that fiscal courts will be under pressure to limit tax increases. Mr. Schroeder mentioned that it has been their experience that libraries have suffered in other states when funding was taken out of the hands of the trustees. He stated that libraries in Kentucky have made considerable headway since 1979 and fear SB 72 will negate many of these gains. Mr. Schroeder noted his district’s triple A rating as an example of his district’s good board decisions and its positive effects upon capital construction costs. He said consistent funding is important to maintain that funding.
Senator Tori asked if any concentrated efforts had been made to link library patrons with school and college libraries. Mr. Schroeder replied yes, they visit many educational institutions to make the connections.
Senator Thayer commented that some states have elected library members and millages. He asked how that affects their finances. Mr. Schroeder stated a few libraries have directly elected board members, but he could get that data. As far as the millage question goes, he continued, it is a matter of consistency. Mr. Schroeder added that it is hard to pass increases, especially in times like these.
Representative Keene asked where home schoolers would go if programs were cut. Mr. Schroeder stated that some supplements would be provided, however, he noted that there is very little money to meet the needs of home schoolers and that the burden would be on the parents if programs were cut.
Senator Thayer next introduced Mr. Jeff Eger, General Manager of Sanitation District No. 1 in Northern Kentucky. Mr. Eger told the committee that Sanitation District No. 1, made up of eight appointed board members, serves the counties of Boone, Campbell, and Kenton, which is all 36 local governments. He added that Sanitation District No. 1 serves as the collection point for sewer systems and has been able to move into handling storm water because of amendments to KRS Chapter 220, Mr. Eger stated that they are already heavily regulated, and that SB 72 would add more costs. He pointed out that the current system is working. Noting the plight of the Metropolitan Sewer District in Louisville, Mr. Eger said that the EPA decisions may cost Sanitation District No. 1 and its constituents $3 billion for the sewer system. He added that rates will have to go up. He cited several construction projects. Mr. Eger noted that all the capital construction is done through the issuance of bonds and that they must go to the general market for additional bonds. He added that a good rating can mean millions of dollars in savings over the life of the bond and that rating agencies look at ability to raise money. Mr. Eger noted that the operations are open, rates are low, and there is additional oversight available via county judge review of rates and fees in KRS Chapter 220.
Representative Riggs asked about the district’s most recent three rate increases. Mr. Eger said that the rate increases were for 15% per year ending FY 2010-2011. Representative Riggs also asked who approves the rate increases. Mr. Eger replied that the county judges approve the rate increases. Responding to Representative Riggs, Mr. Eger stated that no increases occurred from 1987 to 1999, despite taking on all the collection systems. He added that after five years, there was a 35% increase and two years of increases at 15% each. Mr. Eger said there were two years of no increases, then a 20% increase before the most recent increases. Representative Riggs indicated that there was a two-fold purpose of treatment—storm water and sewage. He felt that various forces emphasized one duty over another periodically, but that both were part of the districts’ purposes. Representative Riggs told Mr. Eger that SB 72 would place special districts closer to the fiscal court that would then be better to understand their needs. Mr. Eger expressed concerns that the bill would mandate what law currently allows, and that he was concerned that in his case, a few fiscal court members could veto the rate increases resulting in a poor bond rating.
Representative McKee asked if the sanitation district board members have to be approved by the fiscal court as well as the county judges. Mr. Eger replied in the affirmative. Representative McKee also asked if the board members’ terms are staggered. Mr. Eger said yes, that they serve for four years but are appointed at different times. He noted that the chair rotated from county to county. Representative McKee pointed out that as the terms expired of officials, they would be subject to replacement by other appointees by the fiscal court, demonstrating control over the board.
After confirming Mr. Eger’s position on the bill and noting Mr. Eger’s concerns, Representative Simpson asked if Mr. Eger had any recommendations to add to the accountability of the board and district relative to rate setting. Mr. Eger said they have always invited independent audits to be conducted.
Senator Thayer stated that he has a problem with the level of accountability that currently exists. He said there needs to be an additional level.
Senator Thayer next introduced Chief Rick Messingschlager with the Independence Fire District. Chief Messingschlager noted that the fiscal court exercises control over the fire board through the appointment of board members. He cited statutory requirements of public hearings for rate changes to include those under HB 44. Chief Mesingschlager told the committee that SB 72 questions the integrity of the board members and fiscal court, and that he is against SB 72. He stated that KRS Chapter 75 allows for elected and appointed board members already and should be used as a model.
Senator Thayer told Chief Messingschlager that SB 72 does not question the integrity of the board members; it is a taxpayer protection measure.
Senator Carroll commented about the constituency of the fire board and the simple majority required to approve a measure.
Senator Thayer next introduced Mr. Kenny Brown, representing taxpayers. Mr. Brown indicated that he was here in part now because of his involvement last year with a grass-roots initiative to stop a $48 million park tax levy. He explained that one of the selling points of the initiative was the collective lowering of three tax districts’ rates to compensate for the new tax rates. There was shock in the community, he said, that these tax districts were able to lower their tax rates. Mr. Brown noted that the Boone County library district was one district that volunteered to lower its rates. He added that the rates had gone up 300 percent in ten years. Mr. Brown cited public discomfort with the library district’s real property purchases and capital improvement projects. He said that after the fiscal court was approached by the citizens who objected to these expenditures, the fiscal court indicated that it did not have control over the board, along with other districts. Mr. Brown continued to say that these conditions and responses led to the forming of the group to oppose the park tax. He indicated that the citizens felt that the three tax districts were manipulating the public in order to gain support for the park tax. Mr. Brown noted that the park tax was defeated. He stated that having unelected individuals making taxing decisions amounted to taxation without representation. Mr. Brown questioned the board members accountability to taxpayers. Quoting Chief Justice John Marshall, he said that the power to tax is the power to destroy and cannot be delegated to an unelected body. Mr. Brown told the committee that tax increases should be made by elected officials. He said he supported SB 72.
Mr. Brown said that it is fundamentally wrong to give people the power to tax who do not themselves have to face the taxpayers. He cited the controls of planning and zoning boards’ decisions needing approvals from the local elected officials was a good model. He felt that the individuals providing good services through special districts should not be intimidated by or opposed to accountability or scrutiny of the individuals paying for the services the districts provide.
Senator Schickle commented that he acknowledges the good job that the districts do, but that SB 72 just requires direct accountability to the voters. He added that he was glad to hear the comments relating to more interaction with fiscal courts and indicated that the bill was not perfect and needed fine-tuning.
Representative Simpson asked Mr. Brown if he felt that the fact that the citizens elected the officials who appoint the board members was adequate. Mr. Brown replied that not all fire districts are set up like Boone County’s, and that he felt that the election of the elected members of the fire districts were not publicized adequately. Senator Thayer said that all taxing fire districts created under KRS Chapter 75 are similar to Boone’s district.
Senator Thayer asked committee members to submit any suggestions that they might have to improve the bill. He said the bill’s idea is all about accountability.
Senator Thayer lastly opened the meeting for public comment. Mr. Donnie Snow, with All-Rite Ready Mix, told the committee that rate increases and district board members should be controlled by the voters.
Mr. J. R. Roth, representing the League of Kentucky Property Owners, said that the county judges would likely not be in favor of voting for tax increases. He advocated more voter input in special district operations.
Ms. Sue Puffenberger with the Watershed Authority, told the committee she was against SB 72. She felt that the additional controls would hinder the operations of fiscally-responsible tax districts.
There being no further business, the meeting was adjourned at 12:10 p.m.