The fourth meeting of the Interim Joint Committee on Local Government was held on Thursday, September 24, 2009, at 10:00 AM, in Ballroom A of the Northern Kentucky Convention Center in Covington, 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, John Schickel, and Robin L. Webb; Representatives Scott W. Brinkman, Ron Crimm, Mike Denham, Ted Edmonds, Richard Henderson, Charlie Hoffman, Brent Housman, Dennis Keene, Adam Koenig, Tom McKee, Arnold Simpson, Kevin Sinnette, and Ken Upchurch.
Guests: Representatives Mike Cherry, Dennis Horlander, and Jim DeCesare; Mayor Mike Miller, City of Jackson; Mayor Pro Tem Jerry Stricker, City of Covington; Mayor Elaine Walker, City of Bowling Green; Terry Baute, City of Bellevue; Neil Hackworth, Temple Juett, and J. D. Chaney, Joe Ewalt, Bill Hamilton, Robin Cooper, Tony Goetz, and Bert May, Kentucky League of Cities; Dawn Bellis, Department of Housing, Buildings, and Construction; Debbie Battliner, City of Simpsonville; Mayor Jerry Abramson and Ron Wolf, Louisville Metro Government; Mayor Gippy Graham and Kathy Carter, City of Frankfort; Gale Cherry, City of Princeton; Mayor Fred Siegleman, City of Versailles; Mayor Susan Barto, City of Lyndon; Dan Voegeli and Helen Lee, City of Fulton; Claude Christensen, City of Sadieville; Bill Ed Cannon, City of Corbin; Janet Hammer and Paul Stansbury, City of Danville; Greg Engleman, City of Erlanger; Tamie Johnson, City of Mayfield; Tom Hardesty, City of Shelbyville; Dennis Crist, City of Somerset; Rita Smart, City of Richmond; Jody Anderson, City of Southgate; Mayor David Wilmoth, City of Elizabethtown; Mike Haydon, Governor’s Office; Shelley Hampton, Kentucky Association of Counties; Jerry Deaton, Scenic Kentucky; and Ned Sheehy, Lexington-Fayette Urban-County Government.
LRC Staff: Mark Mitchell, Joe Pinczewski-Lee, John Ryan, Kris Shera, Matt Niehaus, and Cheryl Walters.
Upon the motion of Representative Henderson, seconded by Representative Crimm, the minutes of the August 26, 2009 meeting were approved.
Senator Thayer announced that the committee was meeting in conjunction with the Kentucky League of Cities’ annual convention.
The first order of business was review of Kentucky Administrative Regulations 815 KAR 8:041 (repeal of 815 KAR 8:040, HVAC contractor application reviews) and 815 KAR 35:100 (electrical continuing education procedure). Senator Thayer introduced Ms. Dawn Bellis, General Counsel for the Department of Housing, Buildings, and Construction, to explain the regulations.
Ms. Bellis told the committee that 815 KAR 8:041 repeals 815 KAR 8:040 because it does not conform to legislative intent. She explained that 815 KAR 35:100 adds a requirement to the agency’s determination that the continuing education provider applicant will provide the certification of attendance at all courses offered within five business days of class completion by e-mail, fax, or mail. Ms. Bellis also explained that rather than the inactive license holder providing proof of completing six hours of continuing education for each year the license is inactive, the new condition to be met to reactivate the license is proof of completion of at least six hours from the prior year.
Representative Riggs asked if five days was typical to get licenses. Ms. Bellis replied yes.
Senator Carroll asked if the five days included the date when they received certification. Ms. Bellis said yes. Senator Carroll stated that the word “postmark” should be added to the language.
Representative Riggs moved, seconded by Senator Carroll, to amend 815 KAR 35:100 to add the word “postmark” after the words “or mail” on line 5, page 2. Senator Thayer pointed out that the agency must agree to the amendment before the committee votes on the motion. Ms. Bellis said she agreed to the amendment. The motion carried by voice vote.
The last order of business was presentation of the Kentucky League of Cities’ (KLC) legislative platform for the upcoming 2010 Session of the General Assembly. Senator Thayer introduced Mayor Mike Miller, KLC President-elect for welcoming remarks. Mayor Miller then recognized Mr. Neil Hackworth, KLC Executive Director, to discuss the League’s advocacy for home rule and protection of city interests.
Mr. Hackworth told the committee that KLC defends and promotes home rule. He said they believe that local leaders must have the freedom to govern in the best interests of their citizens. Mr. Hackworth noted that KLC opposes legislation that: (1) infringes upon local decision making, such as legislation that results in unfunded mandates or mandated collective bargaining; (2) threatens or negatively impacts city revenues, including the centralized collection of any city revenues by the state or any proposal that would reapportion city revenues; and (3) threatens the physical growth of cities or places cities at a competitive disadvantage.
Mayor Miller next introduced Mr. Temple Juett, KLC General Counsel, to discuss County Employee Retirement System (CERS) reform. Mr. Juett told the committee that the changes from the 2008 special session and the passage of HB 117 in 2009 delivered important components of retirement reform that will provide some savings for local governments in the coming years. However, he noted that the downturn in the economy reduced returns from investments, with a likely result of higher demands on employers to make up the difference. Mr. Juett also noted that the impact of the recession on employer costs won’t be known until the Kentucky Retirement Systems (KRS) Board of Trustees completes an actuarial analysis and announces next fiscal year’s employer contribution rates in November, 2009.
Mr. Juett stated that without additional reforms to the system, cities will take a major financial hit from sharply higher contribution rates. He explained that rates are currently projected to be over 20% of payroll (non-hazardous) and 42% (hazardous) by FY 2014, which will be almost double of the rates in FY 2006. Mr. Juett said Kentucky’s cities are in need of lasting changes that will make employer contribution rates more affordable in the short term.
Mr. Juett stated that cities will seek legislation that would define “full funding” for future health benefits as 80% of the actuarially required contribution. The pension portion of the retirement benefit would continue to be funded at 100% of the actuarially required contribution. He noted that according to the January, 2008 “State and Local Government Retiree Benefits” report by the United States Government Accountability Office (GAO), “many experts consider a funded ratio of about 80% or better to be sound for government pensions.”
Mr. Juett told the committee that KLC will also pursue changes in governance that would allow for a separate board of trustees to administer the CERS within the KRS. This new board of trustees would be made up of a balanced mixture of employer and employee representatives who would adequately represent local government interests in CERS.
Regarding training for newly elected officials to serve on boards, Representative Crimm suggested that KLC report back to the committee to show that this has taken place. Mr. Hackworth stated that they would be happy to report back to the committee.
Representative Crimm asked if KLC insurance board has to report back to the main board. Mr. Hackworth said the insurance board has to present a report. Representative Crimm commented that KLC should make sure there is a watch dog.
Representative Riggs asked what the makeup of the current CERS board was. Mr. Juett said there are two CERS members on the 9-member board and one from state police. Representative Riggs asked staff to find out what the total membership of the board is.
Regarding the 80% funding for health benefits, Representative Koenig asked if that could be adjusted up. Mr. Juett replied yes.
Senator Webb commented that she didn’t think it would be necessary to create a new board but to just tweak the present one.
Senator Carroll commented that retirement is a problem, but the biggest problem for cities is revenue. He said cities cannot match revenue so they need 100% from the state.
Senator Carroll asked if wellness programs had been considered considering the costs of health insurance. Mr. Juett replied that KLC is focusing on wellness programs.
Representative Housman asked how the $40 million premium compares to the payment of claims. Mr. Juett said $3 million was added surplus last year.
Mayor Miller next recognized Mayor Elaine Walker, KLC second vice president, to discuss the telecommunication tax shortfall and 911 funding. Mayor Walker told the committee that much like the state, the decline in the economy and cost of providing adequate services for citizens has been extremely hard on city budgets. For cities, she noted that this problem has been further exasperated by a shortfall in telecommunications tax revenues.
Mayor Walker stated that in 2005, the General Assembly passed a telecommunications tax to replace local franchise fees on cable and telephone companies and public service property taxes. She pointed out that KLC and its member cities supported this bill with the promise that city revenues would not be negatively impacted by this change and the promise that they would share in the growth fund. Mayor Walker said unfortunately, an insufficient “hold harmless” amount was written into law, causing most cities to experience a 15% shortfall compared to previous collections of local franchise fees and taxes. Furthermore, she added, the rates have been insufficient to generate any additional money for the growth fund.
Mayor Walker stated that KLC is asking the General Assembly to: add approximately $7.5 million to the annual hold harmless fund to accurately account for the total revenues local governments were receiving prior to the telecommunications excise tax law; consider raising the rate to generate growth fund revenue; and include $34 million in past lost revenues in the next budget to compensate local governments for the shortfall from January, 2006 through June 30, 2010.
Mayor Walker noted that in conjunction with legislation, the KLC Board of Directors has voted to begin the process of filing a lawsuit challenging the constitutionality of the telecommunications tax law and seeking compensation for the shortfall in revenue.
Representative Henderson asked for a breakdown of the rates charged for the telecommunications tax.
Mayor Walker told the committee that local governments have the ability to assess fees for 911 services on land-based telephone lines while the state sets, collects and distributes the 911 fee for cellular phones. She explained that the decline in popularity of land line telephones has left many local governments with decreasing revenues to support the expensive 911 services. Mayor Walker added that Kentucky phone companies report that wire-line fees are dropping statewide at an average rate of 4% annually, which creates a disproportionate burden on older citizens who still utilize land lines.
Mayor Walker said this new trend has forced several cities and counties to sharply increase the fee on the remaining land lines. As a solution, she noted that KLC is working with 911 administrators, the Kentucky Association of Counties, and will seek to work with utility companies on legislation that will ensure stable and adequate funding for emergency response systems. Mayor Walker added that KLC will need the support of the legislature to find a way to update this antiquated funding source to ensure that local governments can continue to provide responsive public safety services to the state’s citizens.
Representative Keene asked what percentage of 911 calls was from cell phones. Mayor Walker replied that 60% 911 calls were from cell phone.
Senator Webb stated that there should be more clarity for participating entities when regulating the 911 service.
Representative Crimm noted that he prefiled legislation for the 2010 session regarding the telecommunications shortfall.
Regarding the telecommunications shortfall, Senator Carroll asked if the loss of money to the fund is attributed to the rate set for the tax itself. Mayor Walker replied that the loss is attributed to the rate and the overall shortfall.
Mayor Miller next recognized Mr. Terry Baute, Code Enforcement Officer for the City of Bellevue, to discuss foreclosed properties and how it affects city code enforcement. Mr. Baute told the committee that foreclosure issues are not unique just to the City of Bellevue. He said this is a nationwide problem that is continuing. Mr. Baute noted that according to the most recent information and statistics, the number of foreclosed properties in the United States has reach an all time high of approximately 300,000 per month over the last several months.
Mr. Baute explained that neighborhoods, police, fire, PVAs, code enforcement officials, as well as public works and banks, are all affected by this problem. He stated that although banks have been tremendously impacted by the staggering numbers, the fact remains that it is their responsibility to maintain the property until it is either resold or auctioned off. Mr. Baute added that if there were any type of emergency involving police, fire, theft, personal injury or a property maintenance issue, the proper contact information regarding the current owner of the property is not readily available. He said unfortunately, the former property owner is caught in a web of financial trouble and relocation due to a foreclosure. Mr. Baute noted that lending institutions do not always notify the local government about foreclosure information. He also noted that this is a huge problem due to the fact that the PVA lists the previous owner, who has now moved on, and there is no way of knowing important contact information.
Mr. Baute stressed that city government and lending institutions should all work together in order help stabilize the local codes and blighted violations which occur when properties are in limbo and there is no contact information readily available. He pointed out that through a joint effort and cooperation, legislation can be drafted to help regulate contact information that will greatly assist both lending institutions and the local city government in helping control blight issues that will keep the city looking attractive as well as being a desirable place to live and work.
Mayor Miller lastly recognized Ms. Debbie Battliner, President of the Municipal Clerk’s Association, to discuss protection of the city election process. Ms. Battliner told the committee that the State Board of Elections has received several complaints in the last several years that non-city residents were able to vote in city elections and affect the outcome of races. She noted that to protect the integrity of city elections, KLC will seek legislation that would enact a onetime requirement for city clerks to provide a list of all properties within the city and a map of the city boundaries to the county clerk. Ms. Battliner added that county clerks would use the information to code voter eligibility so precinct officers can determine whether an individual is entitled to vote in a city election. She said any changes in corporate boundaries after the onetime reporting requirement would be completed under the existing annexation and de-annexation laws. Ms. Battliner explained that this KLC initiative would also eliminate the requirement for cities to provide boundary information to Department of Local Government.
Senator Thayer suggested that the Clerks’ Association get going early with a bill that has an emergency clause in it. Mr. Chaney assured Senator Thayer that Senator Kerr has plans to file a bill.
Senator Thayer commented that he had heard that KLC was forming their own entity to deal with municipal utilities. Mr. Chaney replied that to his knowledge, that was not true.
Senator Thayer announced that the next meeting would be October 28th in Frankfort.
There being no further business, the meeting was adjourned at 12:00 p.m.