Call to Order and Roll Call
The second meeting of the Interim Joint Committee on Local Government was held on Wednesday, August 22, 2012, at 10:00 AM, in Room 171 of the Capitol Annex. Representative Steve Riggs, 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 Walter Blevins Jr., R.J. Palmer II, Dan "Malano" Seum, and Johnny Ray Turner; Representatives Julie Raque Adams, Ron Crimm, Mike Denham, Ted Edmonds, Richard Henderson, Adam Koenig, Stan Lee, Michael Meredith, Arnold Simpson, Kevin Sinnette, Rita Smart, and Jim Wayne.
Guests: Alison Lundergan Grimes and Noel Caldwell, Secretary of State’s Office; Adam Edelen, Tom Bennett, Libby Carlin, Will Carle, and Nathan Cryder, State Auditor of Public Accounts’ Office; Bert May, Kentucky League of Cities; Vince Lang, Kentucky County Judge/Executives’ Association; Bryan Alvey, Kentucky Farm Bureau; and Sara McGown, Louisville Metro Government.
LRC Staff: Mark Mitchell, John Ryan, Joe Pinczewski-Lee, Jessica Causey, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative Crimm, seconded by Representative Koenig, the minutes of the June 27, 2012 meeting were approved.
Representative Riggs announced that the Committee’s next meeting will be held on Thursday, September 27, 2012, instead of its regularly scheduled day of the fourth Wednesday.
Uniform Occupational License Tax Reform required by 2012 HB 277
Representative Riggs commented that he wanted to give Representative Santoro credit for coming up with the idea to have a uniform occupational license tax form. He thanked the Secretary of State’s Office for undertaking this endeavor and complimented its efforts.
Secretary of State Alison Lundergan Grimes told the committee that her office currently oversees 728,054 entities that are organized and registered in Kentucky. Of that 728,054, 192,728 are active companies that have filed forms. There are more than 200 distinct taxing districts in Kentucky.
2012 HB 277 requires a central location for all occupational license tax forms. It requires each tax district that imposes an occupational license tax on net profits or gross receipts to submit the following items to the Secretary of State before November 1, 2012: electronic or hard copy of its occupational license tax return form or forms; accompanying instructions; and a copy of its occupational license tax ordinance. All information will then be posted by the Secretary of State on either the state’s One-Stop Portal or another public website maintained by the Secretary of State.
HB 277 also requires the Secretary of State to consult with Kentucky Association of Counties (KACo), Kentucky League of Cities (KLC), Kentucky Occupational License Association (KOLA), Kentucky School Boards Association (KSBA), Kentucky Certified Public Accountants (CPA’s) and business groups to adopt a “uniform collection form.” The uniform collection form is currently in development and not required until 2017. Her office will be meeting with all parties involved in October to review progress.
Secretary Grimes also updated the committee on the creation of the One-Stop Business Portal. The Secretary of State’s Office, Finance and Administration Cabinet, the Cabinet for Economic Development, and the Commonwealth Office of Technology shall jointly establish a one-stop electronic business portal that shall serve as a single, unified entry point for business owners to access and complete initial and ongoing state services and requirements in relation to the creation of ongoing operation of a business located in the Commonwealth. The Kentucky Business One-Stop Portal was launched a year earlier than expected and has been completed.
The Secretary of State noted issues for the 2013 legislative session include: (1) The Kentucky Uniform Fraudulent Conveyance Act. This act will update Kentucky’s very dated fraudulent conveyance act which is currently being drafted by an ad-hoc committee of attorneys; (2) Kentucky Revised Model Nonprofit Corporation Act. The current nonprofit corporation act is antiquated, and piecemeal efforts at updating will not be sufficient to bring it current with modern requirements; and (3) Kentucky Business Entity Transactions Act. The Act is currently being outlined and will combine in a single chapter, all of the rules governing mergers, conversions, share exchanges and other organic transactions involving business organizations. This likely will be ready for submission to the General Assembly in 2014.
In response to a question from Representative Denham, Secretary Grimes stated that not all entities are required to file forms. Sometimes they dissolve or merge but they stay in the system. In response to another question from Representative Denham, Secretary of State Grimes said the entities are not removed from the system in the future.
Representative Crimm complimented the Secretary of State’s website, saying that it was very easy to use.
Progress of Special District Survey and Meetings with Special Districts
Auditor of Public Accounts Adam Edelen informed the committee that he had just returned from 15 town hall meetings in the area development districts around the state. Surveys have been sent to all county judges, county clerks, and sheriffs in the state. They have helped identify special districts that his office did not know existed. Surveys were sent to over 1,200 special districts, which does not count the ones that have just been identified. To date, 900 special districts have responded. The current system of special districts is byzantine and in need of reform because the system does not let the people know how their money is being spent. No one knows for sure how many districts there are, where they are, who runs them, how much money flows through them each year, how much money they have and who is complying with existing reporting requirements. The Auditor’s Office will provide this information by the end of the year and will also provide recommendations for policy changes. The system does not serve the board members either.
Representative Riggs commented that in his opinion, those special districts that have not returned the survey or are ignoring it, would be the ones that he would be interested in auditing. Mr. Edelen agreed.
In response to a question from Representative Riggs, Mr. Edelen replied that his office is not in the position yet to identify those special districts that may or may not have public integrity issues. The system needs to be modified in order to have the ability to make baseline evaluations of special district operations.
In response to a question from Representative Smart, Mr. Edelen said all taxpayers will be able to go to the Auditor of Public Accounts’ website and access a database as a way to be kept informed of special district operations.
In response to a question from Representative Adams, Mr. Edelen stated that he envisions the report to identify the special districts, how they operate, whether they comply or not, and a list of recommendations.
Senator Thayer commented that he commits to the Auditor that he will file a bill in 2013 relating to the accountability of special districts. Legislation should include accountability, transparency, disclosure, and oversight for special districts. The committee needs to engage with the Kentucky Association of Counties and the Kentucky County Judge/Executive Association, and would welcome the Auditor’s policy suggestions.
Mr. Edelen told the committee that this endeavor is not a fix-all but will be a bold first step.
Representative Simpson commented that accountability should be the key part in the legislation.
Representative Wayne commented that Senator Thayer’s bill would compliment what the Auditor’s Office is doing. In response to a question from Representative Wayne, Mr. Edelen answered that the Bridges’ Authority is a special district and would be included in recommendations that his office would make.
In response to a question from Representative Koenig, Mr. Edelen said he would have to get the information for him regarding the special districts’ compliance rates in Northern Kentucky.
There being no further business, the meeting was adjourned at 11:20 a.m.