Call to Order and Roll Call
The fourth meeting of the Interim Joint Committee on Local Government was held on Wednesday, October 22, 2014, 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 Joe Bowen, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Ernie Harris, Christian McDaniel, Morgan McGarvey, R.J. Palmer II, Albert Robinson, Dan "Malano" Seum, Damon Thayer, and Reginald Thomas; Representatives Julie Raque Adams, Ron Crimm, Mike Denham, Toby Herald, Adam Koenig, Stan Lee, Brian Linder, Tom McKee, Michael Meredith, Jonathan Shell, Arnold Simpson, and Jim Wayne.
Guests: Bardstown Mayor Bill Sheckles; Williamsburg Mayor Roddy Harrison; LaRue County Judge/Executive Tommy Turner; Sadieville Mayor Claude Christensen; William May, Kentucky County Clerk’s Association; Vince Lang, Kentucky County Judge/Executives Association; Shellie Hampton, Kentucky Association of Counties; Jon Steiner, J.D. Chaney, Tyler Campbell, Bert May, and Bryanna Carroll, Kentucky League of Cities; Prentice Harvey, State Farm Insurance; Michael Kurtsinger, Kentucky Firefighters Association; and Tom Bennett, Auditor of Public Accounts Office.
LRC Staff: Mark Mitchell, Joe Pinczewski-Lee, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative Simpson and second by Representative Crimm, the minutes of the September 24, 2014 meeting were approved.
Kentucky League of Cities’ Legislative Platform for 2015 Session of the General Assembly
Jon Steiner, Executive Director of the Kentucky League of Cities (KLC) said that KLC was pleased to have the opportunity to share its legislative priorities. He introduced KLC’s new officers who would present the details of the legislative agenda: KLC President and Bardstown Mayor Bill Sheckles and KLC First Vice-President and Williamsburg Mayor Roddy Harrison.
Mayor Scheckles said that the KLC Board of Directors had recently completed its meeting to rank more than 24 legislative issues. KLC’s top priorities include:
911 funding shortfall. KLC Board of Directors voted the 911 funding shortfall as the number one priority for the 2015 legislative session. Cities and counties have been forced to use more general fund resources to maintain the 911 service. Based on the FY 2013 Commercial Mobile Radio Services (CMRS) Board, local general fund dollars account for 40 percent of 911 funding. Local 911 landline fees make up 36 percent of 911 funding, with the state CMRS wireless fee accounting for 23 percent of local 911 fees.
KLC, along with the Kentucky Association of Counties (KACo) and the local and state public safety answering points (PSAPs), supported legislation last session that would have alleviated some of the financial pressures on local 911 operations. The KLC Board of Directors urges the General Assembly to support legislation during the 2015 legislative session that raises the statewide CMRS wireless fee to a reasonable level thereby offering meaningful relief to the 911 budgets of local governments, or support allowing local jurisdictions the ability to assess a wireless 911 fee similar to the landline fee in their communities. If the General Assembly refuses to raise the statewide CMRS fee, which is set in statute, then it should no longer preempt local governments from assessing local fees on wireless subscribers.
City revenue diversification. Cities are struggling with stagnant and declining revenue streams and rising expenses. Great strides were made by the General Assembly with the passage of SB 2 during the 2013 Regular Session. That legislation was critical in helping cities manage their costs. As the demands on aging city infrastructure continue to increase, and core services like public safety and sanitation services continue to increase, cities must have access to more diverse revenue options. The current revenue restrictions force local governments to have to seek revenue based on the productivity of businesses and their employees. Some amount of diversification would more fairly spread the cost among citizens.
Revenue diversification includes the opportunity to expand the restaurant tax to all Kentucky cities. Expanding the restaurant tax to all Kentucky cities would be a step forward in allowing local control for city governments. Cities want to let local elected officials, not appointed officials, control how the majority of the revenues are spent.
Additionally, KLC’s Board of Directors strongly supports a constitutional amendment to allow the voters to decide the issue of a temporary voter-approval local option sales tax for specific community projects. Last session, KLC and KACo agreed on enabling legislation that would allow cities and counties to proceed with ballot initiatives if the constitutional amendment on the local option sales tax passed the legislature. The enabling legislation has paved the way for a path forward for the local option sales in the General Assembly. Thirty-seven other states have successfully navigated the local option sales tax issue and have given local communities the ability to invest in themselves.
Road aid funding formula. KLC encourages the General Assembly to examine and support revisions to the state’s road aid funding formula. While cities spend close to a quarter of a billion dollars a year on constructing and maintain around 10,000 miles of city streets, only around one-third of that money comes from intergovernmental sources, such as the state municipal road aid program and federal grants. The General Assembly established the road aid funding formulas in 1948 for municipal road aid, county road aid, and rural secondary aid. These antiquated formulas do not take into account lane miles, traffic counts, or other measures related to use or maintenance, which significantly impacts the most urban areas. Cities are asking for consideration of equitable reforms that will help get more funding to urban areas, including the more urbanized county governments, by including elements of road usage in the road aid calculations.
Mayor Harrison continued with the League’s legislative agenda:
Drug abuse issues. The impact on the quality of life in communities related to drug abuse and the need to combat the heroin epidemic in Kentucky remains a priority for city leaders. Cities and state policy-makers must continue to explore avenues to address the destructive impact that addiction has on the quality of life in the communities, through the adoption of policies to ensure adequate penalties for those who put drugs in the streets and policies that provide opportunities for treatment and rehabilitation for those that become addicted. That is why KLC supports the bi-partisan legislation that was proposed by Senator Katie Stine last session and is being proposed by Senator McDaniel for the 2015 legislative session.
Elimination of Kentucky’s prevailing wage law. The prevailing wage law has been an issue for cities for quite some time. These laws can cost the taxpayer of cities and other local governments 30 percent or more on their construction projects than a comparable construction project completed by entities not subject to prevailing wage. As taxpayers demand all levels of government to rein in costs, the elimination of prevailing wage means local governments can stretch dollars further for economic development and capital and infrastructure projects.
Amendment of anti-spiking provisions in retirement legislation. City leaders would like clarification in the anti-spiking provision. As it exists, the law forces cities and taxpayers to pay additional money to the retirement systems for previous uncontrolled overtime costs and for increases in creditable compensation that occur following unpaid leave under the Family Medical and Leave Act (FMLA) and under workers’ compensation. KLC worked with the legislature and other organizations to address this issue last session with SB 142, which did not pass. KLC believes a solution to the anti-spiking provisions that continues to prohibit spiking abuses while balancing the need for legitimate increases in creditable compensation during the final years of employment can be achieved in the 2015 Regular Session through legislation similar to SB 142.
Police officer bill of rights. City leaders are opposed to the further expansion of the Police Officer Bill of Rights to include internal disciplinary matters that have been largely left to city officials as employers. In addition, cities would like clarification of police statutes because the inconsistencies and the contradictory provisions in these laws frequently result in needless litigation, which ultimately costs taxpayers.
Occupational tax crediting between cities and counties. KLC opposes any extension and the expansion of the suspension of the occupational license tax crediting provisions. The importance of this issue will continue to grow in the absence of revenue diversification options being considered because cities and counties will continue to have to compete for the same limited number of revenue sources, which puts cities and the Commonwealth at the competitive disadvantage.
Newspaper publication reform. City officials would like to see KLC continue to work in conjunction with the Kentucky Press Association to modernize Kentucky’s newspaper publication laws by incorporating online resources and other mediums to provide citizens more access to information about the operation of their city government in a more cost-efficient manner.
Protect home rule and city budgets. State officials can expect city leaders to vigorously oppose any bills that other interest groups will likely introduce that attempt to preempt local home rule authority or impose unfunded costs on the taxpayers. Protecting home rule is the core of KLC’s entire legislative platform.
In response to a question from Representative Wayne, J.D. Chaney, KLC Deputy Executive Director, stated that KLC is working on legislation to change the road aid funding formula. A draft should be finished by the end of the interim. Representative Wayne suggested that KLC work with the Chairs of the Budget Review Subcommittee on Transportation and the Appropriations and Revenue Committee.
In response to a question from Representative Riggs, Representative Wayne said that the Budget Review Subcommittee on Transportation may have discussed the issue of the road aid funding formula, but the Appropriations and Revenue Committee had not. Representative Riggs said that there should be a meeting of one of those committees that would focus on the road aid formula issue. Senator Harris, co-chair of the Interim Joint Committee on Transportation, said the issue had not been discussed in that committee. He said it is important for KLC to develop a concrete proposal for the Transportation Committee’s review.
Senator Thayer said that prevailing wage should be set by the market place, not by a three-member panel appointed by the Governor. He urged KLC to start promoting the elimination of the prevailing wage law because it is wasting taxpayers’ money. KLC has his support.
Representative Koenig thanked KLC for making the road aid fund formula one of its legislative priorities. Regarding the 911 funding shortfall, he said that local governments have levied a fee on landlines for years, and there is no reason not to extend the fee to cell phones because they provide the same service. He hopes the legislation will pass in 2015.
Senator Bowen commented that the inefficiencies of the 911 call centers should be reviewed. He encouraged KLC to take a broad, comprehensive look at call centers and determine how to make them more efficient. The whole 911 system needs to be studied. Mayor Sheckles agreed and said that insuring cell coverage and GIS mapping are expensive undertakings.
Representative Simpson said that Kenton County has an alternative means to collect 911 funding by putting a levy on tax bills. Mr. Chaney said that cities have explored several options. However, using only a property tax bill as a collection vehicle does not reflect the entire population of 911 users.
In response to a question from Senator Thomas, Tyler Campbell, KLC Staff, stated that repealing the cost recovery statutes that require taxpayers to pay for the cost of wireless providers for carrying 911 calls would free approximately $4 million annually for local 911 services.
Representative Linder said that a flat fee should be considered for the 911 fee so some are not paying more for less service.
Kentucky Association of Counties’ Legislative Platform for 2015 Session of the General Assembly
LaRue County Judge/Executive Tommy Turner and immediate past president of the Kentucky Association of Counties (KACo) said that KACo’s membership is comprised of ten constitutionally elected offices: Commonwealths’ attorneys, county attorneys, circuit court clerks, coroners, county clerks, jailers, judge/executives, magistrates and commissioners, PVAs, and sheriffs. As such, each office has its own independent association representing the interests of the members of that individual office. Each association participates on the KACo legislative committee and has one vote. Included in the committee members’ folders is each affiliates’ list of priority issues, which are: supporting stronger legislation to reduce heroin uses and treat addiction; supporting an increase in the training incentive for deputy sheriffs from the Kentucky Law Enforcement Foundation Program (KLEF); returning a higher percentage of coal severance dollars back to counties; stabilizing the state road fund through an adjustment of the floor on the gasoline tax; support for misdemeanor expungement reform; continuing to explore options for a dedicated source of fund for PVA offices; addressing the federal REAL I.D. Act’s impact on the state; reaching an equitable agreement with cities in sharing revenues derived from an occupational license fee; and allowing low-level misdemeanants to participate in inmate work programs; and the list continues.
In a majority of counties, the perennial issues of jails costs and retirement funding are the largest line items for the counties’ budgets. Employer retirement costs are making their way to the number one expense for a handful of counties, supplanting jail expenses, which has been the greatest cost for several decades.
The two lead topics KACo continues to push to the top of its legislative agenda is E911 funding and local investments for transformation (LIFT). For the second consecutive year, a majority of counties have ranked E911 funding as the top priority. Current revenue sources for E911 funding include:
Landline fees. Local governments can adopt a monthly wireline surcharge to help cover the costs of E911 in their community. As more Kentuckians continue to abandon their land-based phones if favor of cell phones, this source of revenue is dwindling.
Wireless surcharge. The General Assembly established the monthly surcharge for wireless phones at 70 cents in 1998. That amount has not changed in 15 years. The surcharge accounted for approximately $25 million in revenues, or about 23 percent of the total cost of E911 operations in Kentucky.
Neither of these two sources of revenue is sufficient in their current forms to cover the total cost of service. Local government general fund dollars are left to pay for the balance of funds needed, which amounted to around $32 million in FY 2013. That subsidy accounts for almost half of the revenues needed for 911 operations. While the number of wireless calls received outnumbers the landline calls two to one, the revenues received from wireless phones pales in comparison to landline fees and local general fund dollars. Counties need the ability to correct this imbalance.
Last session’s LIFT bills would have allowed local residents to request, and then vote up or down, a temporary sales tax increase to fund projects such as infrastructure improvements, senior citizen centers, parts, public facilities, or a compilation of projects residents deem important to their community and quality of life. LIFT legislation was also supported by KLC, the Kentucky Association of Economic Development, the Kentucky Chamber of Commerce, Governor Beshear, and all living governors.
The LIFT proposal would allow citizens to go to the polls and review the list of projects that would be funded with a temporary sales tax not to exceed one percent that would sunset upon payment of the debt. Counties believe the LIFT program is a valuable option to be utilized as needed, with full buy-in and approval from local voters on local projects. KACo urges the committee to give this legislation a closer look in 2015.
In response to a question from Representative Riggs, Judge Turner said that about ten years ago there were three times as many PSAPs. There has been a lot of merging of call centers so consolidation is occurring and will continue to occur. Local knowledge is valuable. 911 centers are more efficient than most levels of government because of the technology they have built in.
In response to a question from Representative Wayne, Judge Turner stated that KACo recognizes the importance for rural counties to get adequate and affordable cell phone and internet service throughout the state.
In response to a question from Senator Robinson, Judge Turner said KACo has not done an in-depth study to see if the consolidation of call centers has been cost effective.
Regarding a question from Representative Simpson, Judge Turner stated that he did not know the specifics regarding coal severance money given back to the counties. Representative Simpson expressed concerns over a centralized tax distribution system.
Senator Thayer expressed similar concerns about a centralized system and commented that he would like KLC and KACo to work at passing a telecommunications reform act during the 2015 session.
Representative McKee commented that it is important to have 911 services in rural areas. 911 funding must be addressed. He is glad to see that KACo and KLC have this issue as their top priority.
Senator Thomas said that he felt everyone on the committee would agree that landline usage is declining, and that the 70 cent fee does not have the purchasing power it once had.
Representative Koenig stated that local officials are entrusted to make decisions affecting their communities and should be allowed to do so without unnecessary influence from the General Assembly.
Representative Wayne said that KACo and the area development districts should work together on the telecommunications issue. He is opposed to the telecommunications reform act.
Representative Riggs announced that the last meeting of the interim will be November 19.
There being no further business, the meeting was adjourned at 11:45 a.m.