Call to Order and Roll Call
The fourth meeting of the Interim Joint Committee on Local Government was held on Wednesday, October 28, 2015, at 10:00 AM, in Room 171 of the Capitol Annex. Senator Joe Bowen, 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 Ralph Alvarado, Stan Humphries, Christian McDaniel, Morgan McGarvey, Albert Robinson, Dan "Malano" Seum, and Damon Thayer; Representatives Linda Belcher, Ron Crimm, Mike Denham, Jim DuPlessis, Adam Koenig, Stan Lee, Tom McKee, Michael Meredith, Russ A. Meyer, Phil Moffett, Jonathan Shell, Arnold Simpson, Rita Smart, James Tipton, and Susan Westrom.
Guests: Roddy Harrison, City of Williamsburg; Claude Christensen, City of Sadieville; Jonathan Steiner, J.D. Chaney, Bert May, Joe Coleman, and Bryanna Carroll, Kentucky League of Cities; Shelley Hampton, Kentucky Association of Counties; Dan Meyer, Wine and Spirits Wholesalers of Kentucky; and Ollie Barber, Kentucky Public Transit Association.
LRC Staff: Mark Mitchell, John Ryan, Joe Pinczewski-Lee, Tom Dorman, Jay Hartz, Brian Traugott, Vaughn Murphy, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative Crimm and second by Senator Alvarado, the minutes of the September 23, 2015 meeting were approved.
Kentucky League of Cities’ Legislative Platform for 2016 Session of the General Assembly
Jon Steiner, Executive Director of the Kentucky League of Cities (KLC) said that the focus of cities is fixing issues that are negative to cities and creating new opportunities and tools for cities. He introduced KLC’s officers who would present the details of the legislative agenda: KLC President and Williamsburg Mayor Roddy Harrison, and KLC First Vice-President and Sadieville Mayor Claude Christensen.
Mayor Harrison said that the KLC Board of Directors had recently completed its meeting to rank more than 25 legislative issues. KLC’s top priorities include:
911 funding shortfall. The KLC Board of Directors voted the 911 funding shortfall as the number one priority for the 2016 legislative session for the second year in a row. The growing concern of the unsustainable funding model for the 911 system has been increasing over the past several years. Advancements in technology, increased 911 call volumes from wireless devices, along with the migration away from landlines, has resulted in decreased funding for 911. From 2000 to 2013, the total number of landlines decreased by 23 percent while the number of wireless users increased by 294 percent. This has forced cities and counties to use general fund dollars to replace lost funding for maintenance of this essential service.
In fiscal year 2014, local governments contributed over $32 million from their general funds to support local 911 efforts. Those general funds dollars accounted for 41 percent of all the resources used for funding public safety answering points in Kentucky. Local fees from landlines made up 36 percent of funding and those range from 50 cents to $4.00. Funds generated by the wireless fee made up just 23 percent of total local 911 revenue but accounted for 71 percent of the 911 call volume. The wireless fee was set at 70 cents at its inception in 1998 and remains unchanged today.
The KLC Board of Directors would like to urge members of the committee and the entire General Assembly to support legislation that raises the Commercial Mobile Radio Services (CMRS) wireless fee to a reasonable level which would offer much needed relief to local governments. In addition, cities remain committed to supporting legislation that maintains clear guidelines and transparency for 911 expenditures. While KLC has accomplished a great deal of efficiencies through consolidation by decreasing the number of public safety answering points (PSAPs) across the state to 112, KLC will continue to support policies that encourage interlocal cooperation and incentivize consolidation. Legislation will likely include components that eliminate provider reimbursement, address CMRS governance, and corrects the collection issues surrounding prepaid wireless users.
Local officials are not seeking new revenues—instead they are seeking to replace lost revenues. Cities would prefer to do this without legislative assistance, however, state laws preempt local governments from making the necessary adjustments, so KLC needs the General Assembly to be a partner to ensure there is a solution. City leaders also look forward to working with counties on this issue.
In response to a question from Senator McDaniel, Mayor Harrison replied that the KLC Board of Directors is still in dialogue about how many PSAPs they would recommend having. The state needs to be careful how much consolidation is appropriate, but KLC is open to discussing consolidation.
Senator Bowen commented that expense should be a built-in incentive to consolidate.
In response to a question from Representative Tipton, Mayor Harrison said there is no collection tax for prepaid wireless users.
Representative Smart commented that her district consolidated PSAPs in 2009 and are still having the same problem of keeping employees. Mayor Harrison stated that he did not have any information on employment issues in other parts of the state.
Representative Riggs commented that interlocal agreements are not being utilized enough and that the agreements could help with freeing up money by saving it in the first place. Mayor Harrison said KLC agrees and encourages interlocal agreements.
Senator Bowen commented that there are too many counties.
In response to a question from Senator Robinson, Mayor Harrison said the consolidation of PSAPs would not be done in such a way as to affect fire and police service to rural areas but that they have not looked into the efforts of consolidating PSAPs in regards to the actual services of the departments.
Senator Humphries commented that he hoped there was a voice for rural Kentucky if consolidation of PSAPs is considered so that personal safety is not sacrificed to save money.
Representative Simpson said that Kenton County has an alternative means to collect 911 funding by putting a fee on tax bills, and suggested that all communities look at that option to fund 911.
In response to a question from Representative DuPlessis, Mayor Harrison said there was quite a bit of misused 911 calls.
Representative DuPlessis suggested a co-pay fee for those that used prepaid phones and those that misuse 911 be charged a fee as well. Mayor Harrison said those were viable suggestions that KLC would look into.
Representative McKee commented that it was not right for customers to pay 70 cents for 911 service when prepaid users do not pay anything.
Road aid funding formula. Mayor Harrison stated that the KLC Board of Directors voted modernizing the state’s road aid funding formula its second priority in late September and encourage members of the committee to examine and support revisions to the antiquated formula. In 1948, the General Assembly established the road aid funding formulas which include municipal road aid, county road aid or municipal secondary road aid. These formulas have not been updated since their inception nearly 70 years ago.
Kentucky’s cities spend more than one quarter of a billion dollars each year on constructing and maintaining nearly 10,000 miles of city streets, yet one-third of that money comes from intergovernmental resources such as the state municipal road aid program or federal grants. In fiscal year 2014, cities spent nearly $270 million on municipal roads but received less than $60 million from the municipal road aid fund. Conversely, unincorporated areas spent less than $290 million to maintain county or rural roads yet received almost $325 million from the county and rural road funds. The cost of constructing and maintaining unincorporated roads are funded more than 112 percent by the state road fund while city roads are funded less than 22 percent by the same fund.
KLC supports the restructuring of the road funding formulas for a more equitable allocation to local governments with higher traffic areas that have more frequent needs. KLC proposes retaining the 48.2 percent of Kentucky motor fuels taxes and consolidating all three separate road programs into one “Local Road Aid Program.”
Currently, the formula of fifths is used to divide the road aid dollars. One-fifth is divided equally among all counties, 1/5 is divided by rural road miles, 1/5 is divided by rural population and 2/5 is divided by rural land area. KLC’s proposal would eliminate equal shares to counties and references to urban and rural populations, reduce the influence of land area and increase the influence of population and road miles. It would also require counties to spend road aid dollars based on the current proportional split between county road aid and rural secondary road aid so that roadways in the state are adequately maintained. KLC proposes a formula of thirds. Under this funding formula, 1/3 of the funds would be divided by incorporated versus unincorporated population, 1/3 divided by incorporated versus unincorporated road miles and 1/3 incorporated versus unincorporated land area. This new funding formula would increase road aid dollars for all cities and some counties including Boone, Christian, Laurel, Oldham, Pulaski, and Warren. This would allocate enough funds to counties to cover almost 100 percent of total road fund expenditures in a year.
In response to a question from Senator Bowen, Mayor Harrison stated that KLC is working with KACo on road aid funding formula legislation.
In response to a question from Representative Riggs, Mayor Harrison said he did not have any specific examples where counties are spending money inside cities but would get that information for the Committee.
In response to a question from Representative Belcher, Joseph Coleman, KLC staff, said it was the way the numbers came out using the one-third funding formula was the reason why those particular six counties’ road aid dollars would increase.
In response to a question from Representative Meredith, Mr. Coleman said that in broad terms, about $38 million would be shifted from rural, unincorporated parts of the state to cities. Representative Meredith commented that KLC should make sure they work with KACo in order for everyone to benefit.
In response to a question from Representative Moffett, Mayor Harrison said using land area to calculate the funding formula is the way the state has always been doing it.
Senator Humphries commented on the fiscal obligations that counties are responsible for such as the provision of jails.
Representative Simpson commented that the appropriations should be fair and that he has prefiled a bill that will serve as a discussion starter.
In response to a question from Senator Seum, Mayor Harrison stated that federal monies comes to the state and county, but they have to apply every time for each grant.
Representative Crimm commented that it was not just small cities and rural counties that have road problems.
Revenue diversification. Mayor Harrison stated the Kentucky Constitution severely limits the revenue options available to city governments. Cities need access to varied revenue options to ensure the quality of life that makes Kentucky an attractive place to live and do business. Fifty-six percent of all non-utility Kentucky city revenue comes from taxes. Currently, Kentucky ranks 44th in local taxes collected.
KLC is asking for the legislature’s support to expand the authority to impose a restaurant tax to all cities. Cities would retain 75 percent of the revenues for quality of life enhancements while 25 percent would be remitted to local tourism commissions. The restaurant tax would be used in lieu of the collection of net profits or gross receipts taxes on restaurants; however, participating cities would still have the option to impose payroll taxes on restaurant employees and maintain their regulatory business licensing requirements. It is important to note that this expansion of authority to all cities only gives the cities the option to impose a restaurant tax. It will be up to local officials and communities to determine if a restaurant tax would be a good revenue option for their city.
The KLC Board of Directors strongly supports a constitutional amendment that would allow Kentuckians to decide on the issue of a voter-approved local option sales tax for a specific community project that would sunset after a period of time. The amendment passed the House last year and KLC is asking that the full General Assembly approve the constitutional amendment in 2016 so that the voters of Kentucky can decide this issue. Thirty-eight states have given local communities the ability to make the decision to invest in themselves. Kentucky is the only southern state without this ability.
In response to a question from Representative Smart, J.D. Chaney, KLC Staff, replied that the KLC Board voted, relating to the split of the tax, not to grandfather in those cities that are already collecting a restaurant tax. This would be for the proposed bill as it stands at present. A deal has not been struck yet.
Representative Smart commented that the City of Pigeon Force, Tennessee spends more on marketing that the whole state of Kentucky.
Abandoned and blighted properties. Mayor Harrison told the Committee that abandoned, blighted and code-deficient properties are a major source of concern for nearly every Kentucky City. KLC supports incentivizing property owners or other stakeholders to take responsibility for those properties and finding proven methods to reintegrate the properties into the community.
Amendment of anti-spiking provision in retirement legislation and CERS separation from KRS. KLC will seek legislation to maintain 2013 SB 2’s provisions prohibiting the abuse that caused exorbitant artificial spikes, while making considerations for valid increases in compensation. The legislation will also provide relief to employers to authorize necessary work and allow employees to work without fear of being penalized for legitimate increases of their creditable compensation. Members of the coalition have been working on compromise language with the Kentucky Retirement Systems (KRS) and will have it ready to file for the upcoming session.
The KLC Board of Directors also voted to seek legislation that explores options for the County Employee Retirement System (CERS) to separate from KRS. After the pension reform of 2013, CERS has been on an upward trajectory and has seen its funding ratio increase while employer contributions have steadily decreased.
Prevailing wage. Mayor Christensen told the committee that the repeal of prevailing wage would mean more tax dollars that can stretch further for economic development, and capital and infrastructure projects. Kentucky’s city leaders seek to be good stewards of the tax revenues that they receive and ask that members of the General Assembly consider repealing this costly unfair law.
Drug abuse. KLC strongly supports legislation that proactively addresses drug abuse and its consequences. Cities will continue to advocate for legislation that addresses the evolving issue from both a criminal and a treatment perspective.
Increase in police and fire incentive pay. Cities support the increase of the training incentive payments to police and professional firefighters to $4,000 annually, and urge the payment of the additional costs associated with the payment.
Rehiring of retired police officers. A great number of cities in Kentucky struggle with maintaining a fully staffed police force as hiring a new recruit is costly and comes with a long waiting period due to training. Sheriffs’ offices have the ability to rehire retired police officers without making employer contributions to retirement or reimbursing or otherwise providing health insurance benefits to the rehired retiree. City leaders ask that police departments are afforded the same ability as their county counterparts.
Newspaper publication reforms. The KLC Board of Directors has voted to continue to work together to modernize the newspaper publication laws in the Commonwealth by incorporating technology to provide citizens more access to information about the operation of their city government in a more cost-effective manner. The cities do not intend to do away with the printed word. Cities want expanded opportunities to use resources that are less expensive, but equally effective.
Public-private partnerships. KLC asks that the legislature support legislation that would clarify the use of public-private partnerships in the Commonwealth and offers clear guidelines for entering into a P3 for capital projects. Public-private partnerships are a valuable economic development and alternative financing tool for local governments.
Lastly, as during any legislative session, state officials can also 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 our local taxpayers. Protecting home rule is the core of our organization’s entire legislative platform.
In response to a question from Senator Robinson, Mayor Harrison said that the cities will support changes to the prevailing wage law.
Senator Bowen announced that the next meeting will be November 18th.
There being no further business, the meeting was adjourned at 11:45 a.m.