Daily Independent (Ashland, KY)

Local News

September 27, 2013

Payroll tax back on table in Olive Hill

OLIVE HILL — The idea of a payroll tax to shore up Olive Hill’s shaky finances is back on the table.

A fire service subscription fee for out-of-city residents might be in the offer ing as well.

Mayor Kenny Fankell said following a special meeting Thursday that was called to discuss revenue-generating options for the city that he planned to call another special session soon to once again consider an occupational levy. The council had earlier proposed a 1.5. percent payroll tax, but shelved the idea after it encountered fierce opposition from residents.

However, at Thursday’s meeting, several citizens said it wasn’t so much the tax they had a problem with, but the proposed rate. And, Fankell said he and the council would definitely be open to the idea of enacting the tax with a rate lower than 1.5 percent.

Olive Hill is facing what Fankell has called the worst financial crisis in its history. The city ended the fiscal year with a $60,000 deficit, and, after withdrawing the payroll tax proposal, adopted a bare-bones budget that cut $11,000 from five city department. Those cuts could force the city to reduce or eliminate some services is additional money isn’t found.

Fankell said earlier the city’s ability to meet its payroll for more than a few weeks was in serious doubt, which could force layoffs in the police department, which would make it impossible for the town to provide around-the-clock police protection.

The mayor also had said the financial crisis may force him to restrict the fire department to calls within city limits, and since Olive Hill’s department covers most of the western end of Carter County, it would leave that entire area unprotected. About 80 percent of the department’s runs are outside the city.

After the council withdrew the payroll tax proposal, Fankell appointed a citizen committee to review the town’s finances and come up with suggestions for saving money and generating additional income. The purpose of Thursday’s meeting was to hear from that committee.

The four-member committee’s proposals included putting city-owned real estate on the market, capping or reducing contributions to city employees’ health insurance premiums and selling off the city-owned electrical and water systems.

Fankell said he didn’t believe the latter would help ease the budget crunch because “utilities aren’t where we’re in trouble. Utilities are bringing in money.”

While divesting itself of its electrical and water systems would eliminate the city’s expenses of having to maintain those utilities, whoever bought the systems would pass those expenses along to customers, which would likely lead to higher rates, council member Jerry Callihan said.

Councilman Glen Meade also noted that several city employees, including City Clerk Angie Owens, were paid out of the utility fund.

Assistant Fire Chief Jeremy Rogers told the council enact a yearly fire service subscription fee for out-of-city residents to help fund the fire department. He said the city of Manchester had recently adopted such a fee.

Another option might be to create a special taxing district for the fire department, Rogers said. However, that would have to either be enacted by the Carter Fiscal Court, or placed on a ballot by petition, he said.

According to Rogers, there are roughly 3,000 residences in the unincorporated areas covered by the OHFD. Even if only half those households pay a $50-a-year subscription fee, “that’s a substantial amount of money,” he said.

Rogers also noted limiting fire call to city limits likely would result in many firefighters leaving the department since they live outside the city themselves.

“If I can’t protect my own property, I’m out,” he said.

Rogers told the council he felt it needed to bite the bullet and impose a payroll tax, even though it might be a politically unpopular. He noted that the levy would likely wind up costing the average person who works in Olive Hill less than $1 a day.

“I guarantee you that every person in this room wastes more than $1 a day,” he said. “I know I do.”

Resident Richard Short agreed with the need for a payroll levy, noting it was one of a very limited list of options that Kentucky law allows municipalities for raising revenue.

Short said his first thought when he heard the council was considering an occupational tax was “It’s about time.” He also noted the neighboring cities of Grayson and Morehead both had payroll levies and said he saw no reason why Olive Hill shouldn’t as well.

Short also said the committee’s ideas were “like putting a Band-Aid on cancer” because they would mostly produce one-time windfalls that wouldn’t help improve the town’s long-term financial health.

The tone of Thursday’s meeting was mostly positive, and Fankell said he found the session very helpful and productive.

“I feel like this was the first step in getting things turned in the right direction,” he said.

KENNETH HART can be reached at khart@dailyindependent.com or (606) 326-2654.

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