RACELAND A proposed doubling of the payroll tax in Raceland has staffers in the Raceland-Worthington School District up in arms, but city officials say there is no other way to get money it needs to pay bills.
The city council introduced the tax hike at its meeting last week and plans to adopt the tax with a second vote July 25.
The tax, levied on the gross income of anyone employed in the city, would jump from 1.5 percent to 3 percent per year.
The council also has introduced a tax on boats and motorcycles and will also make the final decision on that levy July 25.
Teachers, administrators and support workers in the school district dispute the fairness of the tax because many don’t live in the city and they believe Raceland is using them as a cash cow.
“The school district is paying the burden of the city. We’re taking a big hit in supporting the financial needs of the city,” said Zenaida Smith, a Spanish teacher at Raceland-Worthington High School.
There are few other employers in the city. Among them are a convenience store, a funeral home, a couple of attorneys and automotive businesses, and the city itself.
“It’s one of the few ways by state law we can increase revenue,” Mayor Mike Wilson said. “If it was legal, an income tax would be the fairest way, but we can’t do that in Kentucky.”
Kentucky cities are prohibited by law from enacting income taxes.
The city has little choice but to raise the tax, according to Kevin Jackson, the council member who proposed it. “It’s simple. The city doesn’t have enough recurring income,” Jackson said.
Other than the payroll tax the city subsists largely on property taxes, and receipts from that levy are largely spent as they are collected from October to March, Jackson said. “By early spring to late summer, the money to sustain us is not there,” he said.
The payroll tax brings money in year-round, currently about $101,000 per year, said Jackson, who favors a pilot period of two years at the 3 percent rate.
Over two years that would bring an additional $202,000, he said. That amount would add an additional $8,400 per month to the city’s bottom line.
Inflation is eating up the city’s income, Jackson said. Among heavy expenses are water, which Raceland buys from Russell, wastewater treatment, provided by the Greenup County Environmental Commission, payroll and workers compensation, which has been raised because of past claims.
Layoffs have been suggested but city workers are unionized and their contract makes that problematic, according to Jackson.
Teachers point out that when the new middle school addition behind the high school opens in 2019, it will bring most of the staff currently working at Worthington Elementary into the city and thus add their incomes to the tax base.
District employees pay about $56,000 per year in payroll taxes, and if the current Worthington employees, about two dozen of them, were added at the 1.5 percent level, it would add about $13,000 to the total, according to district treasurer Dustin Stephenson.
“We don’t mind to work with the city but they can’t just penalize teachers,” Smith said.
The city and the district have scrapped before on the payroll tax, which was first enacted in 2009 at 1 percent and hiked to 1.5 percent in 2015.
In 2009, school employees, joined by workers at CSX and Progressive Rail, packed council meetings in protest. The city blinked to an extent — slashing the originally proposed 2 percent levy in half.
Since then, CSX and the car shop have been determined to be outside city limits and thus are not subject to the tax, Wilson said.
Smith said she plans to attend the July 25 meeting and is contacting other teachers to attend as well.
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