SUNDAY EDITION | Small cities complicate Louisville mayor's loca - WDRB 41 Louisville News

SUNDAY EDITION | Small cities complicate Louisville mayor's local-option sales tax plan

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Louisville Mayor Greg Fischer Louisville Mayor Greg Fischer

LOUISVILLE, Ky. (WDRB) -- Mayor Greg Fischer says a local-option sales tax would benefit all of Metro Louisville.

By collecting an additional penny for every dollar spent, Fischer's proposal would raise an estimated $138 million annually to fund big public projects -- something on the order of Waterfront Park, or a new public transit system.

But Jeffersontown, an independent city within Metro Louisville, has its own wish list that includes an amphitheater. St. Matthews, meanwhile, needs money to finish some storm sewers and to beautify thoroughfares like Chenoweth Lane.

And nothing in Fischer's proposal would prevent the residents of St. Matthews, J'town or any of the more than 80 independent cities within Louisville Metro from voting in their own sales tax -- collected within their borders and dedicated to their small-community projects.

Fischer has said it's not his intention to have a patchwork of various sales taxes throughout Jefferson County. Not only would that add complexity and potential confusion, but suburban city carve-outs would also mean less revenue going toward the big projects Fischer wants to pursue.

But independent city councils and commissions don't answer to the mayor of Metro Louisville.

As currently worded, Fischer's proposal would not allow both Louisville Metro and a suburban city such as St. Matthews to collect separate 1 percent sales taxes in St. Matthews. But it says nothing about what would happen if both governments tried to do just that. Would one city get to collect the tax, but not the other? Would they split the money?

"I don't know how that gets reconciled," said Janet Kelly, a University of Louisville professor who has studied the sales tax proposal for Metro government. "But I know that, if the proceeds from that major retail center (St. Matthews) are not available to the Metro, it becomes much more difficult to fund major infrastructure projects."

During a hearing in Frankfort last month, State Sen. Tom Buford grilled Fischer on these questions. The Republican from Nicholasville, Ky., wanted to know what would happen if one of the independent cities "pulled the trigger" on a local sales tax before, or at the same time, as the bigger Metro government.

"You've identified an open issue," Fischer told Buford.

In an interview this week, Fischer said: "We know that we need to work out this issue with the smaller cities within a county, not just here in merged governments, but also throughout the state."

But short of prohibiting Jefferson County's smaller cities from using the tax – which Fischer's proposal would not do – a solution is not readily apparent, said Kelly, who directs the Urban Studies Institute at U of L.

"I have laid awake at night thinking about how in the world you would get it done," she said. "Immediately, I don't see a clean path that would satisfy both the needs of Louisville to be able to fund large projects and be respectful of the independent taxing authority in the small cities."

The rub, Kelly said, is Louisville Metro's "most unusual" structure with the continued existence of 83 smaller city governments, all with independent taxing power, despite the 2003 merger of old City of Louisville and Jefferson County.

Whether the small cities actually would want their own sales taxes, the prospect of their pulling the trigger may nonetheless give them disproportionate influence over how the new community-wide revenue is spent.

For example, the mayors of St. Matthews and J'town suggested in interviews this week that their cities would refrain from pursuing their own sales taxes if some of the new Metro-wide revenue were earmarked for their projects.

But Metro Louisville residents living in the old City of Louisville and in unincorporated areas like Fern Creek, Pleasure Ridge Park and Fairdale have no such bargaining power, as there are no independent taxing authorities representing them.

How the local-option would work

Saying Kentucky needs to "move into the 21st Century," Fischer began advocating for the sales tax option in the spring of 2012. Louisville needs a self-funding tool for public projects to compete with similarly sized cities, he argues.

Fischer's prime example is Oklahoma City, which has renovated schools, added river trails and built an NBA arena using local sales tax proceeds in the last 20 years.

The proposal has picked up momentum among local officials, winning the endorsement of the Kentucky League of Cities and the Kentucky Association of Counties. Gov. Steve Beshear's tax reform commission endorsed the idea last year, and the Kentucky Chamber of Commerce signed on last month.

The proposal requires an amendment to the Kentucky Constitution, which involves broad support in the General Assembly and approval by voters in a statewide referendum.

Only then could leaders in Louisville Metro come up with a list of public projects that Jefferson County voters would be asked to approve in an up-or-down vote. The projects would be paid for by adding up to 1 percentage point in Metro Louisville to the current statewide sales tax of 6 percent. After a period of years, the new tax would expire unless re-approved by voters.

Details still to come

So far, Fischer's allies in the General Assembly have introduced only a two-page bill containing the language of the constitutional amendment. The bill says nothing about how cities and counties might resolve a conflict over the tax – only that no more than 1 percentage point in new taxes can be added in any county.

Answers to the thornier questions would come in a separate bill called "enabling legislation," said Mary Ellen Wiederwohl, Fischer's chief of strategic initiatives.

The enabling legislation could be paired with the constitutional amendment, or supporters could wait until the constitutional amendment passes to work it out, she said.

Asked why he wouldn't want to limit the new taxing power to a merged city-county government like Louisville and Lexington, Fischer said the proposal needs to benefit "everybody in the city," including the independent cities.

Another wrinkle: The backing of rural officials throughout Kentucky will be crucial if the local-option sales tax is to find supporters in the General Assembly. Limiting the new taxing power to Louisville and Lexington would cut out small cities all over the state, such as Princeton, Ky., population 6,329.

Princeton Mayor Gale Cherry testified alongside Fischer last month in support of the tax.

In fact, the balance of power in Frankfort is so tilted in favor of rural areas that Fischer and Lexington Mayor Jim Gray would do well to "shut up" about the local-option tax and let small-town officials like Cherry make the case to lawmakers, said Al Cross, a veteran political observer and journalism professor at the University of Kentucky.

In Louisville, suburban cities complicate picture

Only a handful of the 83 suburban cities in Jefferson County -- J'town, St. Matthews, Prospect, Shively, West Buechel, Lyndon, Middletown – have retail within their borders and thus, any reason to even think about a local sales tax. The vast majority of the little cities are essentially homeowners associations.

Shively Mayor Sherry Connor "can't imagine" her city pursuing its own sales tax. She said Shively has enough taxes and voters wouldn't approve another one.

But Middletown Mayor J. Byron Chapman said his city "wouldn't want to shoot ourselves in our foot… one day down the road, we may need that money."

That appears to leave cities such as Middletown in a good position to ensure their areas benefit from the countywide tax, as they could always complicate the larger effort by enacting their own sales tax.

Jeffersontown Mayor Bill Dieruf said he's discussed an arrangement with Fischer in which J'town would include its projects, such as the new amphitheater, on the same ballot listing the big projects Fischer would ask voters to approve.

"If I put my project in with him (Fischer) and J'town produces enough sales revenue, then our project is done too," Dieruf said. J'town couldn't get any more revenue from that deal than it could raise from its own sales tax, Dieruf said.

Dieruf said it would not be preferable for J'town to have its own sales tax, but he wouldn't want to rule it out. He added that he and Fischer have a good working relationship and he wouldn't want J'town to "hinder the county from doing a major project."

Testifying in Frankfort last month, Fischer played down concerns about small cities cutting into the local-option revenue.

"That is not the anticipation," Fischer said, adding that he would work with the Jefferson County League of Cities to come up with projects on which people throughout the county can agree.

Fischer also said any attempt by the suburban cities to levy the tax would have to be approved by the Metro Council, though that stipulation is not in the constitutional amendment and Buford suggested it could lead to "court challenges."

Like Dieruf, St. Matthews Mayor Bernie Bowling would prefer not to have different sales taxes throughout Louisville Metro. But he also wants to ensure St. Matthews gets something from a Metro-wide tax.

"We would back any local-option that we could put our projects in rather than have taxes here, there and anywhere," he said.

Asked whether it's fair for his city to have a disproportionate say in how the new community-wide funds are spent, Bowling said: "The fairness issue is that we could enact our own tax, and then Louisville wouldn't get any sales tax from the East End (and) the Mall St. Matthews."

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