Analysis | New LG&E fee shows Metro Louisville still not fully " - WDRB 41 Louisville News

Analysis | New LG&E fee shows Metro Louisville still not fully "merged"

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Mayor Greg Fischer Mayor Greg Fischer
LOUISVILLE, Ky. (WDRB) -- The idea behind merging Louisville and Jefferson County in 2003 was to have – as Metro Council President Jim King put it earlier this year -- “one government, one entity that manages the entire county.” Yet, more than a decade later, the promise of merger remains at least partially unfulfilled.

The new 2 percent “franchise fee” on natural gas usage that narrowly passed the Metro Council last week is only the latest example of how residents and businesses still face uneven taxes and public services depending on where they live within Metro Louisville.

The gas fee will pay for additional Metro police officers whose presence will benefit the whole community, Fischer said last week. Yet, about 20 percent of Louisville Metro residents won’t have to pay it because they live in a separately incorporated city like Shively, Jeffersontown or St. Matthews.

“You’re looking at several parts of this community that will have a tax, and others that will not,” said Metro Councilman Ken Fleming, one of five Republicans who vehemently opposed the fee, at a press conference last week. “I don’t care where you live…That’s not right.”

Even Fischer agrees it’s not fair that some will be exempted from the fee, he said Friday. But the city had few other ways to quickly raise new revenue for much-needed public safety upgrades after the outbreak of youth violence at Waterfront Park in March, the mayor said.

“There’s lot of imperfect solutions that I have to deal with every day, and this is just another example of that,” he said.

The uneven tax burdens stem from the continued existence of 82 smaller cities – each with independent taxing power – within the “merged” Metro Louisville. It’s a structure that Janet Kelly, director of the Urban Studies Institute at the University of Louisville, has called “most unusual.”

Sometimes the independent cities prevent taxes from applying evenly across Metro Louisville. Other times, they add to countywide taxes and create an additional burden for workers.

Last year, a handful of Metro Council Democrats proposed raising the Louisville Metro tax on insurance policies to address a shortage of affordable housing – a community-wide issue.

Like the new LG&E fee, the proposed insurance increase wouldn’t apply to residents and businesses in the suburban cities. Instead, supporters could only hope that some 80 independent city councils and commissions would also raise their insurance taxes and dedicate the new money to affordable housing.

To be sure, it was not the uneven application of the tax that killed the proposal, but the fact that the new money could not be permanently earmarked for affordable housing.

Last summer, it became clear that the small cities presented a similar complication for Fischer’s proposed local-option sales tax. The idea is to allow voters to approve an additional sales tax of up to 1 percentage point – leveled countywide – to pay for public projects that would benefit everyone.

But there could be a patchwork of hyper-local sales taxes – and a potential conflict with Metro government – if the independent cities sought to add their own new sales levies, collected only within their borders.

To keep them from doing that, the mayor’s staff had to devise a complicated framework for divvying up the new, countywide tax revenue. The proposal  would ensure that some of the money – but not a disproportionate amount – would fund projects important to the independent cities.

The sales tax proposal failed to make it out of the General Assembly earlier this year, but Fischer and other advocates have vowed to try again next year.

Perhaps the biggest difference in post-merger tax burdens is the hardest to spot, because it comes right out of workers’ paychecks.

Everyone who works in Metro Louisville pays 2.2 percent of their wages (if you live in the county) or 1.45 percent (if you live outside the county) to Metro government, JCPS and TARC.

But if you happen to work in St. Matthews, Jeffersontown, West Buechel or Shively, you pay an additional 0.75 to 1.5 percent to those independent cities, regardless of whether you live in them.

As a result, workers in West Buechel and Shively pay the highest “occupational” taxes in Metro Louisville – as much as 3.7 percent of their income.

That's about $1,219 annually for someone making the median metro area wage of $32,947, as I wrote in The Courier-Journal in May 2013.

For that story, I talked to a mid-level manager at the West Buechel Kroger store who made $18.55 an hour. We calculated she pays about $587 in additional withholding taxes a year to West Buechel . The main purpose of that: the six-tenths-of-a-square-mile city can its own police force.

Nevermind that the Kroger employee already pays for Metro police through the countywide tax, and that West Buechel’s department doesn’t help her when she’s at home in southern Indiana.

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