LOUISVILLE, Ky. (WDRB) -- Louisville Mayor Greg Fischer has proposed tripling the city's tax on residents' insurance premiums for home, life, malpractice and other types of policies over the next four years to close a projected budget gap and prevent "devastating" cuts in public services.
The proposal would gradually increase the city's taxes on insurance premiums — except for auto policies — from the current 5 percent to 15 percent in the 2022-23 fiscal year.
In a news conference Wednesday, Fischer said the increases are being considered as the the city faces a $65 million budget gap over the next four years. That gap comes mainly from state-mandated pension costs that will rise each year through 2023, he said.
"There are no easy or painless or abstract cuts to make and certainly not enough to erase a $65 million deficit," he said. "All of us up here wish this weren't necessary, but it absolutely is."
Fischer proposed increasing the city's tax rates on home, life, marine and miscellaneous policies like malpractice insurance, title insurance and umbrella coverage. He said the plan would increase the average family's home insurance by $12 to $13 per month.
Without raising those taxes, Fischer said a number of city workers could lose their jobs, including police officers, firefighters and EMS workers. Those cuts could include more than 300 layoffs in fiscal year 2020 alone.
The city could also consider cuts and reductions that would affect every resident, including:
- Move recycling and yard waste pickups to every other week
- Reduce support for Waterfront park by $500,000
- Close two Louisville Free Public Library branches
"We're talking about cuts to vital services — services and programs that have saved and transformed lives and encompassed the soul of our city," Fischer said.
Below is an email Fischer sent to city employees Wednesday:
The tax hikes proposed Wednesday would increase rates from their current 5 percent to 12.5 percent in fiscal year 2020 and fiscal year 2021, 13.5 percent in fiscal year 2022 and 15 percent in fiscal year 2023.
“These cuts will damage our city’s momentum, which is why the council and I worked together to propose this new source of revenue," Fischer said Wednesday. "This is not an easy choice, but under the circumstances, it’s a pretty clear one. Keep the momentum of our city moving forward or fall back?”
Fischer said a Metro Council vote on the tax hike proposal will need to come by March 21.
"At this point, I can tell you, I'm against this tax," said Metro Councilman Anthony Piagentini, a freshman Republican who represents District 19. "I'm against what his proposal is and this knee-jerk reaction in the form of a tax increase."
Even though Fischer argued Louisville is already leaner than many of its peers, Piagentini thinks Metro Council and the mayor can find some fat to trim.
"I'm not saying we're the fattest government on the Planet Earth, but to claim, 'Trust me. We're the leanest,' without having a scrutiny of the budget, is disingenuous," he said.
He said he'd like to explore areas to cut and other cost-saving measures during upcoming council discussions.
Metro Councilman Bill Hollander (D-9), meanwhile, said it's imperative for Piagentini, and others who feel similarly, to bring specifics to the table.
"If people think that we can do this by cutting services that are acceptable to the community, than it is incumbent on any elected official to tell us exactly what service you would cut," Hollander said.
Hollander expects the tax hike ordinance will be introduced and have its first reading before Metro Council next week. Hollander's Budget Committee will begin discussing the plan even sooner in a Thursday meeting.
In additional documentation released Wednesday, Fischer said his administration has warned about the increased pension requirements for years. He also outlined areas where the city has already tightened its belt. According to Fischer, 49 positions were eliminated in the fiscal year 2019 budget, new EMS fees were adopted to recover costs, travel spending was limited, and surplus property was sold. He said increasing the insurance premium tax is the only revenue-raising option that makes sense and can be accomplished by Metro Council before July 1.
According to Fischer, Louisville hasn't experienced a tax increase since the early 1980s, when the insurance premium tax was increased from 2.5 percent to the current 5 percent.
- Emergency services could face serious cuts due to city's budget shortfall
- City workers could be laid off to counteract state pension costs, Mayor Fischer says
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