The City Commission has approved a 2 percent decrease in its property tax rate. Mayor Gippy Graham was the lone dissenter in Monday’s vote.
At issue is a tax switch. Commissioners Sellus Wilder, Michael Turner and Katie Hedden voted for increasing the occupational tax rate in June – from 1.75 to 1.95 percent – saying they would vote to decrease the property tax later on.
The problem, says Graham, who voted against the budget containing the occupational tax increase in June, is that this tax switch isn’t an even trade.
The property tax cut, approved 4-1 (Commissioner Bill May voted for the decrease Monday but against the occupational tax increase), totals $75,651 this year for the 11,500 property taxpayers in Frankfort, according to City Finance Director Steve Dawson. That works out to $6.60 savings a year for the average property owner.
The cut will show up in annual property tax bills sent out in October.
The occupational tax increase, however, will add around $842,000 to city coffers this fiscal year, and about $1.7 million the next full fiscal year. It goes into effect Jan. 1.
“I’m not for trying to raise taxes on anybody,” Graham said in explaining his “no” vote. “This fiscal year we’re going to raise $842,000 on the occupational tax, but on property tax we’ll save the citizens $75,000. So I don’t see that as a good trade-off.”
Graham said Wilder, Turner and Hedden were raising the occupational tax to offset the lower revenue of the new “pay-as-you-throw” garbage collection fee system the trio voted into law. He and May voted against the new system.
Graham said he supported the unpopular $5-a-month flat fee for garbage collection in 2009 because the revenue generated by occupational taxes had dropped in the wake of the recession due to more workers losing their jobs. Last fiscal year, the $5 flat fee brought in $600,000 for the city.
But the “pay-as-you-throw” system, which replaced the flat fee, is only expected to bring in $300,000 this fiscal year. “Pay-as-you-throw” rewards citizens for recycling and producing less trash by not charging any collection fees for those who use the smallest cart, with a 35-gallon capacity.
“So what I’m saying is that, where does the extra money come from?” Graham said. “To do these things it’s going to come from the occupational tax.”
Wilder acknowledged that the new system is bringing in less money than the flat fee but said it allows for collection via automated trash trucks, which are expected to save the city money in personnel costs over time. Dawson said net costs of garbage collection went up nearly $800,000 with the new system, even with the purchase of a new garbage truck subtracted.
Even with the increase in the occupational tax, the budget contained a $723,973 hole that was plugged by $300,000 from continued hiring freezes for city employees and $423,973 from the reserve fund. This drops the reserve fund from roughly $8.5 million to $8.1 million.
Wilder said rising energy costs and possibly higher health care costs for city workers due to the federal health care overhaul would have to be offset in the future, and that raising the occupational tax affects non-resident workers and residents equally and could possibly bring in more revenue as people get back to work.
“At some point we had to do something that would actually balance the budget in the long run,” he said.
Wilder argued that by raising the occupational tax, which affects both Frankfort residents who work in the city and workers who commute from outside the city, and lowering the property tax and cutting garbage fees, both of which affect only Frankfort residents, was a way of essentially “outsourcing” the tax burden more onto those who work but don’t live in Frankfort.
“Frankfort right now has a population of 26, 27,000, but we have to pay for and maintain a level of service more akin to a city of 40,000 or so because of all the folks who come in from out of town in order to work here,” Wilder said. “Those services had to be paid for, and traditionally we’ve relied on local taxpayers in order to subsidize the cost of providing those services to out-of-towners.”
The rest of the items on the agenda were approved unanimously.
OTHER ITEMS OF NOTE:
>The commission approved using $600,000 in grant money to mitigate stormwater runoff issues in the Holmes Street area. The city will spend the money to do the work and be reimbursed by the state.
>The commission approved creating an investment policy for the Police and Firefighters’ Retirement Fund. Since the mid-1980s police and firefighters have been enrolling in the state pension fund instead, and Dawson said there are only about 15 individuals left drawing a combined $30,000 per month from the $5 million Police and Firefighters’ Retirement Fund. Dawson said he believes those millions, when those 15 individuals die, will return to the city’s general fund, so he wanted an investment policy to help maintain $5 million in the fund until then.
>The commission approved allowing the city to seek loan assistance from the Federally Assisted Wastewater Revolving Fund. The loan would have less than a 2 percent interest rate. The fund is likely to allow the city a loan, but the city has not yet decided whether to take the money if given. Sewer Director William Scalf said the money would be used to build an equalization basin located near the Wastewater Treatment Plant. The basin would hold excess stormwater during periods of heavy rain and save it to be treated later.
>The city bought one 4WD Extended Cab 2013 Chevrolet Silverado Work Truck from Bob Hook Chevrolet for $31,398. The vehicle will replace a 2003 utility truck, belonging to the Sewer Department that needs repairs and has over 112,000 miles. The city also bought a 2012 Chevrolet pickup for the Sanitation Division of Public Works for $26,728. The new truck will replace an older model.
>The city bought a new 2012 Caterpillar Loader for the Street Division of Public Works. With trading in an older model, the cost will be $131,418.92.
>The city bought more sewer chemicals to be used at the Ravencrest Pump Station in response to odor complaints from residents of the Silver Lake subdivision. It also bought chemicals to help remove more phosphorous from wastewater. Scalf said phosphorous can make its way through the Kentucky River to other waterways and finally the Gulf of Mexico, where it feeds algal blooms that starve fish of oxygen.
nThe city agreed to have its insurance carrier pay H. Gene Taylor and Joyce Albro $20,000 to dismiss their lawsuit. Taylor and Albro sued the city in 2008, asserting that the city had trespassed during the placement of a storm drain that caused some damage to Albro’s home.