City, county officials discuss occupational tax

Sep. 13—Mistruths and misunderstanding of the county's occupational tax and its distribution policies were outlined so that both city and county governments profiting from the funds were clear to both entities.

The Laurel County Fiscal Court and London City Council met jointly on Monday morning to share information regarding the 1% county tax and how it is distributed to the city government.

The city recently asked for a 10% increase in their share of the tax, raising that amount from the current 30% to 40%. That spurred many questions about the tax distribution, prompting the two Laurel County governments to meet to dispel rumors and clarify the split of the money.

Laurel County Judge Executive David Westerfield and fiscal court members went straight to the point, asking Occupational Tax Office Director Charles Brown to address the London City Council members.

Brown explained that the tax distribution was not always an equal amount to the city government as that distribution and operation is multi-faceted.

The city has requested lists of businesses located inside city limits through open records requests to the Laurel County Fiscal Court. Brown said the equipment used by the Occupational Tax Office does not differentiate between city and county businesses.

"It's a county tax," he said.

Brown presented the city officials with a printout as an example of the distribution, showing the differences.

"Because the occupational tax is $12 million in one year doesn't mean the city will get $1 million every month," Brown explained. "There are two parts to this. Businesses whose tax liability is over $500 in a quarter file quarterly. Many companies contract with payroll companies and they take out the tax."

Many employees whose office is located in Laurel County work outside the county, which further complicates the distribution of tax monies. Drivers for companies such as Walmart Distribution Center, UPS, FedEx, Laurel Grocery, Truitt Brothers and construction companies whose employees work outside Laurel County can claim reimbursement of the occupational tax money paid in when they work outside the county.

"Drivers who work outside the county can bring in their W-2's and get a reimbursement of 1/10th of their 1% occupational tax," Brown said.

He added that he has no idea of how many businesses are located inside city limits.

"I've never been asked about city businesses," he said, reiterating a previous statement. "It's a county tax. We're only responsible for collecting it; we don't distribute it."

Another issue with the city potentially imposing its own tax — as has been mentioned during recent meetings — is businesses having two locations within the county, one within London city limits and one in the county. Magistrate Richard Bales pointed out the Lowe's Home Improvement and Walmart both have two locations in Laurel County — one off KY 192, which is in city limits, and the other in southern Laurel County. Those companies compute and submit their tax payments in one lump sum and do not separate the city and county locations.

London Mayor Randall Weddle said he'd heard many statements that the city was trying to hurt the county by the 10% increase in the occupational tax as well as the possibility of imposing a city occupational tax that would include all businesses operating within city limits.

"We're not trying to hurt the county," he said. "We've also heard statement that if the city has their own tax the county would have to raise taxes. There is no evidence that a 10% increase would increase taxes."

Westerfield then responded, "If you have a budget set and you lose money, you have to make that amount up somewhere. If you had to cut your budget by $1.2 million, what would that do to your budget? You'd have to cut services to accommodate that loss. If we lose another $1.2 million, it will be a hardship."

Councilwoman Kelly Greene said she disagreed with the additional 10% tax collection for the city.

"Everyone should work together. We are one people," she said. "We are going to force our fiscal court to raise taxes."

Magistrate Jeff Book pointed out that while the city wants transparency of the occupational tax division, he wanted to clarify the duties of the county.

"We are very transparent. But there are 62,613 residents in the county. That's over 50,000 that don't live in the city," he said.

Magistrate John Crawford pointed out that only 12% of the county residents are city residents. Magistrate Bobby Overbay added that the county maintains 1,757 county roads and that 54% to 55% of the county's population resides outside city limits.

County Attorney J.L. Albright interjected that statements had been made that open records requests by the city to the Occupational Tax Office had not been answered.

"I don't have anything to do with the occupational tax but if the open records requests have not been answered, I need to know what else you need," he said.

Magistrates and council members were given packets that included Brown's breakdown of the occupational tax revenues for the calendar years and fiscal years for 2021 through 2023. A calendar year runs from January through December while a fiscal year begins on July 1 of one year and runs through June 30 of the next year.

Brown said those numbers differed due to the time span of each year.

Weddle had previously mentioned in a city council meeting that the city had been charged $450,000 for the administration of the occupational tax office — indicating that the city was paying for the total operations. However, he also mentioned that Fiscal Court had been footing the entire bill for the 9-1-1 Communications Center for the past several years. He said the city had budgeted $500,000 for the 9-1-1 Center in their current budget.

Westerfield said the county treasurer had operational costs for the department at $4 million, and the city's share had been $224,008 for the past fiscal year.

Magistrate Bales suggested that the city pay for 30% of the Occupational Tax Office operations after the county pays for the operational expenses.

Another issue is the interlocal agreement between the city and county on the occupational tax. Weddle said investigation showed that the last written agreement expired in 2007. Judge Westerfield said that he and former Mayor Troy Rudder should have revived that agreement but did not because there had been no controversy until now. But he did agree that a written agreement was necessary.

Council members and fiscal court members then agreed to appoint committees to meet and further discuss the occupational tax distribution to both governments. Those committees will then bring that information before each government entity and resolve the issue.

"We'll make the changes we want and you make the changes you want. Let's make an agreement and put this behind us," Westerfield said.

Another topic discussed was the Interstate Coal property, which includes Somerset Community College, the Laurel County Public Library and the Wellness Park — which is jointly owned by the City and the County.

Westerfield said former County Judge Lawrence Kuhl gave four acres to the public library and that Somerset Community College was also included in the shared property. But he added that the Wellness Park was also on that property.

"The Wellness Park was built on the city and county property without the county's permission," he said. "They just came to us and said what they wanted to do and we agreed because it's a benefit to the community."

But there remains 50 acres and a road-widening project that will take a major portion of the city's Street Department prompted the discussion of the city utilizing the jointly owned city-county property to relocate the Street Department.

"We don't have much time and that would keep the Street Department close to the Sanitation Department," Weddle said after the meeting.

But a proposed hiking trail around the jointly-owned property is also another issue. Much of the trail will encompass the Somerset Community College property and go around the entire property including that around the Wellness Park and by the railroad tracks.

Committees will be appointed to review that property to reach a decision.