Elected county commissioners and magistrates could veto increases in taxes and fees imposed by local taxing districts under changes that the state Senate made Wednesday to a House bill.
The House bill is intended to increase oversight of the more than 1,200 tiny taxing districts that have existed largely under the radar of government auditors.
The Senate State and Local Government Committee first voted 8-2 to change the bill. The full Senate, which has a Republican majority, then passed the modified legislation. The vote was 23-10, mainly along party lines.
Auditor Adam Edelen called the Senate changes unacceptable because he said they could jeopardize the support of a broad coalition of local officials that has been pushing the legislation.
“To have that potentially jeopardized and lost over something that isn’t even germain to the bill that we have proposed, I think, represents a sad occasion,” Edelen said.
But Senate Majority Leader Damon Thayer insisted that the provision is crucial to the bill in that it gives elected officials the right to strike down hikes in taxes and fees, rather than leaving that to the sole discretion of appointees.
“For me, it’s a deeply held philosophical belief that taxpayer dollars should not be expended unless there is some kind of oversight component by those who are elected by the people,” he said.
Scott Lockard, the Public Health Director of Clark County and the current president of the Kentucky Health Department Association, supports House Bill 1, but harbors disappointment for its current state.
“We have been working closely with Adam Edelen’s office on endorsing House Bill 1,” Lockard said. “I support the transparency and accountability to taxing districts, but I’m disappointed in the committee substitute. It adds another layer of bureaucracy. It will just add to the workload of the fiscal court.”
Lockard said he does not anticipate the bill will remain in this state and there will be modifications.
“This is just the impact of it now. Lots of agencies and other county judges have concerns with this,” Lockard said.
County Commissioner JoEllen Reed strongly supports the passage in its original language.
“This substitute language jeopardizes the fiscal court in bonding critical infrastructure projects. I’m all for accountability and oversight, not for tying the hands of the fiscal court,” Reed said. “It’s a good bill. I strongly hope it goes back to its original form. The language should not be substituted. If we have to take on bonding from special districts, it will be hard to take on bonding for the county.”
Clark County Judge-Executive Henry Branham shares the same concern.
“I think the bill will compromise the integrity of the reason special districts were set up,” Branham said.
The House passed the measure 96-1 in early February.
Edelen released a report last year identifying 1,268 taxing districts that collect $1.5 billion in taxes and fees each year, plus another $1 billion in grants and private donations. He said the districts also hold about $1.3 billion in reserves.
Because they’ve operated with little oversight, Edelen said, the taxing districts represent a “ghost government.”
Edelen’s staff found that about 40 percent of the taxing districts that are required to submit budgets to elected leaders in fiscal year 2011 did not, and just 55 percent of districts with revenues or expenditures exceeding $750,000 underwent annual audits.
House Speaker Greg Stumbo, D-Prestonsburg, sponsored the measure and gave it the designation House Bill 1, meaning it is considered the top priority for the session.
Besides improved oversight, Stumbo’s proposal also would create a centralized registry for taxing districts so that taxpayers and government agencies will know how many of them exist in Kentucky. And it would require leaders of local taxing districts to undergo ethics training and to answer to a local ethics commission, just as other government officials do.
Edelen said he’s hopeful that Thayer’s provision will be removed and that the Legislature will pass the original version of the bill.
“House Bill 1 represents a historic opportunity to bring meaningful reform, transparency and accountability to a layer of government that hasn’t had it, essentially, ever,” Edelen said.
Clark County has nine taxing districts, which include the Bluegrass Area Development, Clark County Conservation, East Clark County Water, Clark County Public Library, Clark Extension Board, Clark County Public Health, Winchester-Clark County Industrial Authority, Winchester-Clark County Tourism Commission and Kentucky River Foothills districts.