Request By:
Mr. J. Kirk Clarke
Clarke & Clarke
Attorneys at Law
119 Sutton Street
Maysville, Kentucky 41056
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
As the Chairman of the Maysville Independent Board of Education you have asked the Office of the Attorney General to consider a question involving the levying of a three percent Utility Gross Receipts License Tax for schools as authorized by KRS 160.613. You informed us the Maysville School Board has adopted a resolution to effectuate this form of tax. It also is our understanding the recall procedures set out in KRS 160.597 have been invoked and the electorate of the city of Maysville will have an opportunity to vote on whether they are in favor of this special school tax later this month.
A collateral factor involved in this Utility Gross Receipts License Tax for schools issue is that of the future possibility of the Maysville Independent School District reaching a financial position of having to merge with the Mason County School District. The County School District has been levying a Utility Gross Receipts License tax for several years.
In view of the above you have asked the following question:
"I would request that you provide me with your opinion as to whether, upon a potential merger of the Mason County School District and the Maysville Independent School District, the Utility Gross Receipts License Tax of three percent presently in effect in the Mason County School District will become effective as to the entire merged district in the event that the voters of the Maysville Independent School District should reject same as permitted by KRS 160.597."
It is the formal opinion of this office the answer to this question is in the affirmative. We believe the three percent Utility Gross Receipts License Tax would be subject to being levied in the entire resulting school district following a merger of the Independent and County school systems.
In partial support of our conclusion, we first point out the provisions of KRS 160.040 and 160.041 regarding the merger of school districts. It is clear from these two statutory provisions that following the merger of an independent school district with a county school district the resultant district is the county district. See OAG 61-330. There is no language in these two statutes, however, which specifically answers your question. The language of KRS 160.040 that "tax levies authorized for the payment of interest and the retirement of bonds or to create sinking funds for such purposes shall continue to be levied and collected over the same area by or for the new board in accordance with the laws under which the levies were originally made until all bonded obligations of the old district have been retired" is not deemed applicable to the facts you have presented concerning a Utility Gross Receipts License Tax.
The basis for our conclusion rests primarily with the decision of the former
Court of Appeals in Board of Education of Lexington v. Harville, Ky., 416 S.W.2d 730 (1967). In this case, the Court determined the tax liability of the residents of Lexington upon the merger of the city school district with the county school system. The county school system had in existence two special voted school taxes. As a part of the merger document (see KRS 160.041 and also now 702 KAR 1:100) the taxpayers in the city school district were to become subject to the voted tax levies. A concern about this developed due to the fact no referendum had been held to enable the city residents to vote on these taxes. In deciding the legal question before it, the Court of Appeals stated:
"As we interpret these statutes [KRS 160.040 and 160.041] and apply the case law applicable thereto, we conclude that, upon merger, the city school district 'loses its identity and it is swallowed up and absorbed by the county district.'
Board of Education of Pulaski County v. Nelson, 268 Ky. 83, 103 S.W.2d 691. Hence, all property owners in the county school district (including the residents of the former city school district) will be liable for payment of the county school tax and a referendum under KRS 157.440 and 160.477 is unnecessary. After merger the situation of the residents of the former city school district is analogous to that of property owners who automatically become liable for a voted indebtedness of a city upon annexation of their property.
Lowe v. City of Bowling Green, Ky., 247 S.W.2d 386." 416 S.W.2d at 733.
We believe there is a justifiable similarity between the way the Court adjudged the Lexington residents to be liable for the Fayette County School Districts two special school building taxes and our conclusion that the residents of Maysville would become subject to the Mason County School District's three percent Utility Gross Receipts License Tax with the merger of the school systems. We do point out, nevertheless, that a fair amount of discretion is available to the boards of education of two school districts to jointly develop a merger plan. For example, a matter for contemplation would be the fact that a Utility Gross Receipts License Tax may be reduced from the maximum three percent. See KRS 160.635.
We trust this opinion will be of assistance to you and others concerned with the Utility Gross Receipts License Tax question presented. If we may be of further assistance, please contact us.