Request By:
Hon. James C. Milam
Council Attorney
City of Russellville
100 Park Square
Russellville, Kentucky 42276
Opinion
Opinion By: David L. Armstrong, Attorney General; Walter C. Herdman, Asst. Deputy Attorney General
This is in response to your letter of November 2 in which you refer to the 1984 amendments to KRS 81A.470 and 81A.475 which relate to annexation and require the city, within 60 days following the annexation of territory, to furnish the county clerk a description of the annexed area together with a map and a list of the names and addresses of property owners and registered voters residing in the area. One of the amendments to KRS 81A.470 includes the following provision:
"(2) No city which has annexed new territory may levy any tax upon the residents or property within such annexed area until the city has complied with the provisions of subsection (1) of this section, and of KRS 81A.475."
With respect to the above-quoted excerpt from the statute prohibiting the city from levying any tax upon the residents or property within the annexed area until the city had complied with the requirements of the referred to statute, you raise the following questions:
"1. May the city impose its occupational tax upon employers and employees within the annexed area immediately upon publication of the annexing ordinance? If not, why, and when may it be imposed?
"2. If so, what effect, if any, does the KRS 81A.470(2) requirement of compliance with subsection (1) of KRS 81A.470 and of KRS 81A.475, have upon imposing the occupational tax upon an employer or employee within the annexed area who's also a resident of the annexed area?
"3. Does the imposition of the occupational tax upon employers and employees within the annexed area require an amendment to the city's budget? If so, when?"
Our response to your initial question would be in the negative as the quoted statute clearly prohibits the levying of any form of tax in the annexed area until the reporting requirements have been complied with. Of course, an occupational license tax is a tax authorized by Section 181 of the Constitution and KRS 92.280. See also
City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248 (1948).
On the other hand, any individual residing in the annexed territory but who is employed in the city proper would obviously be subject to an occupational tax as any other nonresident who works in the city. The same rule would apply to employers who may also operate a business facility within the city outside the area in question.
In view of our response to your intitial question, your second question becomes moot.
Our response to your third question would be in the affirmative since the budget should include the anticipated increase in tax revenue that may be expected from the annexed area. The Budget Act applicable to all cities provides in effect under KRS 91A.030 that no city shall expend any monies from any governmental or proprietary fund except in accordance to a budget ordinance adopted pursuant to this statute. This statute further provides that the city may amend the budget ordinance at any time following its adoption so long as the amended ordinance continues to satisfy the requirements of the Budget Act. See subsections (1) and (10).