Request By:
Dianna Knight
3208 Haddon Road
Louisville, Kentucky
Opinion
Opinion By: Frederic J. Cowan, Attorney General; Ross T. Carter, Assistant Attorney General
You have submitted the following query to the Attorney General:
We, a group of concerned citizens, need your opinion on the current issue of the Library Taxing District in Jefferson Co. Proponents of the issue contend that the rate of the occupational license fee cannot be raised without a referendum. Opponents contend there is no provision in the Ky. Statutes and that the rates can be raised to the cap limit of 1% (KRS 65.192-Sec. 10). After a recent debate both sides agreed your opinion should be had as soon as possible so that the voters will have as much time as possible to fully understand the issue.
We conclude that the rate of the occupational tax, once approved by the voters, may not be raised.
Background:
KRS 65.192 authorizes a method of creating taxing districts in counties containing a city of the first class. Persons desiring to form a taxing district may present a petition to the fiscal court. If the petition satisfies the requirements of the statute, the fiscal court must notify every planning commission, city, and area development district within the area of the proposed district and must conduct a public hearing on the matter. Following the hearing, the fiscal court must adopt a resolution submitting the question to the voters. The question presented on the ballot must describe the type of financing that the petition proposes for the district. The district is automatically established if a majority of those voting favor its creation.
The statute authorizes two alternative methods of financing: an ad valorem tax and an occupational license tax. The ad valorem tax is imposed by the governing body of the district. The occupational license tax is imposed "by the public body or bodies with jurisdiction over the area served by the special district, if the levy has been approved by the voters in an election on the question." KRS 65.192(10). If an occupational license tax is approved, "the appropriate legislative bodies shall add the levy to the occupational license fee as of January 1 of the year following the election. " KRS 65.192(8).
Discussion:
The procedure authorized by KRS 65.192 differs from the general procedure for creating special taxing districts, set forth in KRS 65.182, by removing decision-making power from the local governmental units and placing it directly in the hands of the voters. Under the general procedure, the fiscal court "shall approve or disapprove the formation of the taxing district, " and the district is created only upon enactment of an ordinance by the fiscal court. KRS 65.182(6) and (7). In contrast, under KRS 65.192 the fiscal court must place the issue before the voters and the district is established without the enactment of an ordinance. Similarly, the local governmental legislative bodies must levy the occupational tax; they have no discretion to refuse.
One of the purposes served by this restriction is the enforced cooperation of all the legislative bodies within the service area of the district. The statute does not grant any power to the district itself to levy an occupational license tax; rather the taxing authority is vested in the "public body or bodies with jurisdiction over the area served by the special district" (presumably cities and the county), which shall treat the tax as an "increase" (KRS 65.192(11)). We may speculate that the General Assembly selected this procedure to simplify the administrative tax burden associated with the occupational license tax. An ad valorem tax levy for a special district may easily be added to an annual property tax bill, but an occupational license tax, with the necessary periodic reporting and calculation of income, presents a higher level of complexity. The simple solution is to piggy-back the cities' existing administrative tax structure by designating the special taxing district's levy as an addition to the occupational taxes that are already in place. This approach is feasible only if the cities are uniform in their levy of the additional tax. If the cities were granted individual discretion to impose the tax or to select the rate, it could hardly be expected that the tax burden for the district would be evenly distributed throughout the district's service area.
We conclude that the statute must be construed to insure a uniform rate of taxation throughout the district's service area. Obviously this may be accomplished in only two ways: by prohibiting any change in the rate, or by requiring all cities imposing the tax to act in unison in changing the rate. We find nothing in the statute that prescribes any sort of procedure for a synchronized rate adjustment by all the cities imposing the tax. Conceivably this could be done within the annual budget document, which must be approved by each legislative body levying the tax (KRS 65.192(11)); but the budget provision in the statute refers merely to an "estimate of proposed revenue" rather than a plan or proposal for increasing revenue. The word "budget" in common usage means a plan of operations based on an estimate of expected income and expense and does not, in our opinion, connote a proposal for establishing or assuring a stated amount of income. In short, we do not believe that the budget review process may be used as a mechanism to raise the tax rate uniformly through the district. Since there exists no procedure to assure a uniform change in the cities' tax rate, we conclude that the rate may not be changed at all.
Your question suggests that the rate could be changed, in any case, by a referendum. We find no authority for placing such a question before the voters. The only referendum procedures authorized by statute deal with the establishment and dissolution of the special taxing district (KRS 65.192 and KRS 65.170) and the increase or decrease of the property tax rate (KRS 173.790). While it may sensibly be argued that a referendum procedure for property tax ought also to apply to occupational tax, the statute is quite clear in extending the referendum procedure only to property tax levies. Once the district is established with funding to be supplied by an occupational license tax, the district's governing body is powerless to obtain any change in the tax rate.
Conclusion:
We conclude that when a special taxing district is created pursuant to KRS 65.192, and the district is financed by an occupational license tax, the tax rate established for the district cannot be changed under any circumstances.