BY LAUREN P. DUNCAN
Source: Paducah Sun
If a local option sales tax comes to fruition in Kentucky, Paducah and McCracken County would have to work together to collect the maximum local sales tax of 1 percent.
If they don’t agree, the most the city or county could collect would be .5 percent.
The Paducah City Commission unanimously approved a resolution at its meeting Tuesday to support House Bill 1, also known as Local Investments for Transformation. Under LIFT, communities could impose a local sales tax up to 1 percent to raise money for capital projects approved by local voters.
House Bill 1 must be passed by the legislature before it can come to a statewide referendum, which would likely appear in 2016. The referendum would allow voters to decide if the state’s constitution should be revised to allow for the tax. Then, local cities and counties would have to develop their own capital project plans and request the tax be approved by local voters.
According to LIFT spokesman Tyler Glick, the Kentucky Association of Counties and the Kentucky League of Cities formed an agreement last year regarding implementation of the tax in cases where cities and counties do not opt to work together on projects. He said counties and cities, or even multiple counties, are encouraged to form interlocal agreements for local LIFT projects.
If a city and county fail to reach an agreement, each would be able to pursue its own local sales tax and projects, but they would be capped at .5 percent.
“It’s set up with regard to best practices in other states, and there are 37 other states that have some form of this. The idea would be that cities and counties would come to some sort of interlocal agreement on a project or slate of projects,” he said.
The tax would apply to anything currently taxed at the state’s 6 percent sales tax, bringing the total sales tax rate up to 7 percent. Items such as groceries, medicine, residential utilities and automobiles, which are exempt from the state sales tax, would be exempt from the local sales tax, Glick said.
The tax would have a sunset date and could not be collected once the designated projects were completed.
Sandra Wilson, president of the Paducah Area Chamber of Commerce, which supports LIFT, said the local option sales tax plan is designed to encourage counties and cities to partner for projects.
“It’s obviously to your advantage for communities to work together,” she said.
One possible local project Wilson mentioned the city and county could partner on is a sports park to be used for local and regional activities such as baseball, softball and soccer. If the city and county wanted to use a local option sales tax to fund such a project, they could also package the project with other projects, such as improved technology at both the county and city schools.
Voters then would vote on the entire package, Wilson said.
The Kentucky League of Cities estimated that Paducah would bring in about $16 million a year from a 1 percent local sales tax. If a total package of projects was estimated to cost $32 million, then the tax would have to end after two years, Wilson said. If the city and county wanted to start another project, the planning and referendum process would have to start over again.
“In two years, your communities would have all of those projects and it would be paid for,” Wilson said. “It is a really great tool for communities to do projects. In the old days, you could go to Frankfort and beg for money. Now, some of these are things you’re not going to get.”
Although LIFT would likely not even go to a statewide vote until 2016, Wilson said she thinks it’s important to start talking about possible projects local residents would be interested in now to help garner support for the statewide referendum.
Glick said he thinks the measure will pass in the legislature because it has bipartisan support. Supporters include the bill’s sponsor, Democratic House Speaker Greg Stumbo and Republican Jeff Hoover, the house minority leader. Local Republican Sen. Danny Carroll and Democratic Rep. Gerald Watkins both support allowing voters to decide if there should be a local option sales tax.
Contact Lauren Duncan, Paducah Sun staff writer, at 270-575-8692 or follow @laurenpduncan on Twitter.