County, city examine consensual annexations

• 5250 and 5266 US Highway 60 West with a Sonic Drive-in and Taco John’s

• 185 Lion’s Den Lane, with Tenacity Fitness gym

• 5470 Old Highway 60 with a Valvoline Instant Oil Change

• Non-commercial land at 1630 N. Friendship Road

• 5345 Hinkleville Road with a Tractor Supply Company and O’Reilly Auto Parts

“I can’t blame the city for wanting to grow, especially if it’s consensual,” County Commissioner Eddie Jones told The Sun. “It’s not unhealthy because the city’s chosen that, it’s unhealthy because Frankfort hasn’t addressed the issue with legislation. And they should.”

In a June 28 letter to city, county and Greater Paducah Economic Development leaders, Jones proposed a 20-year split-revenue solution: 40% to the city and county each and 20% to “a joint city-county industrial development authority” for future economic development.

Property, insurance premium and occupational taxes generally fund counties. Those above 30,000 in population — and of 120 counties, some 30 meet this criterion — are limited to a 1% payroll tax and lose tax revenue from city-annexed territory under KRS 68.197.

“Annexation in Ballard (County) is nothing like it is in McCracken because of the law,” Jones said. “If we were in a county of 20,000, the city could annex all day long, and it wouldn’t affect the county budget. Over time, there’s no replacement for loss of revenue from a fiscal standpoint.”

Jones said the statutes buffer a county when the city exists in two or more counties.

“I don’t understand why, because one county taking a hit hurts worse than two counties taking a hit,” he said. “There’s a real need for the legislature to fix this, as it’s unhealthy to have this situation … which pits against each other counties and cities in terms of growth. Some communities have had interlocal agreements that say, ‘Let’s fix it and share income.’ ”

Jones said corrective legislation feels unlikely, as the situation only exists in about 30 counties statewide.

During a March 14 fiscal court meeting, commissioners discussed revenue-sharing options — something to revisit at Monday’s meeting, McCracken County Judge-Executive Craig Clymer said.

“The county has not discussed any formal proposal,” Clymer said. “It may or may not be consistent with what Jones has (written), but we have to discuss these things and decide on what to do.”

Paducah Mayor George Bray said he and Clymer had discussed possibilities.

“It’s a topic (we’ve) discussed on more than one occasion, and we both see the benefits of cooperating for the community’s benefit long-term, but — I think we’re a little mis-timed on it,” Bray said.

“I think we need to get the sports complex and 911 issues resolved. A successful implementation of those two major projects’ cooperation and collaboration could bode very well for our future annexation agreement.”

City Planning Director Nic Hutchison said obtaining commercial property isn’t the city’s strict goal. Under its annexation policy — seen at paducahky.gov/annexation-policy — residential, vacant or underdeveloped properties can consensually annex. Those that do are privy to property tax rebates, sanitation services and lump-sum closing costs.

“In those situations, there isn’t a change in revenue for the county when the property is annexed,” Hutchison said. “It’s when the property is developed the county loses that 1% payroll tax, but they’d still continue to maintain the property tax.”

In March 2021, the city outlined consensual annexations as one of 12 priorities, with six annually as an “arbitrary goal.”

“That (number) was a benchmark, because we were focused on performance metrics and consensual annexations. It wasn’t like there was a firm number we had to get,” Hutchison said. “We don’t have a projection on revenue; it’s hard to say, because every property differs.”

Although the city isn’t seeking non-consensual annexations in its current policy, “a handful” of city-owned properties unincorporated into the city are subject to annexation.

Hutchison said a primary goal is morphing Paducah’s territory into a less jagged map — the city’s western boundary resembles an incomplete jigsaw puzzle with isolated stretches of land. Population growth also qualifies the city for additional grants.

“It’s mainly cleaning up that boundary and making it contiguous,” he said. “The other side of it is looking at existing services and making sure we can maintain those in a reasonable fashion. If it checks all of those boxes, we can proceed with the annexation process.”

In the past, county residents have raised umbrage: During an April 4 planning commission meeting, a crowd attended to confront members on rezoning 4.6 acres at 185 Lion’s Den Lane to a commercial district. The rezoning passed — albeit with banned liquor sales and electronic signage at attendees’ behest.

“When a property is annexed, it doesn’t change ownership,” Hutchison said to residential concerns. “It remains private property. Of course, the only thing is they start to receive (city) municipal services.

“The city of Paducah believes annexations are not to be an adversarial process, and we view it as a learning opportunity for the community to get involved and learn more about the process. Our approach has been consensual annexations. At the end of the day, it’s a private property owner making the decision who sees the value of obtaining (city) services.”

City annexation is a common practice, but the resulting contention isn’t new or unique to McCracken. The city of Mayfield’s 2016 decision to annex a portion of Graves County school property provoked lawsuits and protests.

In 2008, a Lone Oak Road corridor annexation rankled county officials. With only commercial properties annexed, McCracken was left with less revenue and still held liable for fire and law services to nearby residents.

In 2017, an annexation on 174 acres in the Schneidman Road area — by corridor-annexing thousands of narrow feet on a Paducah & Louisville Railway-owned right-of-way — resulted in a county lawsuit, which a judge dismissed, recognizing the city’s legal precedent.