Fiscal court to tax insurance premiums, rate to be decided

DEREK OPERLE | The Sun

McCracken County Judge-Executive Craig Clymer leads the fiscal court through what has taken the county to its current financial point and why he believes an insurance premium tax will help with the county's revenue problem at Monday night's meeting.

A packed Monday night meeting of the McCracken County Fiscal Court saw the governing body continue its pursuit of insurance premium taxes to solve the revenue problem that's plagued the county in recent years.

"Insurance is, from our analysis, the best and fairest way to (increase revenue)," said McCracken County Judge-Executive Craig Clymer. "There are a great number of counties in Kentucky that tax insurance premiums.

"We all are elected to do what's right for the county, not what's right for ourselves. We've got to step up to the plate."

Clymer's initial proposal for an insurance premium tax rate was 8 percent, which he arrived at through looking at rates in 10 counties comparable in size and environment to McCracken County -- the average of which was 8.1 percent.

Though the numbers could change in the weeks ahead, the court landed on the following tax rates for insurance premiums: 6.9 percent on automobile insurance; 6.9 on life insurance (only the first year would be taxed); 4.9 percent on fire and allied perils (which includes home insurance); 4.9 percent on inland marine insurance; 4.9 on casualty insurance; and 4.9 on all other risk insurance.

All members of the court agreed that health insurance premiums should not be taxed.

A workshop with an opportunity for public input on the possible insurance premium tax rates is expected to be scheduled before the next fiscal court meeting on Feb. 11.

The rates agreed upon came from an amendment proposed by Commissioner Eddie Jones.

"The cars should be higher than the house (home insurance is included in fire and allied perils) because the people who own their house are already paying us a property tax and it's more fair," Jones said. "The city of Paducah has a 7 percent insurance premium tax rate and I want it to be lower. I want it to be cheaper to live in the county, still."

Clymer voted no on both the amendment and the resulting ordinance as he favored a rate of 8 percent across the board, with the exception of health insurance. Both votes were 3-1 with Clymer as the lone dissenter.

The need for revenue was explained in a presentation by Clymer, detailing the financial fall of the county in recent years:

• McCracken's "savings account" has gone from nearly $9 million in 2011 to under $1 million by October 2018. This has largely come from capital spending on projects without a revenue stream to support debt-servicing payments.

• The tax rate, Clymer noted, is 14 percent lower than it was in 1990.

• "Grossly under-assessed property" in the county on the part of the former Property Valuation Administrator led to less revenue from property taxes.

• The climb of pension costs has also eaten away at the county's funds and will continue to grow. Fiscal Year 2020 pension costs for McCracken will be nearly $2 million, but that is projected to grow to nearly $5 million by 2025.

Commissioner Jeff Parker noted that the county "was in a tough spot" in regards to revenue after Commissioner Bill Bartleman led the group through his thought process on the matter.

"We have a lot of positive aspects on the budget," Bartleman said. "I think we're headed in an upward direction, but to meet obligations beyond the next one or two years we're going to have to raise revenue and what we have to decide is how much we put on the insurance premium tax."

Early in the meeting, the court heard a presentation from Shea Faulkner, the lead representative of MCA2, a local second amendment advocacy group, as to why the county should become a "second amendment sanctuary."

With over 40 people in attendance to hear the court's opinion on the subject, the court took no action on the grounds that doing so could lead to massive legal implications for its individual members and the county as a whole.

More coverage on this subject will follow in the Sun later this week.

In other fiscal court happenings:

• Continued progress was made towards figuring out the county's giving towards outside agencies, as the group agreed to divvy up funds based on averages of the individual commissioners' and judge's allotments, with the exception of a local scholarship fund.

• Greater Paducah Economic Development CEO Bruce Wilcox gave his quarterly presentation to the court, updating them on the organization's work over the past few months.

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