Clymer: 'There is no alternative' to insurance tax


McCracken County is in a dire financial position. Here I will explain why, and what we must do.

Here is the why:

1. McCracken County has for a decade spent out of our reserves (savings account), most recently reducing our savings from $8.6 million in 2011 to less than $1 million.

2. Because of our low reserve fund, our bond rating has downgraded. That means our ability to borrow money is lessened and our interest rate higher.

3. Our property tax rate has not increased in 30 years. Our property tax rate is 14% less than it was in 1990. No inflation adjustment, no cost of living adjustment.

4. Our Property Valuation Administrator both grossly under assessed and completely omitted property value in the county, causing county revenue to be greatly reduced for decades. So our property tax revenue has been substantially less than it should have been for over 25 years.

5. The state "pension crisis" continues to grow unchecked, saddling us with an estimated $3 million in additional costs within five years.

Decades ago, the county was in a strong enough financial condition to not raise tax rates even with new projects and despite increasing costs. Shortfalls were paid from savings and borrowing money. Citizens were happy they weren't assessed more taxes, and officials were happy they did not have to raise taxes. For a while, that works. Then the money runs out. Then you cut expenses, defer costs, defer maintenance, lay off employees, "tighten the belt." We have done that. We have 25 fewer employees now than we had in 2010. This year alone we deferred $500,000 in needed paving and over $1 million in needed equipment and vehicles. We deferred maintenance at an industrial park. We have held salaries at far below market rates.

An example is new deputy jailers. We pay $12 per hour. They can make $15-plus clerking at area stores. We train them, equip them, uniform them, and they're gone in a month. Road deterioration over time increases the costs of repair. Small projects become big. What could have been mowed now has to be bulldozed. We can only "kick the can" so far until we feel the pain. That is where we are now. We cannot continue scraping and deficit spending and trying to "get by" on savings and borrowed money.

Not only is our savings at a critically low level, we are in debt $20 million. We have cut, we have tightened, we have done what we can. We cannot run the county today on the same level of tax rate that funded us three decades ago; just as people cannot run their homes or businesses on 1990s revenue.

Many ask why a tax is needed when the new PVA is discovering omitted property and is correcting under assessed property. The tax revenue will, they believe, begin flooding in. It will not. A state law limits property tax revenue to no greater than 4 percent above the previous year. So, hypothetically, even if our property value were to double (and it won't) our revenue could only increase by 4 percent. We would have to decrease our rate to stay within the limit.

How about a small "consumption tax?" A tax on food, gas, fuel, meals out, etc. State law prohibits that as well. Revenue will begin to creep upward from the property tax, but not at a sufficient rate to significantly reduce our problem. Likewise, cost cutting measures at the jail and other departments will help, but not in the short-term. It took decades to get to this spot; it will (absent additional revenue) take years to begin to recover.

The commissioners and I were elected to do what is best for McCracken County, not what is best for us. We don't like to raise taxes, and you (and we) don't like to pay them. We have looked at all alternatives, and have concluded that the only responsible thing to do is to increase revenue. We have looked at all methods and concluded that an insurance tax is our only viable choice.

An accepted way to analyze how to generate revenue, and at what rate, is to analyze what comparable counties have done. We look at counties with similar populations, tax rates, median incomes and other factors. In doing so, we found that similar counties (for years) have assessed insurance tax rates at an average of 8.1 percent either "across the board" or assessing all but health insurance.

We are looking at an average of 5.5 percent but zero on health. The specifics are:

• Auto and life insurance: 6.9%.

• Casualty, inland marine, fire and allied perils, and other risks: 4.9%.

Life insurance would only be taxed once, not annually. Our property tax rate (for 30 years) has been around 1 percent or less.

Because of the great number of variables, it is impossible to determine with any reliable accuracy what the cost to individual citizens will be. Each person, each family, has different amounts of insurance on various policies, from small to large, to none.

We are often compared to Daviess County (Owensboro). Their property tax rate is 1.35% (35% above us) and insurance tax is 8.9% (45% above our proposal). They do not tax health insurance. The closest comparable county by population and insurance tax rate is Pulaski. It is 2,500 residents smaller than us, and taxes insurance at about 12% higher. If other (unknown) factors are similar, its cost per resident would, therefore, be a bit higher than ours. The rate produces $3.3 million annually. McCracken County needs approximately $5 million to build up reserves. We have over $1.6 million in deferred maintenance, roadwork, and equipment. So the first year of insurance tax revenue (which would not be seen until October) would only bring us to halfway of where we should be on essential savings and services. After two years we will (absent unforeseen circumstances) have savings restored and be able to finish deferred projects.

None of this money yet addresses any of the pension crisis, new projects, debt reduction, wage adjustments, and other variables. And all of this revenue is needed for essential services -- law enforcement, roads, health and safety, emergency management. Without adequate funds in reserve the county also risks not being able to contribute matching funds to grants or support attractive projects that may require revenue. If we do not have the necessary contribution, we stand to lose a 90 percent funded project for lack of our 10 percent.

Commissioners Bartleman, Jones, Parker, and I have examined this problem every way we know how. We have consulted experts, crunched numbers and studied all angles to find a way to avoid any tax.

There is no alternative.

All we can ask is that you have some confidence that we are being diligent, we are being fiscally conservative, and we are doing what you elected us to do -- to do what is best to make our community of McCracken County a home you, your children, and grandchildren can be proud of and enjoy.

We hope you will agree that is worth 33 cents a day.

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