Revenue Options Requiring Only Metro Council Action
The following revenue options solely require a simple majority vote by the Metro Council to enact:
- Car Rental Fee: Louisville Metro Council has the authority to levy up to a 3% car rental fee. This fee would primarily be exported to non-residents visiting our city and using our resources and infrastructure. However, with rental companies being exempt if a majority of their revenues come from the sale of cars, our estimated revenues from a 3% car rental fee would be $500,000 to $1 million annually – an inadequate amount
- Franchise Fee: A local franchise fee can be levied up to 5%. Currently, Louisville Metro does not levy a franchise fee. Approximately $13 million in revenue would be generated annually through a 5% franchise fee. A franchise fee taxes energy usage and would be passed down and appear on the consumer’s LG&E bill. This can be an unstable revenue source due to winter seasonality, usage patterns, and annexation issues. Furthermore, Louisville Metro cannot levy a franchise fee on suburban cities, so they would be exempt from having to pay this fee.
- Insurance Premium Tax: Louisville Metro’s insurance premium tax is currently set at 5% and can be increased by Metro Council without any statutory caps. Each percentage increase would generate an estimated $12 million in revenue annually if all lines of insurance are equally increased – this is with the assumption that all suburban cities implement the same rate as Louisville Metro as these cities are then credited back their revenues. There are concerns about the disparate impact of raising the automobile insurance premium on low income citizens.
Revenue Options Requiring State Statutory Change
The following revenue options would require the Kentucky General Assembly pass legislation in order for Louisville Metro to enact any of these options.
- Occupational License Fee: Pursuant to KRS 91.200, Louisville Metro’s occupational fee is set at 1.25%. If we were able to increase our occupational license fee by .2%, $47-49 million would be generated annually. Occupational license fees are generally unpopular since it is a tax on productivity and can be seen on your paycheck.
- Restaurant Tax: Cities formerly of the 4th and 5th class have the authority to levy up to a 3% restaurant tax to fund a local convention and visitors bureau. There has been a long-term effort, led by the Kentucky League of Cities (KLC), to expand this authority to all cities. Under the KLC proposal, 25% would go to Louisville Tourism and 75% would come to Louisville Metro with offsets to any suburban cities who also levy a restaurant tax. We estimate Louisville Metro would receive $15 million annually with a 3% restaurant tax under this proposal.
Revenue Options Subject to Voter Referendum
The following revenue options are subject to voter approval. Because of the timing of the budget implementation (July 1, 2019) and the potential votes (November 2019 or May 2020), the $35 million budget reductions for FY20 would still have to be implemented until it is known if the revenue option is approved at the ballot.
- Taxing District: A taxing district could be created to divert current Louisville Metro obligations with voter approval of an occupational license fee to independently fund those obligations. For example, a taxing district could be created to fund the library, public health, and parks. The time required to mount a taxing district campaign is longer than the July 1 time to launch the new budget.
- Property Taxes: All local governments are limited to a 4% annual increase of property taxes. Should a local government choose to increase their property taxes by more than 4%, that increase would be subject to a voter recall. A petition would have to be made to place the property tax increase on the ballot for voter approval. This petition requires 10% of the registered voters in the last Presidential Elections, which would be approximately 35,000 signatures for Louisville. Louisville’s property tax rate is 12.35 cents/$100 of assessed value, not including other taxing jurisdictions rates. $70-75 million would be generated annually if that property tax rate was doubled to 24.7cents/$100. The time required to mount a taxing district campaign is longer than the July 1 time to launch the new budget.
Note: Louisville does not have the authority to raise cigarette or alcohol taxes, or to tax gambling activities. Any additional taxing authority, such as those mentioned, would have to be granted to us by the General Assembly.