2017-10-04 / Front Page

County to sue state over minerals tax


New calculations made in Frankfort in the way unmined minerals are assessed for taxes have forced the Letcher County Fiscal Court into joining other coal-producing counties in a lawsuit to challenge the unmined minerals tax rate. The court will also take the unusual step of asking special taxing districts in the county such as the Letcher County Health Department and the Letcher County Library Board to come to a special called court meeting to discuss the possibility of lowering their tax rates to allow the court to raise the county’s rate without making the overall tax rate go up.

At a special meeting called last Friday morning for the stated purpose of accepting tax rates from the special taxing districts, Judge/ Executive Jim Ward told the court that the drastic drop in the way unmined coal taxes are assessed will drop the county’s share of unmined minerals taxes from more than $186,000 to only $17,468. Ward said the unmined minerals assessment has also lowered property tax evaluations along with a new formula that has lowered property tax assessments across the state. The total property in Letcher County in 2016 that was subject to be rated was $994,784, 156, and the total in 2017 is $667,275,181. This represents a decrease in taxable property of $327,508,975, almost 33 percent. Ward said that Letcher County will join other coal counties in suing the state to restore a semblance of balance to the unmined minerals tax rates.

Ward said that most of the unmined coal in Letcher County is now owned by multinational holdings companies which have no interest in Letcher County coal other than as an investment. He said that state’s change in assessment has taken the burden off of foreign-held companies and placed it on the backs of taxpayers who are unable to shoulder a greater burden, particularly in this time of high unemployment and low prospects for coal mining’s future in Letcher County.

Fourth District Magistrate Keith Adams asked how the formula for taxing unmined mineral was changed and Ward replied it was done in Frankfort, and the state legislature had taken no action to change it. He added that both public school districts in the county have been adversely affected by the changes. At last week’s meeting of the Jenkins Board of Education, the tax rate was raised from last year’s rate of 83.3 cents per $100 to 87 cents. Third District Magistrate Woody Holbrook said that in a conversation he had with state officials, he was told that last year’s formula was no longer available so there was no way to compare the two.

The court has been averse to increasing property taxes in the past, even when employment rates were high, and has relied on coal severance taxes and unmined mineral taxes to make up for the low property tax rates. Ward said that now, even with an unsustainable loss in the rates for taxable property, it would be too much to ask county residents to accept the kind of rate hikes that would make up for the losses in unmined minerals taxes and taxable property. For that reason, he said he will ask the county’s special taxing districts to visit the court and discuss possibilities.

Ward said that he does not intend to try to force any changes on the special taxing districts, but rather to ask that those with significant surpluses or large bank savings balances to lower their tax rates for one or two years to allow the court to raise its tax rate enough to make up for shortfalls created by the lowered assessments. In the past, Ward has told the court it has no power to compel the districts to set any particular tax rate and has been adamant that the court only has the choice to accept the rates proffered by the districts.

The special taxing districts in Letcher County are: Letcher County Soil and Conservation District; Letcher County Board of Health; Letcher County Public Library District; Letcher County Cooperative Extension Service; Letcher County Public School District; and Jenkins Independent School District.

The special taxing districts are, by state law, not answerable to the court and in regular times the only action the court is able to do is to act as a pass through for their tax rates and merely state that it has received them. The issue of special taxing districts was on the Kentucky legislative agenda in 2012 and 2013, and in January of 2013, when then State Auditor Adam Edelen referred to the taxing districts as “ghost governments.”

In the 2013 General Assembly session, the House and Senate passed legislation designed to make the process of tax rates for special districts more transparent. According to an article in the March 12, 2013 edition of The Lexington Herald-Leader, House Bill 1, which was sponsored by House Speaker Greg Stumbo, required special purpose government agencies, which includes libraries, fire departments, sewer districts, and others, to submit their budgets to the a “publicly accessible online agency.”

The purpose of the legislation was to clarify audit standards and to “give teeth” to existing laws that compel compliance for reporting and auditing standards for the districts. The bill was also designed to establish educational standards for board members and staff and to require them to adopt ethics codes. The Kentucky Senate added a requirement that gave fiscal courts and city councils veto power over tax increases by the districts, but the House removed the requirement before it was passed. The Herald Leader’s report states emphatically, “The final bill does not give fiscal courts the ability to veto the entities’ tax or fee increases.”

The Kentucky Department of Local Government carries information on taxing districts on its website, including a set of tax calculation rate guidelines. To see DLG’s information, go to https://kydlgweb.ky.gov/Entities/ SpecDistHome.cfm.

Last year’s tax rate in Letcher County was $.137 (13.7 cents) per $100 dollars of real property, motor vehicles and water craft, and personal property. The state’s compensating rate for 2017, the recommended rate that will keep revenues the same as the previous year, is $.197 (19.7 cents per $100).

In other business, the court accepted Letcher County Sheriff Danny Webb’s 2016 tax settlement. Whitesburg Accountant Dennis Wayne Fleming presented the assessment. Total charges for county taxes stood at $1,095,891, and total credits, including delinquents, exonerations, discounts, and refunds were at $102,716, leaving a balance of $993,175, less commissions of $42,290. This left a balance due of $950,885. Payments previously made by Sheriff Webb to the court totaled $950,517, leaving a balance due of $368.

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