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Magistrates explain votes against coal, gas well fees

A week after the Letcher Fiscal Court deadlocked on an ordinance to create a business license for industries extracting non-renewable resources, magistrates defended their “no” votes by indicating the county attorney had advised them to vote against the ordinance.

The ordinance, which would have charged coal companies, gas companies, stone companies and similar industries an amount equal to $2,500 for each facility they own in the county, was intended to address a budget shortfall estimated at $1.3 million next year.

During a special meeting held April 10, the court voted 3-3 on the ordinance after a closed session requested by County Attorney Jamie Hatton.

At the fiscal court’s regular April meeting Monday night, District One Magistrate Bobby Howard said he voted against the ordinance because he had been told it was illegal. Howard then asked Hatton to explain the matter to the court, but Hatton declined to do so in an open meeting.

Judge/ Executive Jim Ward, who proposed the ordinance, said the county has had several legal opinions saying the proposed ordinance is legal. Ward has said the fee would have raised about $3.7 million a year for the county treasury, and increased the budget to about the level it was at in 2012.

District Two Magistrate Terry Adams said the fee “wouldn’t have fixed the problem” because it would be tied up in court for years. Ward said that’s not necessarily true, but Adams disagreed and asked Hatton for his opinion.

“I don’t want to give my opinion,” Hatton said, telling magistrates that he would only talk about the matter in closed session.

Adams, however, indicated he believes he could be sued personally if he voted for the fee.

“If the county attorney is advising us not to do something and we do it, that makes us liable,” he said.

Almost immediately after the fiscal court announced its intention to act on the licensing fee, which Ward had proposed as an alternative to other revenue-raising possibilities such as a property tax increase or the establishment of the county’s first payroll tax, magistrates found themselves under pressure from the affected industries, primarily the natural gas lobby.

The threat of a lawsuit against the county government by the Kentucky Oil & Gas Association, a Frankfort-based lobbying group, led to a private meeting between Hatton and court members during the April 12 meeting. What was discussed during the closed session wasn’t mentioned during the open meeting, but Howard left the session fearing the natural gas industry would sue him personally if he voted in favor of the licensing fee, friends of Howard said.

Magistrates also received a copy of a letter from an attorney with the Kentucky Department for Local Government (DLG) in which the attorney says he would “be wary of passing” the licensing fee, which he referred as a “tax.”

“While I cannot say with certainly how a court would rule regarding the proposed ordinance,” DLG staff attorney Bill Pauley writes in a review of the proposed ordinance, “I do believe it most certainly would be challenged by the affected businesses. This would result in costly litigation with no assurance of the outcome.”

Ward remains confident the licensing fee ordinance, which he said has been reviewed favorably by a number of attorneys familiar which such legislation, would hold up against any lawsuit the gas or coal industries might file.

He said the measure is the only action available to the court that would raise the revenue needed to balance the budget without “breaking the backs” of homeowners who would pay the price of a property tax increase and workers who would bear the burden of a payroll tax.

The court earlier this year mentioned the possibility of passing a 1 percent payroll tax, but no action was ever taken. Magistrate Keith Adams, who also voted against the business license, asked Monday night if the court could discuss that tax again.

Ward said magistrates could discuss it, but no vote could be taken because there was no written ordinance available as required by law. Ward said that since two readings are required to pass an ordinance, it would take a minimum of 21 days to approve the payroll tax once a written ordinance is brought to the court.

The county has only two months before the end of the 2016-17 fiscal year. Fiscal courts are required by law to finish their fiscal year with a balanced budget.

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