KLC: Growing Cities are a Growing Kentucky

Kentucky League of Cities Executive Director and CEO James D. Chaney told lawmakers on Friday that most annexations in the past 8 years were consensual, current law provides a complicated and at times arduous process to annex, Kentucky’s cities are not unique in their shape, and counties have left revenue on the table.

In a presentation titled ‘Growing cities are a growing Kentucky, and that’s good for everyone,’ Chaney thanked officials on the Task Force on Local Government Annexation for their work studying the issue and giving KLC the opportunity to show how annexation benefits cities and counties.

Despite being less than 4% of Kentucky’s land mass, cities are by far the economic hub of the state with 75% of economic activity taking place in a city.

“Cities are not annexation happy,” Chaney told lawmakers.

The KLC Executive Director and CEO also showed, that while annexations can be a tool, there’s a lengthy legal process cities must follow with ample input from property owners. Most often annexations come at the request of property owners seeking city services.

“Almost every bit of our growth occurs because property owners request to because Kentucky annexation law puts their rights as a priority,” Chaney said. “Between 2016 and 2022 – 92 percent of annexations were done at the property owners request.”

Previous testimony from the Kentucky Association of Counties raised concerns over the shape of cities in Kentucky, something KLC addressed on Friday with a slew of maps from prosperous cities around the country. The norm, KLC showed, was cities with corridors – often at the request of landowners.

“City governments are living breathing creatures. (…) They don’t have static and unchanging boundaries,” Chaney said.

Typically, when a city makes investments to provide critical infrastructure during an annexation, and that property eventually becomes developed, the land rises in value and increases the amount counties collect in insurance premiums and property taxes without making any investment.

“Regardless of the county all city taxpayers also pay county property taxes. Property taxes are the great equalizer, in all counties and they ensure all residents are paying the same for the base county services that everybody receives,” Chaney said. “There are some counties that for whatever reason have not used the property tax tools available to them. Because they’ve lowered property taxes below the compensating tax rate or failed to use the 4 percent revenue increase provision. They’ve fallen so far behind they couldn’t possibly catch up under Kentucky law.

Chaney said he was sympathetic to counties’ need for revenue, but before citizens take the brunt by stacking taxes, counties should first use all the tools provided by the Kentucky constitution.

He also offered some areas of potential compromise with counties, such as a constitutional amendment related to local taxation, jail reform, a limited exception to occupational taxation in newly annexed territory, revenue hold harmless calculation, limited reprieve from recall provisions of HB 44, strengthening of property owners’ rights regarding non-consensual annexations, changes to statute of limitations and legal standing changes, and clarify ownership of city utility infrastructure. 

State Representative Michael Meredith, R-Oakland, said when confronted with the resolutions before lawmakers “you will find the true difficulty,” the task force faces.

“Whether we’re talking about the jail cost that is so overburdensome to counties, the pension costs which are burdensome to both cities and counties that we see today,” Meredith said. “The limited revenue options that have been allowed under the Constitution since 1891 or 1901 when it was amended. The 30,000 that we’ve talked about multiple times – none of the things which I have named which are the root cause and the fault of where we are today is the fault of a city or a county.”

Lawmakers will hold the final scheduled task force meeting on Nov. 17 at 1 p.m.