The Hopkinsville City Council Committee of the Whole took no immediate action Thursday night after being presented with a grim picture of what the city’s budget may look like in the future with rising pension costs.
The Future Funding and Pension Committee looked over the numbers these last several months and brought two recommendations.
Chief Financial Officer Robert Martin presented projected numbers showing the annual pension cost for the city increasing by about $2.2 million over the next four years and by about $2.7 million over the next decade.
If city council does nothing and if the city only experiences minimal revenue growth outside of any tax increases, there would be significant budget shortfalls over the next five years—beginning with just over $1 million next fiscal year and about $4.8 million in 2024-2025.
One recommendation from the committee would increase the insurance premium tax by 1.5%, property taxes would go up enough to bring in an additional 4 percent in revenue, the business license tax calculated on net profits would go up to 1.95 percent and the cap on maximum liability would incrementally go up until its eliminated in about two years.
A second option that the Pension Committee crafted with input from additional city council members would enact the same increase to property taxes, would immediately lift the cap on the business license tax while increasing the rate to 1.95 percent and it would not include any increase to the insurance premium tax.
Both options include a ‘payment in lieu of taxes’ levy toward HWEA of 2 percent on revenues from water and wastewater services in the city. While that action would not directly be paid by the customers, it’s possible HWEA could pass that cost along on monthly bills.
Martin notes the city would also make painful spending cuts under both recommendations—including 4 percent to departments and 5 percent to agencies—in addition to additional cutbacks.
Mayor Carter Hendricks noted the city has paid every pension bill that it’s ever received and that the problem is not created by city council. He blamed years of the General Assembly not taking action to address the pension woes and what he sees as their willingness to put an undue portion of the financial burden on local governments.
He says the General Assembly could create additional avenues for cities such as Hopkinsville to create additional revenue without necessarily having to raise the aforementioned tax rates.
Mayor Hendricks urged members of the community to contact their state lawmakers and urge them to address the pension issue for local governments in any number of ways.
Councilman Phillip Brooks says he’s not hopeful of any relief from Frankfort.
Ultimately, the meeting adjourned after a motion to table the recommendations failed and no other action was proposed.
Several council members said they want to wait until after a meeting with the local delegation to Frankfort with members of the city’s administration on January 27 before going forward with any plan.
Committee of the Whole Chairman Terry Parker also stated his desire to see additional revenue and cost numbers over a span of 10 years before taking any actions. He believes the city could see more than minimal growth in payroll tax revenue and that the cost of healthcare may not be as high as it has the last couple years, which featured in inordinate number of large claims.
In other action, council heard from City Attorney Doug Willen, who again explained the process for replacing Mayor Carter Hendricks when he resigns to take the executive director position at the Economic Development Council at the beginning of February.
There was no discussion of any potential candidates and Willen notes the vacancy doesn’t become official until the February 4 Hopkinsville City Council meeting.