During the 2007 “We the People” AmericaSpeaks 21st Century Town Meeting®, 650 people from all walks of life and all areas of Owensboro-Daviess County participated in an unprecedented exercise in public deliberation. Through that experience, “the people” set the agenda and made many recommendations to bring about their vision for a 21st century community.
In the session that focused on community and economic development, the priority was clear: We must transform downtown Owensboro.
Since the town meeting, community leaders, stakeholder groups and interested citizens came together to create a downtown master plan and implementation strategy. They retained Gateway Consulting, a leading planning and urban design firm, and invited the public to help craft the plan. Dozens of groups and hundreds of citizens participated in numerous public meetings and workshops.
Notable downtown redevelopments consist of public sector projects (e.g., parks and plazas, convention and public assembly facilities, infrastructure, parking, etc.) and private sector projects (e.g., hotel, office, residential, retail, restaurants, etc.). One option is to sidestep public sector investments in hopes that private sector investments will occur on their own. But based on their experience in other cities, the Gateway consultants advised that private sector investments will not likely occur without an infusion of public sector projects.
To stimulate private investment in the form of hotel, office, residential, retail, restaurants and entertainment, the master plan recommended a package of public sector investments:
The plan incorporates lessons learned from other cities in downtown revitalization, the latest and best practices in urban design –– concepts such as mixed-use, form-based codes, new urbanism, urban village, leveraged anchors, infill development to reconstruct the “street wall,” street-level vitality and other “placemaking” principles.
Estimated cost for these public sector catalytic projects: $79 million
Estimated private sector investment that will be stimulated: $200 million+
The Gateway firm concluded that:
The $79 million plan does not include:
The costs are significant:
But how do we pay for the downtown master plan? What are the options for financing this unprecedented community investment?
This issue brief examines three options:
If you work in the city of Owensboro, you pay an occupational tax of 1.33 percent of your wages. Businesses in the city also pay 1.33 percent of their net profits.
If you work in Daviess County outside the city limits, you pay an occupational tax of .35 percent of your wages. Businesses in the county also pay .35 percent of their net profits.
If you earn $25,000 per year and are subject to the city occupational/net profits tax, you pay $332.50 per year. If you get paid twice a month, then $13.85 is deducted from your paycheck.
If you earn $25,000 per year and are subject to the county occupational/net profits tax, you pay $87.50 per year. If you get paid twice a month, then $3.65 is deducted from your paycheck.
Several pay levels are illustrated below:
|Gross Wages/Profits||If you work in Owensboro||If you work in Daviess County (outside the city limits)|
A countywide occupational/net profits tax increase of .37 percent would generate revenue to retire the debt on the proposed public projects included in the downtown master plan: $79 million of projects financed over a 20-year period. The additional tax obligation for several pay levels would be as follows:
Additional amount that would be deducted from your paycheck* to finance the $79 million Downtown Master Plan if an increase in the Occupational/Net Profits Tax is used
* if paid twice per month
Occupational/Net Profits Tax Comparisons
|Daviess County||.35 percent|
|Bowling Green||1.85 percent
|Ft. Thomas||1.25 percent|
|Louisville Metro||2.20 percent|
* for employees in Bowling Green's new industrial park
If you reside in the city of Owensboro, you pay a local tax on property and casualty insurance premiums of four percent. (Health policies purchased by individuals and life insurance policies after the first year are not taxed by local governments.)
If you reside in Daviess County outside the city limits, you pay a local tax on property and casualty insurance premiums of 4.9 percent.
A typical homeowner policy for a three-bedroom, two bath house in our community might require an annual insurance premium payment of $1,000. If paid quarterly, residents in the city would pay $11.50 for the insurance tax on top of the $250 premium. County residents would pay an insurance tax of $14.25 in addition to their $250 quarterly premium.
On a relatively new automobile valued at $20,000, an owner may carry an insurance policy that costs approximately $1,200 per year. If paid twice a year, residents in the city would pay an insurance tax of $27.60 in addition to the $600 semi-annual premium payments. The insurance tax would be $34.20 on top of the twice-yearly premium for those who live in the county outside the city limits.
A countywide insurance tax increase of four percent would generate revenue to retire the debt on the proposed public projects included in the downtown master plan: $79 million of projects financed over a 20-year period.
|If you reside in Owensboro||If you reside in Daviess County (outside the city limits)|
|Home Value/Est. Annual Premium||Current Tax/Increase of 4%||Current Tax/Increase of 4%|
*based on quarterly payments
|If you reside in Owensboro||If you reside in Daviess County (outside the city limits)|
|Vehicle Value/Est. Annual Premium||Current Tax/Increase of 4%||Current Tax/Increase of 4%|
*based on semi-annual payments
Insurance Tax Comparisons
|Daviess County||4.9 percent|
|Bowling Green||7.0 percent|
|Ft. Thomas||10.0 percent|
|Louisville Metro||5.0 percent|
|Oldham County||10.0 percent|
If you own real estate in the city of Owensboro, you pay 25.93 cents per $100 of assessed value in property taxes and 30.3 cents per $100 in personal property taxes (e.g., automobiles).
If you own real estate in Daviess County outside Owensboro, you pay 13.6 cents per $100 of assessed value in property taxes and 17 cents per $100 in personal property taxes.
If you own a $100,000 house and a $20,000 car, your annual property tax obligation is as follows:
|If you own property in Owensboro||If you own property in Daviess County (outside the city limits)|
Those who own property in the city also pay county taxes on that property.
Kentucky law limits annual property tax increases to four percent. That is, a net increase of four percent through higher assessments or increases in the tax rate.
A four percent increase in the real estate and personal property tax in both the city and county would produce approximately $522,000.
Local officials generally rely on property tax increases to cover the incremental and inflationary cost increases connected with basic governmental services: public safety (police and fire), sanitation, road maintenance, etc.
To finance the $79 million downtown master plan through property taxes, it would require a 78.25 percent increase in the property tax – much more than is allowed by law.
Other public projects could be added to the downtown master plan – or there could be less of a need to increase local taxes to implement the plan – if any of the following occur:
U.S. Senator Mitch McConnell secured more than $30 million in federal funds to stabilize and enhance Owensboro's downtown riverfront. In response to the national financial crisis, significant funds may be allocated to states and communities as part of the economic stimulus initiatives under consideration.
There may be elements of the master plan that already qualify for grants. The proposed Market Square Plaza, for example, may be eligible for support through the state extension office.
State and federal earmarks can be promoted by local officials, but they are beyond the control of the city and county.
Foundations, individuals, corporations, and community organizations have the capacity to make significant contributions to the downtown plan. Some have suggested that this be tied to specific sponsorship opportunities, such as the fountain proposed for the riverfront.
A major campaign could bring forth significant private sector support, but it could delay the implementation of the downtown plan and dilute philanthropic funds needed by other community institutions and organizations.
A restaurant tax is currently not allowed in cities of our size (designated second-class), but the Kentucky League of Cities and other groups continue to challenge that restriction. Cities larger and smaller have the option to add a restaurant tax following a voter referendum, but in second-class cities, a proposal cannot even be placed on the ballot until authorized by state legislation.
Such a tax could generate a substantial source for community projects, and much of the tax would be paid by out of town visitors who are here for sports tournaments, conventions and shopping.
In many states, communities receive a portion of the state sales tax or local governments can add a local tax onto the state sales tax. Such a tax is not authorized in Kentucky, but there is growing interest in it. Action of the state legislature would be required to establish a local option sales tax.
State law allows county governments to establish a hotel bed tax up to six percent. Our current tax is five percent – three percent goes to the Owensboro-Daviess County Convention and Visitors Bureau, one percent to RiverPark Center, and one percent to the Owensboro Museum of Fine Arts. The use of the funds generated through a bed tax is restricted to tourism purposes. Consequently, an increase in the hotel tax could be used to help finance or operate a new events/convention center, although bed tax revenues have been significantly affected by the closing of the Executive Inn.
State law allows cities and counties to designate redevelopment districts, establish a benchmark tax base, and apply future increases in tax revenue within the district to finance public projects within the district.
The Gateway firm supports the establishment of a downtown TIF district, but they acknowledge that the district will not produce revenue in the short-term to substantially contribute to the master plan implementation.
Some have suggested that the downtown master plan should be the impetus for a comprehensive restructuring of local taxes to eliminate double-taxation (i.e., city-county property taxes), adjust tax disparities (i.e., city-county school taxes), and re-evaluate tax districts (health, library, extension office) and more.
Some tax reform can occur through the action of local governments and school boards, but a comprehensive tax restructuring would be subject to certain restrictions in state law.
Our community has unique assets that, if sold, could generate significant resources that could be placed into endowment or used directly to finance projects, serve the disadvantaged and more: Owensboro Municipal Utilities, Owensboro Riverport, and Owensboro Medical Health System are the most substantial.
Opponents of such action stress that buyers of these community assets would recover their investment in higher rates and fees.
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Daviess County Fiscal Court
Owensboro City Commission