FRANKFORT — Lexington Mayor Jim Gray urged state leaders Wednesday to pass legislation that would allow communities to vote for a temporary sales tax of as much as 1 percent to pay for major infrastructure projects.
"The most American thing that you can do is give citizens the right to vote," Gray told the Interim Joint Committee on Local Government.
Gray and Louisville Mayor Greg Fischer and county officials told the House and Senate committee that 37 other states allow local governments to raise local sales taxes after approval by the city or county's voters. As cities have struggled with rising pension and health care costs, there is less money available for capital projects and big-ticket items, Fischer said.
In order to allow local voters the option to raise taxes, the legislature must approve a constitutional amendment that would go on the ballot in November 2014. Voters would then decide whether they want to give local cities the option of raising taxes.
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The measure met with a lot of resistance Wednesday from House and Senate Republicans, who say they don't want to raise taxes.
"I've never had a constituent come up to me and say they want to pay more taxes," said Senate Majority Leader Damon Thayer, R-Georgetown. "I am dubious at this time about this moving forward in 2014."
The Kentucky League of Cities, the Kentucky Association of Counties and many major business groups back local option sales taxes, setting the stage for what could be a major battle in the 2014 General Assembly, which begins in January. Wednesday's hearing was just for informational purposes.
Gray said Wednesday that even if the measure were approved by the legislature in 2014, a local-option sales tax would not be used on Kentucky's marquee redevelopment project: the redesign of Rupp Arena and the Lexington convention center. Proposals on how to pay for Rupp Arena are to be announced later this year.
A temporary local-option sales tax could, however, be used for other infrastructure projects, including more than $600 million in stormwater upgrades that are required under a federal agreement with the Environmental Protection Agency.
Fischer said that temporary sales tax increases have been used on major projects in Oklahoma City. More than $2 billion has been generated from a 1 percent local sales increase over 17 years. That public money, coupled with $5 billion in private investment, has paid for multiple major projects, including a new music hall.
Voters in a city or county would be told before they vote what infrastructure project would be paid for by the increase, how much it would cost and how many years it would take to pay off the cost of the project, Fischer said.
Cities or counties could raise the sales tax by less than 1 percent. Cities in other states have raised it by a tenth of a penny to pay for sports arenas.
City leaders told state leaders Wednesday that in order to stay competitive with Nashville, Indianapolis and other cities, they need to have thriving cities that attract both people and jobs.
"Jobs go to where the people are," Gray said.
Many Republicans said Wednesday that taxpayers don't trust the government and question whether public money should be spent on big infrastructure projects.
Sen. Chris McDaniel, R- Latonia, questioned what would happen if the sales tax did not generate the money it was expected to generate and if a project came in above the projected cost. Fischer said that in Oklahoma City, a project is not started until the tax has generated the necessary money needed.
Rep. Stan Lee, R-Lexington, said many people are skeptical of the government and its dealing with private investors and how it pays for big projects.
"There is a high suspicion of government from the citizens," Lee said. "I think people are leery."
Fischer, however, countered that in 2012, 68 percent of infrastructure projects paid for by temporary local sales taxes were approved by voters in those jurisdictions. In a February 2013 Bluegrass Poll conducted by The Courier-Journal of Louisville, 72 percent of voters backed local-option sales taxes.
Rep. Steve Riggs, D-Louisville, chairman of the House Local Government Committee, said after Wednesday's meeting that he thinks there would be enough support from both the House and the Senate to pass the bill when legislators learn more about what they are being asked to consider.
"It simply gives people the right to vote," Riggs said.