Appeals court strikes down challenge that threatened funding for many Kentucky libraries

The Kentucky Court of Appeals struck down a challenge Friday to the taxing authority of library districts, in a case that could have forced most of the state's library systems to roll back their tax rates and collectively refund millions of dollars to local taxpayers.

The lawsuits, filed by taxpayers in Kenton and Campbell counties, argued that many library districts improperly raised taxes for decades without the 51 percent voter approval required by a previously obscure 1964 state law. Judges in Kenton and Campbell circuit courts ruled for the taxpayers in 2013.

In their appeal, the Northern Kentucky libraries said a separate law, House Bill 44, enacted in 1979, included most libraries among the special taxing districts that may raise taxes each year by an amount that increases their revenue by as much as 4 percent. State revenue officials in Frankfort have long advised the libraries to follow HB 44.

Both sides make legitimate points about the conflicting taxation laws, but evidence suggests that the libraries interpreted their taxing authority just as the state's legislative and executive branches intended, a three-judge appellate panel ruled.

"The record in this case reflects that 80 library districts across Kentucky, created by petition under KRS Chapter 173, who have followed the tax provisions of KRS 132.023, would be adversely affected if the decisions of the Campbell and Kenton circuit courts were to stand," Judge Jeff Taylor of Owensboro wrote for the panel.

"For over 30 years, without protest or challenge, the library districts created by petition have acted in good faith and conducted their affairs in accordance with the directions of the executive branch, which was charged by law to implement the applicable statutes in question," Taylor wrote.

Library advocacy groups, who warned of calamitous budget cuts, layoffs and branch closings at libraries across the state if the taxpayer suits succeeded, praised Friday's decision.

"If the lawsuits had prevailed as they were filed, requiring refunds to the time the law was implemented, this would have bankrupted library districts across the state," said Tom Underwood, executive director of the Kentucky Library Association, one of several advocacy groups to file friend-of-the-court briefs in the case.

"We find it gratifying that the court recognized that libraries have been acting in good faith, going all the way back to guidance they received in the 1980s from (then) Attorney General Steve Beshear," Underwood said.

The Lexington Public Library would not have been affected either way by Friday's ruling because its governing board does not set tax rates; instead, revenue is collected for it by the Lexington-Fayette Urban County Government.

Brandon Voelker, lead attorney against the libraries, did not immediately return a call Friday seeking comment. One of his clients, Charlie "Coach" Coleman of Campbell County, said he hadn't had time to read the court's decision or speak to Voelker about their next step.

During oral arguments at the Court of Appeals in December, Voelker said the lawsuits started when several people asked for his help in opposing a Campbell County library ballot measure that would have raised taxes by a large sum to build a new branch library. Voters ultimately defeated that measure.

While researching state laws about library taxation, Voelker said, he found a 1964 statute that required library districts created by petition to raise their tax rates through petitions signed by 51 percent of local voters. Although library officials say that HB 44 replaced this 1964 statute when the legislature approved it 15 years later, the original law remains on the books, Voelker said.

Voelker sued the Campbell and Kenton county library districts in January 2012. Similar taxation challenges against the libraries in Anderson, Montgomery and Boone counties are on hold in their respective circuit courts pending the Court of Appeals' decision.

"It's a simple issue. Just go back to the people," Voelker told the judges during oral arguments. "This suit is about preserving the right of the people to decide their tax rates."

This story was originally published March 20, 2015 at 1:58 PM with the headline "Appeals court strikes down challenge that threatened funding for many Kentucky libraries."