The Urban County Council will consider a proposed increase in property tax rates on Tuesday to make up a projected deficit of more than $500,000.
The budget shortfall was caused by overly optimistic estimates of property value increases, said Kyna Koch, the city's finance and administration commissioner. Property values are up in Fayette County, just not at the rate the city estimated, she said.
Sign Up and Save
Get six months of free digital access to the Lexington Herald-Leader
Mayor Jim Newberry's administration has presented the council with three options: Setting the rates at the same level as last year, which would leave the city short $586,190; increasing the rates just enough to balance the budget; or raising the rates by 4 percent, the maximum level allowed by law.
Newberry has not said which option he prefers.
Council members do not appear to favor a tax increase. They cite tough economic times, as well as additional taxes that have been levied in recent years, as reasons not to increase property taxes. For example, the sanitary-sewer user fee was increased by 48 percent in May.
"Everybody's stressed with the high prices of everything and the economy is down," said Councilwoman Linda Gorton. "I don't think we should be asking the citizens to pay more."
Councilmen Ed Lane and Kevin Stinnett, co-vice chairmen of the council's budget and finance committee, have taken similar stances.
"There's no reason to hammer the taxpayer," Lane said.
Koch said the city had assumed property values would grow by 6 percent, but they increased by only 4.5 percent.
"We were anticipating about 6 percent based on historical values," she said.
Currently, the owner of a $150,000 house pays the city $120 a year in property taxes, $238.50 a year for garbage service and $14.10 a year for street cleaning.
In the budget-neutral option, the total tax increase for a $150,000 house that receives city garbage and street cleaning services would be $3.90 a year.
The property and garbage taxes are proposed to increase by one-tenth of a cent. For a $150,000 house, that's an increase of $1.50 a year in each category. Street cleaning would go from .94 of a cent to 1 cent per $100 of assessed value, an increase of 90 cents per year on a $150,000 house.
The maximum increase option would give the city a $491,010 surplus by raising the tax bill for a $150,000 house with city garbage and street cleaning services by $6.90 a year.
The property and garbage taxes would each go up by two-tenths of a cent, an increase of $3 a year in each category for a $150,000 house. Street cleaning would be raised to 1 cent, an increase of 90 cents per year on a $150,000 house.