Three Eastern Kentucky coalfield towns considering a rare merger face stark challenges because of declining tax bases and other problems, whether they remain separate or combine under one government.
That’s the bottom line in a study of merging Cumberland, Benham and Lynch, in Harlan County.
Researchers concluded the cities will have to take action to cut costs or raise revenue, or some of both, to avoid deficits, with or without a merger.
Some local leaders see merging the three local governments into one as part of the answer, citing the potential for greater efficiency, more clout in seeking grants and loans, and perhaps the ability to renegotiate debts to lower payments.
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“It’s the one thing that can make the area stronger,” said Jeff Wilder, president of the Tri-City Chamber of Commerce. “A merged government would be more efficient and a bigger voice with state and federal officials.”
However, some local officials have expressed concern that a merger would require residents to assume responsibility for debts that their city didn’t incur, and about losing influence in a larger, merged city.
The chamber of commerce, which serves all three cities, commissioned the study on the feasibility of merging the government structure because of the financial pinch facing the cities. The Kentucky League of Cities prepared the analysis.
Each of the three city councils would have to approve putting the merger question on the ballot, and then residents would have to approve putting the towns together under one government.
Lynch Mayor John Adams said he would be willing to put the idea on the ballot, and George Massey, a council member in Benham, said he believed the council there will approve letting residents vote on a merger.
However, Cumberland Mayor Charles Raleigh said he’s not convinced merging the governments is the best answer, and doesn’t think the council there would approve putting it on the ballot at this point.
The chamber of commerce plans to campaign this summer to have all three cities approve letting residents vote on merger, said W. Bruce Ayers, executive director of the chamber and former president of Southeast Community and Technical College in Cumberland.
Mergers have been rare across the country.
The study cited other research showing that between 1921 and 1996 there were 132 efforts to combine city and county governments in the U.S., and only 22 succeeded.
A merger would be a new chapter in a history that has had ups and downs.
Cumberland was settled in the 1830s. It was first named Poor Fork, the name of a tributary of the Cumberland River on which it lies, and grew up as a trading center for the area.
Benham traces its roots to 1909, when International Harvester began building the town from scratch in the valley along Looney Creek in order to get coal for its manufacturing operations.
It was an example of the hundreds of mining towns in Central Appalachia created by coal companies, where miners lived in company-owned houses, used company-issued currency called scrip at company stores, and sent their children to schools run by the company.
In 1917, U.S. Steel, which needed coal for manufacturing during World War I, built its own company town next to Benham, naming it Lynch.
It was the biggest company-owned coal town in the world, with a commissary reputed to be the best in Eastern Kentucky, hundreds of houses, sturdy buildings that Italian immigrants built from sandstone quarried from the surrounding hills, and a population that peaked at about 10,000, according to a local history.
For decades, each city was something of an island, each with its own schools, jobs and places to shop, worship and play, even though they are strung together end to end near the state’s highest peak over just a few miles.
U.S. Steel and International Harvester sold the houses in Lynch and Benham to residents decades ago, turned over buildings to city governments and closed their mines, but the cities remained separate.
They have been in decline for awhile.
Lynch lost 57 percent of its population between 1980 and 2016 as residents died or moved away to find work; the loss for Benham was 51 percent and for Cumberland 44.5 percent, according to the Kentucky League of Cities study.
More recently, the coal industry across Eastern Kentucky has shed more than 60 percent of its jobs since 2011, adding to the financial strain.
In Harlan County, 824 people had coal jobs in the first three months of this year, down from an average annual total of 2,310 in 2011, according to the state Energy and Environment Cabinet.
That has hurt businesses and caused some to close, reducing revenue to Cumberland, Benham and Lynch, the study said.
The cost of maintaining aging water and sewer systems, and the fact that as remaining residents age more of them qualify for a property-tax tax break called the homestead exemption, add to the challenges, the study said.
“I’ve seen the city just decline,” Massey, a former coal miner, said of Benham. “I don’t see the city of Benham going two more years unless something happens.”
Massey said the city needs a new water tank but doesn’t have the money, and can only make Band-aid fixes to its aging sewer system.
The study projected that if revenue and spending stays the same, all three cities face growing deficits. That was based on trends in population loss, inflation and other factors.
“Each year, more homeowners are eligible for the homestead exemption which reduces the property tax base and, subsequently, property tax revenue,” the study said. “People continue to leave, thus depleting the workforce and the opportunity to grow the economy.”
The study laid out several options, including merging the three local governments into one.
Each would retain its name under that option, but there would be one mayor and city council for all three.
The study said a merger could increase efficiency in making budgets, prioritizing needs and delivering services; bring opportunities to boost revenue by expanding services outside the city; and mean increased potential to get federal and state grants because of the larger combined population of about 3,200.
Cumberland had an estimated population of 2,059 in 2016, the study said, while Lynch was at 694 and Benham was 459.
But there would be disadvantages to merging as well, the study said, including the perception of a loss of community identity and political power and the potential loss of some jobs.
Another option would be to remain as independent cities.
The downside of that would include decreasing opportunities for funding because of operational inefficiencies, mostly in having three different water systems.
“Impending deficits will require increases in revenue or cuts in expenses. Each city will be forced to make these decisions within the next two years, if not sooner,” the study said.
However, if the three towns continue under separate governments, they might be able to boost efficiency and cut costs by sharing service such as providing water and picking up garbage.
Raleigh, the Cumberland mayor, said he favors such an eventual merger of services, but not a merger of the governments.
Raleigh said the council increased the fee for water service. It has used the money to pay down debt on an old infrastructure bond, and is current on paying bills, Raleigh said.
He said some new businesses have opened in town as well.
“It’s looking up,” he said of the city’s financial situation. “Are we above water? No. But we’re not sinking anymore.”
Still, the city faces long-term debt of $1.3 million on money it borrowed, with about $1 million of it due by 2023.
The merger study concluded it would not be feasible for only two of the three cities to merge, in part because it would leave the third even more financially vulnerable.
It also concluded there would be no advantage for the three cities to dissolve, leaving the county to provide services, in part because residents would still be responsible for their debts.
Dissolving the cities may seem far-fetched, but consultants on the study believe it is a “very real possibility that all three cities will be forced into bankruptcy” and dissolve within the next 10 years if they don’t take action to resolve their financial challenges, the study said.