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Mayor scraps proposal for 1% tax on employee wages

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La Grange needs cash to pay Oldham Reserve debt

By Tracy Harris

UPDATED >>> Mayor Bill Lammlein announced today (Thursday, Aug. 16) that he is taking the compensation tax off the table.

"I'd like to give my city council members more time to find other ways to resolve this fiscal issue," he said.

The proposed ordinance will not be on the Sept. 4 city council agenda.

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If you work in La Grange, you may soon pay a tax on your wages to the city.

Members of La Grange City Council have proposed a 1 percent occupational tax to help pay the city’s bond used to purchase Oldham Reserve.

The $6 million bond is now $8.2 million including interest, and payment is due in two years.

The tax will be levied on all wages paid inside city limits, but La Grange Mayor Bill Lammlein said it doesn’t have to come out of workers’ paychecks.

Instead, he said, business owners can chose to pay the tax for their employees instead of passing the expense.

“It’s not necessarily our job to say who is going to pay it,” he said. “It’s our job to collect it.”

Several business owners have already told Lammlein they plan to pay the tax, rather than have the employees pay it. 

But council members are skeptical that small business owners will be able to do the same.

“Employers are not likely to take on that burden,” council member Melanie Woosley said.

Council member Tom Goldsmith said he wishes there was a different solution, but nobody has one.

The council inherited a “big, substantial debt” and have to find a a way to pay it, he said. 

“We can’t just forget about it,” Goldsmith said. “If we don’t pass this, how do we generate revenues?”

Lammlein said the tax could generate $500,000 to $800,000 annually.

Woosley said she does not feel the city budget has been trimmed enough to increase taxes. 

Lammlein said there is little left to cut. Without an increase in revenue, he said city officials may have to consider eliminating services like the city’s police department and public works department.

Several business owners and residents spoke briefly during a committee meeting Monday, including Jason Kinser, owner of 119 West Main restaurant.

Kinser opened the restaurant in November. He had to eliminate breakfast hours because he couldn’t keep employees for the breakfast shift.

A tax could drive away more workers, he said, who can find jobs in other cities without the tax.

Instead, he said, La Grange residents should be responsible — including himself.

“The property owners voted in an administration who voted to gamble with the city’s money,” he said. “They should pay for it.”

City council members voted earlier this month to keep current real and personal property taxes at 20 cents and 26.5 cents respectively, per $100 of value. 

According to the city’s budget, that tax should bring in more than $1.2 million this year, about 32 percent of the city’s $3.8 million budget.

Lammlein said the city needs about $600,000 annually to pay debt service on the Oldham Reserve bond.

In April, members of the Oldham-La Grange Development Authority — a joint partnership between the city and county that owns the business park — concluded they need about $5 million for infrastructure to attract businesses. The project began eight years ago when the county and city governments jointly purchased 1,000 acres off New Moody Lane in La Grange.

Both entities invested $10 million into the land purchase and initial infrastructure.

To date, only one company has built on the property — The Rawlings Group, an insurance subrogation firm that employs about 700 people. 

Development of Oldham Reserve is overseen by Oldham Chamber and Economic Development along with a board of directors separate from the chamber’s board.

Deana Epperly Karem, executive director of the chamber, said she doesn’t believe a compensation tax would hurt the park’s development.

“In my experience, I’ve never known a compensation or occupational tax to deter a company from coming to a community or expanding where they’re already located,” she said.

Karem said other cities of similar size levy a comparable tax. Bardstown collects .75 percent from workers and Jeffersontown collects 1 percent, she said.

About 220 Kentucky cities and counties levy occupational or compensation taxes.

Under state law, some businesses are exempt from compensation taxes, including banks, election workers and life insurance companies.

Some forms of temporary workers will also pay a compensation fee, including carnivals, door-to-door salesmen, farm workers and peddlers.

A public hearing is planned Sept. 4 to discuss the measure.