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County financial officers are working with insurance companies to correct what they believe is an ongoing taxing mistake that costs the county as much as $1 million annually, according to figures from the judge-executive's office. But this correction will cost some city governments funding, and create additional work for county employees.
Judge-Executive Duane Murner and county financial officers recently discovered the insurance premium tax - a tax on property owners in Oldham County - has been misdirected by insurance companies to the wrong jurisdictions.
According to Stan Clark, a county financial officer, the problem is caused by insurance companies' use of incorrect mailing addresses.
They don't know how to say, "Is this an incorporated city, or in the county?", he said of insurance agents.
Financial officers are contacting insurance agencies by phone and through the mail to identify the problem and request a correction. Clark said most of the problem lies within Prospect, where most of the 2,857 resident's insurance premium tax is going to the city.
According to a Kentucky statute, the county collects an insurance premium tax from property located outside the jurisdiction of a city. Every property holder outside the jurisdiction of a city pays this tax to the county. These taxes are directed by insurance companies, and are calculated by a household's insurance premium.
Members of Oldham County Fiscal Court gave Murner permission to send letters addressing the problem with insurance companies at a Sept. 18 meeting. The Court is bypassing the state's services to correct the problem, which Clark said could take several months.
The letter will explain the reason for the change and request the insurance companies direct the insurance premium tax to the appropriate jurisdiction.
"We're going to write to them and remind them of the statute," Murner said recently. "We figured the faster correction would be to offer our services."
Four months ago, Murner and county financial advisers went to the state insurance department to clarify state regulations on the insurance premium tax. Court members are waiting for a response from the insurance companies.
"It's a very nice, simple correction of something they've been doing wrong for a number of years," said Murner.
Mayor Elsie Carter believes the city governments should not only be informed, but given proof of the mistake before the court moves forward with adjustments. She said the City of La Grange wasn't informed of the county's investigation, and she would like to see a presentation of the county's results.
"We haven't heard anything from them about it," she said of Oldham County Fiscal Court. "If they prove it to us then we will look at it then."
Though she wants evidence, Carter doesn't think the changes will drastically effect the city budget.
Mayor Dennis Deibel of Crestwood has communicated with Murner about the possible misdirection of funds, and is comfortable with the proposed changes.
"We don't know for certain if the money is going to the wrong place, but we're okay with them looking into it," he said.
Deibel thinks the change will not harm his city's budget.
The tax has been incorrectly applied since it was in the early 1990s, said Murner
With the county's current budget crisis, Murner said the funding was "too much money to let go." The county is looking for ways to produce revenue in the coming year to maintain a balanced budget, and aims to produce an additional $3 million. Murner said the city governments in Oldham County will understand of the correction.
"They know these taxes have been incorrectly applied," he said.
County financial officers predict the adjustments will add $500,000 to $1 million to the budget if the insurance companies respond to the problem.
"It kind of wandered on," said Murner. "No one paid attention to it."
Magistrate David Voegele commended Murner and his staff for bringing the discrepancy to the council's attention.
"I give him credit," said Voegele. "Our judge and financial officers are working with the state to get the appropriate amount of insurance premium tax we should from the county."
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