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Ft. Mitchell Explores Tax Options as Pension Bill Looms

Like cities across the state, Ft. Mitchell is facing touch choices as it prepares the budget for the next fiscal year, due in large part to inaction in Frankfort on the state's pension problem.

The state is forcing cities, counties, school boards, universities, and other local governments in the system to increase their annual pension contributions. For Ft. Mitchell, the increase amounts to roughly $179,000 more each year, just for the pension contribution.

"We either cut services or raise taxes or something," said Mayor Jude Hehman at Monday night's city council caucus meeting. The meeting is not unlike others at city buildings across Northern Kentucky. Kenton County mayors have worked to craft a message to residents warning them about the steep increase and the local consequences, hoping to gain support for a bill in Frankfort that would allow the increase to come incrementally rather than all at once.

But Republican leaders in the General Assembly apparently won't hear of it, not without the passage of the pension bill dubbed Senate Bill 1, which appears to be dead.

Local governments are preparing for legislators to do nothing.

So, in Ft. Mitchell, leaders are looking for new revenue.

Already, $100,000 can be deducted from the balance because Crestview Hills has reached a new agreement - at a higher cost - to have Ft. Mitchell provide fire service to part of that city. Edgewood will continue to offer fire service to the other part. 

A new option for Ft. Mitchell would be to assess what is known as a franchise fee, placed on energy bills. Cities in Kentucky are permitted to do so at a rate of up to 5 percent.

In Ft. Mitchell, a 3 percent franchise fee would net about $195,000 from Duke Energy rate payers.

"Honestly, the city's taxes are not out of control," Hehman said. "We have a great school district and we pay for that school district through the tax - no one in this room has any control over that. City to city, we have a residential tax that is the third lowest of all the other cities in the county and we should be proud of that. And we're at the low end of the spectrum for business tax."

Councilman Greg Pohlgeers said Ft. Mitchell is in better shape than other cities being hit by the pension cost. It has about $2.5 million in its rainy day fund. "We still obviously have this on the horizon and we have to think about it and talk about it and make the touch decisions," he said.

Councilwoman Kim Nachazel noted that a franchise fee would probably hit taxpayers less individually than an increase in the property tax, which would be another option.

Councilman Jim Hummeldorf noted that the pension costs may force cities to explore more shared services, such as police and fire. City administrator Sharmili Reddy said that talks in that regard continue. The city had previously been exploring a partnership with Erlanger's fire department so that cities don't duplicate their expensive fleet purchases.

A franchise fee takes about six months to take effect and is collected quarterly, Reddy said. The fee would likely be placed upon Duke customers' electrical usage only.

-Michael Monks, editor & publisher