Louisville Metro Council announced two public hearings on an ordinance that would have substantially increased the local tax rate on most insurance premiums. The proposal was presented as one way to address a projected $65 million gap over four years and avoid reductions in city services and staffing.

The ordinance would have raised the rate on most covered premiums from 5% to 12.5% over the following two fiscal years, then to 13.5% in 2022 and 15% in 2023. Vehicle insurance, which officials said generated a large share of local insurance-tax revenue, would have remained at 5%.

The measure concerned license fees paid by insurers operating in Louisville. Officials expected insurers could pass some added costs to customers. Because the next fiscal year began July 1, council action was required by its March 21, 2019 meeting for a new rate to take effect on that schedule.

Proposal at a glance

  • Raise the rate on most insurance premiums in phases.
  • Keep the vehicle-insurance rate unchanged at 5%.
  • Use added revenue to reduce the scale of projected service cuts.
  • Complete council consideration before the 2019 statutory deadline.

Why officials said the gap had opened

City officials projected a $35 million gap for the next budget year and $65 million over four years. They attributed much of that pressure to increasing pension contributions for city employees after the assumptions used to calculate local-government payments changed in 2017.

Budget presentations at the time projected annual increases in the city’s payment to the County Employees Retirement System. The resulting debate was not simply about whether to raise revenue; council members also asked which services could be reduced and how quickly credible alternatives could be identified.

Business advocates voiced concern that a higher rate could affect Louisville’s competitiveness. The administration estimated that the proposal could add roughly $12 to $13 a month to an average family’s home-insurance costs, while saying estimates for other policy types were not yet available.

The hearing schedule

The council’s budget committee planned a special meeting for February 25, 2019, followed by a public hearing on February 28. A second opportunity for residents to comment was scheduled for March 4. Under the timetable then under discussion, the committee could act March 14 and the full council could consider the ordinance one week later.

The special meeting was expected to include a city budget presentation and comments from statewide county and municipal organizations about the effects of higher pension costs on local governments.

Services identified in the 2019 projections

The administration published a list of possible reductions if additional revenue was not approved. These were projections used to frame the budget debate, not a statement that every reduction ultimately occurred.

Police and fire

Plans contemplated leaving positions vacant through attrition, ending a gunshot-detection program and closing several fire stations over four years.

Emergency medical services

The projection included reducing the number of ambulances available in stages.

Libraries

Officials discussed branch closures, reduced weekend access and staff reductions.

Neighborhood services

Several neighborhood service locations and associated positions were listed as potentially affected.

Parks and recreation

Possible changes included closing community centers, pools and municipal golf courses.

Public health

The projection covered clinic, immunization, harm-reduction and health-equity programs, along with department staffing.

Community programs

Violence-prevention work, nonprofit grants, housing-related services and emergency support were among the areas discussed.

Other operations

The list also included the Belle of Louisville, litter and tree programs, youth detention, building maintenance and council-controlled neighborhood funds.

Revenue versus reductions

Supporters argued that broad cuts would affect response times, library access, public-health capacity and community programs. Some council members said the city had too little time to evaluate such a consequential tax change, while others responded that alternatives needed to identify specific savings rather than rely on general calls to cut spending.

The administration also acknowledged that the final budget could combine revenue and reductions. The amount approved before the deadline would determine how much the council needed to address when it considered the annual operating budget later that spring.

For additional contemporary reporting, see the earlier explanation of the insurance-premium tax plan, coverage of the projected service reductions and reporting on business and council concerns.