FRANKFORT — Back in November when state Auditor Adam Edelen released a report on special taxing districts, he characterized the system as “byzantine, a ghost government” and a “scandal.”
But Tuesday as Edelen stood with Democratic Speaker Greg Stumbo and several co-sponsors of a bill which will require transparency and accountability, he and Stumbo went out of their way to say most special taxing districts “do it the right way.”
“These bad examples should not disparage those who do it the right way,” Edelen said. Stumbo said it is a “credit to the Kentuckians that serve on the various entities that there hasn’t been rampant and widespread abuse.”
There have several publicized reports of widespread abuse and questionable spending at some larger taxing districts such as the Lexington Airport and Louisville Metropolitan Sewer District.
Preventing that abuse is the purpose of House Bill 1, sponsored by Stumbo and resulting from Edelen's review.
The bill will require taxing districts to file reports with a central registry housed in the Department of Local Government; require annual financial reporting and audits; and authorize Edelen’s office to audit any which don’t comply.
Edelen said the bill puts “teeth in the law to compel compliance.”
Governing boards of such districts (libraries, conservation districts, water and sewer districts, some health districts) will be required to follow the local county’s code of ethics. An online database will allow taxpayers to see the districts’ financial reports and compliance status.
The bill will also clean up dozens of conflicting statutes governing various special taxing districts – often authorized to supply needed or desired public services which local governments couldn’t afford to provide from their general funds.
With Edelen and Stumbo were several co-sponsors and supporters, including members of leadership from both parties and both legislative chambers.
Senate Majority Leader Damon Thayer, R-Georgetown, who has pushed similar legislation in the past, said the issue’s “time has come” and predicted HB 1 “is going to sail through the Kentucky state Senate.”
While the bill appears to have overwhelming support, that isn’t to say there aren’t some with concerns.
Senate Republican Whip Brandon Smith worries about the impact of the bill on libraries. There are 106 library districts in Kentucky and Edelen’s review found all 106 in compliance with all reporting requirements. Smith is chairman of one of those library boards.
“They’ve got an issue that has merit,” Smith said. “I understand that but I have some concerns, especially about the impact on libraries, and I want some more information.”
Mary Lynn Collins of the Friends of Kentucky Libraries said her organization supports the measure but will be on guard about the possibility of potential amendments to turn the bill into something libraries might find unacceptable.
“We will be watching very closely to see what amendments will be filed,” Collins said. “We’re very supportive of House Bill 1 as it’s written but we’ll look at each and every amendment that is filed.”
Some members of the legislature have said they’d like to give local governments power to appoint library board members and set tax rates for the libraries.
But Edelen and his staff as well as Stumbo say nothing in the proposed bill will do that. It requires “accountability and transparency,” but does nothing to change the governance or funding structure of libraries.
Some libraries were established by voter referenda and the enabling statutes make no mention of taxes, instead mandating an appropriation of a prescribed amount from the local government, usually fiscal court. There is at least one Court of Appeals case upholding those statutes, and even some supporters of HB 1 concede some library districts are not special taxing districts.
Edelen and his staff say that won’t change but the libraries will be required to submit financial information and otherwise comply with the requirements of the bill.
Stumbo said the bill will get its first committee hearing Wednesday.