Tue February 12, 2013
Council Democrats Propose Tax Increase to Pay for Housing Trust Fund
A handful of Louisville Metro Council Democrats are proposing to raise the insurance premium tax by 1 percentage point to pay for the Affordable Housing Trust Fund.
The ordinance would increase the premiums on policies such as life, casualty, home and automobile insurance from 5 percent to 6 percent.
It is estimated raising the tax will generate an additional $9.7 million in revenue towards the city's general fund. Supporters of the ordinance admit other council members may want to use new funds to fill the project $13 million budget shortfall or shore up the city's depleted road fund.
Besides housing issues, the legislation specifically speaks to the "acute need of road and sidewalk repair" and to improve transportation.
Councilwoman Tina Ward-Pugh, D-9, is one of the seven sponsors of the bill. She says if the increase passes it will last only five years, and that she and others will work to make sure it is used for housing.
"The seven of us are going to do our best to convince a total of 14 of us on the Metro Council when we come to budget negotiations that this new $10 million revenue over the course of the next year should be dedicated specifically to affordable housing issues," she says.
The council created the Affordable Housing Trust Fund five years ago with a funding goal of $10 million annually, but it has struggled to find a consistent revenue stream. It was set up to give grants and loans for affordable housing activities, such as new construction, home rehabilitation, payment assistance and emergency repair.
"This is bill is a good sign, it shows that there is a lot deep concern over the housing crisis in the community. That people actually realize something actually needs be done about the problem,” says Christopher Kolb, president of Citizens of Louisville Organized and United Together, which has lobbied for the increase.
The city has about 7,000 vacant properties and a recent report assessment showed 92,000 Louisville families cannot afford their rent or mortgage. Affordable housing advocates point out that is more than four times the capacity of the KFC Yum Center.
"The research shows the legislation will not only put a dent in the housing crisis, but will create jobs and generate revenue for the city," says Kolb.
An economic impact study conducted by the mayor's office in 2006 said investing $10 million into the fund would have a $60 million impact in the local economy, and create 1,100 jobs. But not all council members are convinced that raising taxes in a poor economic climate is the best way to address the housing crisis or the initiative's inadequate funding.
In December, Council President Jim King, D-10, told WFPL raising taxes of any kind for the fund would be too burdensome on residents and small businesses.
King said at the time he didn't believe raising taxes had enough support on the council, but a spokesman said the council president wants to review ordinance and declined to comment for this story.
The tax company H&R Block released a graph this month showing Louisville is the 7th most tax burdened city in the country.
For a person with a $300 life insurance premium who is currently paying $15 in taxes at the five percent rate, the proposed hike would add another $3 to their costs. Council Republicans argue that represents a 20 percent tax increase on individuals.
Councilman Kelly Downard, R-16, who is chair of the vacant properties committee, says the proposal is being rushed, and lawmakers should look at alternative funding streams first.
"It's certainly not the time to raise taxes. There’s never a good time—but this is a terrible time to be doing it in a year when we’re struggling to get our economy back going and struggling to find more jobs," he says. "And at the same time we’re bumping into a situation where this is a pretty extreme cost. This is a 20 percent increase in the taxes."
Critics also point out that the insurance premium hike would not apply to resident's who live in one of the 80 other smaller incorporated cities such as Shively, Seneca Gardens or Hurstbourne. The insurance premium rates in those areas varies from 5 to 8 percent.
Initially, Mayor Greg Fischer stood against the idea of raising the insurance premium to help fund affordable housing, and pointed to his push for a local option sales tax instead. In November, however, the mayor told The Courier-Journal he would support the idea if council members agreed.
But in a statement sent to WFPL on Tuesday afternoon, Fischer was particularly vague about his position and did not specifically voice support for Ward-Pugh's bill.
"Data shows us that there is a need for more affordable housing in Louisville, but there is not a consensus in the community on how to pay for it," he said.
The six other co-sponsors of the tax increase are council members Attica Scott, Mary Woolridge, Tom Owen, Rick Black, Madonna Flood and Brent Ackerson. Other council Democrats reached by WFPL declined to comment, saying they needed to review the legislation further.