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Wed February 13, 2013
Councilman Rick Blackwell Pulls Support for Insurance Premium Tax Hike
Louisville Metro Councilman Rick Blackwell, D-12, is pulling his support of an ordinance to help pay for the Affordable Housing Trust Fund by raising the city’s tax on insurance premiums.
The proposal was introduced by Democratic lawmakers this week, and seeks to increase the tax by one percentage point to raise an estimated $9.7 million.
Supporters argue going from a 5 to 6 percent rate represents a small increase per month for average residents.
In an e-mail message sent Feb. 11 to Councilwoman Tina Ward-Pugh, D-9—the bill's chief sponsor—the Jefferson County attorney’s office said it is "unconstitutional" to designate public funding exclusively for affordable housing
Any new revenue would have to go through the general fund first, and that is unraveling the bill's support.
"I think it’s problematic if it’s not a dedicated source. That’s what people had signed on for," says Blackwell. "It was supposed to be a way to take care of some of the issues in our neighborhoods with the abandoned and foreclosed on homes. And if it’s not dedicated to that I think you’ll have a hard time keeping sponsors and keeping people on board to vote for it."
The Affordable Housing Trust Fund was established in 2008 with a goal of $10 million annually, but it has struggled to find consistent revenue. It is set up to give grants and loans for affordable housing activities, such as new construction, home rehabilitation, payment assistance and emergency repair.
Council Republicans argue the ordinance represents a 20 percent tax increase on an individual or company's insurance premium. They also point out that residents who live in one of the 80 other smaller incorporated cities would not have to pay the increase.
Housing advocates have pushed back against those criticisms, saying the local media and GOP are spreading misinformation about what the ordinance will do.
"The average cost to a person is about the cost of a 2-liter of soda a month. So we think that's a pretty reasonable solution and we know we're already paying the cost in terms of what happens in our community when we don't have affordable housing," says Rachel Hurst, executive director of the trust fund.
A report compiled by the Affordable Housing Trust Fund board says the tax hike would result in an average homeowner’s insurance premium going up by around $8 per year and their automobile coverage by approximately $7.52 annually.
Still, a 14-vote majority of the council is required to pass the tax hike, and all nine council Republicans oppose the legislation. Blackwell's withdrawal leaves six supporters while other Democrats are beginning to join the GOP chorus.
"Right now I am in opposition to the idea," says Councilman David Yates, D-25. "The way it's set up it wouldn't be earmarked and would go into the general fund. Additionally, we're talking about raising another tax and right now we're working to bring in new businesses and get people to invest in this community, and another tax I cannot support."
Councilwoman Attica Scott, D-1, remains a sponsor of the legislation. She says funding the trust is important, adding there is still a lot of lobbying left to do to make sure the funds are used for affordable housing.
"The way that it stands today the ordinance would not pass. We have to work to make it better and take in all input," she says. "There is some division in the Democratic caucus, but while we have differences in opinion I would encourage them to come up with solutions that are better than what we've already suggested."
The ordinance will be introduced to the council this week and likely assigned to the budget committee. It has been amended so that the tax hike expires in five years.