In an interview with the Lexington-based Lane Report, Louisville Mayor Greg Fischer said the city needs to diversify its tax base to help combat budget shortfalls.

About 80 percent of Metro Government's revenue comes from occupational and property taxes, which have stalled due to the economy. The mayor had to fill a $20 million deficit in his last fiscal plan while the tax base has grown at a slower rate and a structural imbalance gets wider.

Lately Fischer has been pushing a local option sales tax, adding cities need more options to raise revenue. In the one-on-one interview, he cited a recommendation from Governor Steve Beshear's Blue Ribbon Tax Commission is that cities share in the state’s sales taxes as well.

From The Lane Report:

EL: Would you raise the sales tax, ask for a share of the current state sales tax, or would you have a local-option sales tax on top of the current sales tax?

GF: Whether it’s a private business or the business of government, a more diversified revenue stream has better odds of staying level or growing. Kentucky cities do not have a sales tax component to their revenue stream. The second possibility is the local-option sales tax: where the citizens of a city can vote on a specific project, for a specific time period, paid for in a specific way. Most all of our competitive cities have that option as well; Kentucky cities do not. So when you see capital investments being made by other cities in their arts district, recreation center or forensic crime lab, frequently they are funded by a local-option sales tax.

EL: Are you in favor of a local-option sales tax to diversify tax revenues for Louisville? Would you lower the occupational tax to help offset a new sales tax increase?

GF: Absolutely. We’re not looking for more money per se; we’re looking for more revenue diversification.

EL: The Kentucky sales tax is 6 percent. What do you feel would be an appropriate share for Louisville to receive?

GF: Six percent (smiles and laughs). The issue is, Louisville generates $2.4 billion a year in total state taxes. Louisville receives $1.2 billion a year from Frankfort after the taxes are redistributed. I’m not going to complain about that because Louisville has responsibility for the rest of the state. But as it relates to the local sales tax option, that’s one of the reasons the Kentucky General Assembly should give cities tools – so they can compete with Austin, Denver and other major U.S. cities.

Note: The local option sales tax would not be applied to the city's general fund, but rather to special projects that residents would vote on.