2018-04-11 / News

How might county fix its broken budget? We asked the candidates. Here are their replies.

By SAM ADAMS

A bad year for unmined minerals taxes and coal severance tax nearly bankrupted Letcher County last year, and the question of how the county will be recoup those losses still hasn’t been answered.

Taxes on unmined minerals dropped 83 percent on unmined coal, 51 percent on oil reserves, and 54 percent on natural gas. Limestone, sand and gravel increased to $9,277, up $135 from the total charged for the 2015 tax year.

Coal taxes dropped by a total of $1.4 million, crude oil by $181,163, and natural gas by $942,889. Those taxes are split among the state of Kentucky, Letcher County Fiscal Court, the Letcher County Board of Education, the Soil Conservation District, Extension Service, Board of Health, and Letcher County Public Library District.

Likewise, coal severance tax dropped because it is an excise tax on coal that is actually sold. Since there wasn’t much coal sold, the Letcher County Fiscal Court is expected to see a drop in coal severance tax money to around $318,000 this fiscal year from $726,370 last year.

In response, the county eliminated its senior citizens program by turning it over the Kentucky River Area Development District, did not replace some employees who retired, placed other employees on furlough for one day per week, and made other cuts to county services, but it did nothing to raise money to replace what was lost.

Several changes in the county tax code — including an insurance tax, a payroll tax and a business license fee on mineral extraction industries — were proposed last year.

None passed.

The proposed fee of $2,500 per operation for mineral extraction, meaning each mine or quarry and each oil or gas well, would have raised about $4 million a year, but the ordinance died on a 3-3 vote after a lobbying blitz by gas companies led by EQT, the largest producer in the county.

Gas companies raised the specter of shutting down wells and taking away royalties to property owners in their effort to defeat the measure, saying a $2,500 per well fee would cut out their profits. Meanwhile, company reports to investors show EQT had a net income in 2017 of $1.8 billion, up nearly $2 billion over 2016 when it showed a loss of $131,063,000. Much of the income is due to an income tax benefit of $1.1 billion, much of which came from the tax cut approved by Congress in December.

With county elections coming up this year, The Mountain Eagle sent a survey to all 32 candidates for judge/executive and magistrate, asking a variety of questions about their stance on issues that have either come before the fiscal court in the recent past, or that citizens have brought up as ideas for a way forward.

Several of the questions related to how the county might address its financial problems. Of the 32 candidates contacted, only 12 responded. Their answers on questions related to the gas and oil well fee and budget cuts are below.

QUESTION: Should Letcher County charge an annual fee on gas and oil wells?

JUDGE/EXECUTIVE

CANDIDATES:

Terry Adams — No. Gas and oil companies (and coal companies) already pay severance tax to Letcher County. Plus it was advised by our county attorney that this fee would be illegal. (Adams attached a letter from the county attorney.)

Mica Smith-Johnston — (This candidate did not answer any of the section of yes or no questions, instead writing that they are “not yes or no questions.”) All companies that do business in our county should pay taxes. However, they have to be able to recover these expenses without putting the cost off on the people of the county.

CANDIDATES

FOR MAGISTRATE:

District 1

Jack Banks — (This candidate did not answer this question in the yes or no section of the survey.) While this doesn’t affect me personally, it does affect a lot of people in my district. I’m undecided at this time concerning this issue.

District 2

Curt King — Yes. I believe that we should impose the gas and oil well fee because states like Pennsylvania have done this with great success. They’ve generated billions of dollars since they’ve started to repair highways, support the environment, fix water and sewer issues, as well as other projects throughout the state. In Pennsylvania they charge a $3,000-$5,000 fee per well with a calculation that takes into account the annual production and age of the well.

Don McCall — No. Some of our citizens receive royalties or free gas from gas companies. A company’s response to an imposed fee may be to close the wells and impact our people financially.

Sherry Sexton — Yes, for too long we have given away our natural resources. We need to get some revenue from this to help maintain our roads and improve our economy. Fees would need to be developed based on the production level of each well.

District 3

Codell Gibson — Yes.

Emory “Fudge” Mullins — Yes. Companies are taking it out of our county, there should a tax fee. How much should be discussed with all.

District 4

Roger Back — (This candidate did not answer this question in the yes or no section of the survey.) I prefer not to tax any business unless it is absolutely necessary. I would consider a possible tax only after I evaluate the county budget. If it is necessary to maintain basic county services …

Melody Coots — Yes, it is a natural resource just like coal and the fee should be adjusted to whether it is an active well and the production of the well. And also an applicable fee for active nonproducing well, similar to the unmined coal tax.

Robert “Sarge” Howard — Yes. The county should benefit some by the elements in our ground, too. So yes, a fee should be charged using a formula perhaps based on the number of wells a company is drilling on a site, the depth of the drilling and other factors to develop a fair annual fee payable to the county.

District 5

Johnathan Belcher — Yes. Like coal severance. Those fees are to be used to build infrastructure. For more renewable resources once the nonrenewable ones have been all but depleted.

QUESTION: Should the county have business licenses?

CANDIDATES FOR JUDGE/ EXECUTIVE:

Terry Adams — (This candidate marked out the question and did not answer it.)

Mica Smith Johnson — (This candidate did not answer any of the section of yes or no questions, instead writing that they are “not yes or no questions.”) All companies that do business in our county should pay taxes. However, they have to be able to recover these expenses without putting the cost off on the people of the county.

CANDIDATES FOR MAGISTRATE:

District 1

Jack Banks — No! Small businesses are struggling to stay open at this time with the current unemployment at an all time high in our county. These businesses need to remain open to help the people in their communities.

District 2

Curt King — No, because many businesses in this area are small businesses that are already within city limits and are already paying a city tax. It’s not fair to charge them for a business license and a city tax.

Don McCall — I’m not in favor of businesses paying a license fee to have a business in our county. I want to encourage any business to open in our county.

Sherry Sexton — No, because we do not want to make it any more difficult for a small business to get started.

District 3

Codell Gibson — No.

Emory “Fudge” Mullins — No. We all struggle enough.

District 4

Roger Back — (This candidate did not answer this question.)

Melody Coots — Yes, I think an annual business license of $100 is sufficient for any business operating in Letcher County regardless of type of business and number of employees. And would be a viable option instead of an occupation tax on employees that the majority only make minimum wage.

Robert “Sarge” Howard — I think business licenses are not a bad idea. It could be done much like we do with vehicle licensing. Base the cost of the license off of a formula that takes into account the size of the business, number of employees, estimated annual revenue, etc., to ensure quality businesses as well as additional county revenue.

District 5

Johnathan Belcher — A small $15-$20 license would not deter startups, nor should it hamper current businesses. Money from this could go to maintaining a director for (the) tourism board.

QUESTION: Should magistrates continue to receive an expense allowance while employees are laid off?

CANDIDATES FOR JUDGE/ EXECUTIVE

Terry Adams — No. Magistrates, the judge and salaried employees should take cuts before hourly employees are laid off and services to citizens cut.

Mica Smith-Johnston — (This candidate did not answer any of the section of yes or no questions, instead writing that they are “not yes or no questions.”) Expenses incurred for official county business need to be reimbursed. It needs to be legit official business.

CANDIDATES FOR MAGISTRATE

District 1

Jack Banks — No! We have to all work together to get our county through this low-revenue time.

District 2

Curt King — No, they shouldn’t. Under those circumstances, the county doesn’t have the revenue to pay for the expense account.

Don McCall — No. Not as long as county employees are laid off and taking mandatory furlough days.

Sherry Sexton — No, magistrates should not have an expense allowance, especially when it is at the expense of jobs and services. Our constituents should come first.

District 3

Codell Gibson — No. They already get paid, and if they need to check something, use that money.

Emory “Fudge” Mullins — No. If any employee is laid off, no way should we have an expense allowance. District 4 Roger Back — No. Salary is enough on its own.

Melody Coots — No, from my understanding the magistrates that are in office are down to the bare minimum. In other words, they get their allowance that is state mandated and no more. And also, there are no county employees laid off. But if you are asking me personally if I would need an expense account, the answer is NO. In my years of working I have never expected an expense account, never asked for one do I require one. I would much rather see the money go towards the growth of the county. I want to be a SOLUTION NOT A BURDEN.

Robert “Sarge” Howard — No. Magistrates receive a salary for the position and should function from that. Adding an expense account only draws funds from an already strapped budget. Financial sacrifices should begin at the top. Before putting people out of work cut the “luxury” budgets and work down.

District 5

Johnathan Belcher — If we take the money we give magistrates (and give it) to suffering departments in times of economic strife, it ensures magistrates will avoid letting our county fall into such dire straits.

QUESTION: Should there be a restaurant tax in Letcher County to fund tourism?

CANDIDATES FOR JUDGE/ EXECUTIVE

Terry Adams — (This candidate marked out this question and did not answer.)

Mica Smith Johnston -- (This candidate did not answer any of the section of yes or no questions, instead writing that they are “not yes or no questions.”) How money is spent for taxes of any kind can be explored once the budget is balanced.

CANDIDATES FOR MAGISTRATE

District 1

Jack Banks — Yes, a small restaurant tax would help fund a tourism department to develop a Facebook page, web page, pamphlets, etc. We have a neighboring county in Virginia that recently stated they had increased their economy approximately $3 million on promoting of ATV trails. We could do the same.

District 2

Curt King — No, but I believe we should reexamine the tax on liquor sales. I say this because I believe that an additional tax on restaurants could cause that cost to be carried down to menu prices, and we don’t want to discourage people from patronizing their local restaurants, which provide many good jobs to Letcher County citizens.

Don McCall — No. I’m not in favor of taxing our businesses. Most would give donations if asked.

Sherry Sexton — Yes, because we need another revenue stream to assist with tourism initiatives.

District 3

Codell Gibson — No. Two reasons not. We are taxed enough and they would just raise prices to cover their cost, and as usual, the working man would pay the cost. Just like (the) alcohol tax. People that don’t drink still have to pay.

Emory “Fudge” Mullins — Yes. A tax won’t hurt one person, but can help everyone.

District 4

Roger Back — (This candidate did not answer yes or no to this question.) I would consider a small tax to provide revenue for tourism in the area. However, I prefer not to tax citizens of Letcher County.

Melody Coots — No, I don’t feel that the restaurants in Letcher County should be taxed for tourism. From my understanding tourism is being handled in a sufficient and well-organized committee. And the people of Letcher County should not be taxed for the purpose of tourism at this time.

Robert “Sarge” Howard — No. I don’t think a restaurant tax would be a good idea for our current economy. Many of our local restaurants struggle to keep open under these current conditions and until we become more solvent as a tourism county, we should leave them to the taxes and fees they already pay.

District 5

Johnathan Belcher — Yes. A small 1 percent to 3 percent tax on restaurants would go a long way if appropriated for development and support of local tourism.

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