Stimulus Program & Economic Updates
As a turbulent 2020 wraps up, we're featuring a series of presentations in the last Budget, Finance, and Economic Development (BFED) Committee meeting of the year. Here's what we're following on the Docket:
CM Worley and Elodie Dickinson will present on the Small Business Stimulus Program
CM Bledsoe (Chair of the BFED Committee) and Arthur Lucas will give a presentation on an Implicit Bias Training Proposal for all city staff
Vice Mayor Kay will present options for expanding the city's revenue through new taxes/fees
CM Bledsoe will highlight some changes to the FY22 Budget Process
Why should these presentations matter to you?
Let's take them one by one:
Small Business Stimulus - As Governor Beshear issues new COVID business restrictions, many employers are worried that they may close - some are even openly and illegally defying the state and city orders. While this presentation is about how businesses used the first round of the city's Stimulus program, this committee has a proposal to reopen the program for a second round. If you are a business owner or frequent locally owned businesses, this fund could help keep at-risk businesses afloat through the pandemic.
Implicit Bias Training - The presence of implicit bias within city government was a chief topic of the Mayor's Commission on Racial Justice and Equality. Many Commission members named it a cause for far-ranging issues: from over-policing of black and brown neighborhoods to disparities in city contracting with black-owned businesses. If you are concerned about some of our city's adverse outcomes regarding race, you should follow this presentation.
Revenue Options - The city's revenue is not keeping up with its expenses - meaning that the city must either cut/change services or taxes/fees must be increased. This year alone, budget cuts have impacted everything from street paving to support for social services. If you care about Fayette County issues from potholes to homelessness, you need to know about this issue.
Budget Process Changes - The COVID-19 pandemic forced the city to alter its budget process significantly, and with no end to the pandemic in sight, more changes are in store for how the city decides to spend tax dollars. If you care about transparency in government decisions about taxes and spending, this presentation is essential.
Small Business Stimulus
At the beginning of the COVID-19 pandemic, LFUCG created a $2.5M Small Business Stimulus Program to support locally-owned businesses.
CMs Worley (proposed the program) and Ellinger (made crucial amendments to the plan) designed LFUCG's program as a fix to the Federal PPP program, widely cited by critics as benefitting large and mostly white-owned businesses.
The LFUCG program issued grants to businesses and nonprofits of up to $25k with the requirement that funds be spent on expenses directly related to COVID-19.
CM Ellinger's main amendment to the program intended that LFUCG would designate at least 50% of all funds to minority and women-owned businesses.
The average grant awarded by the program was $14,154.00.
35% of funds awarded went to women-owned businesses, and 26.7% went to minority-owned businesses. 20.8% went to companies owned by white men. The remainder of the companies funded were nonprofits, which do not have individual ownership.
By race and ethnicity, 58% of grants awarded went to white-owned companies. 13.4% went to nonprofit organizations, 13.2% went to black-owned businesses, 2.5% went to Latinx-owned companies, and 12% went to companies owned by Indian, Asian, Palestinian, African, or other individuals.
The majority of companies receiving LFUCG Stimulus Funds have between 1-5 employees. The average employment was 7.
The plurality of LFUCG Stimulus funding went to the accommodation and food service industry (30%), followed by the nonprofit sector (15%) and retail businesses (14.5%).
Businesses funded through the Stimulus Program reported seeing an average 25% decrease in their payroll between January and July of 2020, with Healthcare (45% decrease, received $40k in assistance) and Retail (42% decrease, received $345k) leading the pack. The least impacted industries that received funding were Construction (.05% decrease, received $40k) and Transport Warehouse & Manufacturing (3% decrease, received $50k
CM Ellinger is requesting an additional $2.5M to reopen this program and allow more organizations to apply for a second round.
Implicit Bias Training Proposal
Many of the recommendations in the report released by the Mayor's Commission on Racial Justice and Equality focused on addressing implicit bias across layers of the city government.
The Mayoral Administration is requesting $120,000 to fund a Request for Proposals (RFP) to a consultant to create a year-long "Implicit Bias, Diversity and Inclusion, and Cultural Competency" training for all 3,200 LFUCG Employees.
The Administration proposes paying for this training by reallocating $120k from the city's $1.9M Household Assistance program created through COVID relief funds. This has caused significant controversy amongst housing activists in Lexington.
In a recent General Government and Social Services Committee presentation, the Administration said that the organizations tasked with dispersing this $1.9M could not utilize all the resources.
The consultant hired to create this process would work with the Office of Diversity and Inclusion and the Division of Human Resources to develop a specific timeline. However, the earliest training would begin in May of 2021 if this proposal advanced through committee in this meeting.
The city is requesting that the consultant design the program to address groups within the city differently. The training may look different for supervisors than it does managers, differently for police than waste services.
Deputy CAO Glenn Brown would lead this project alongside Arthur Lucas and Eric Howard, all three of whom are people of color.
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Revenue Options
Vice Mayor Kay has raised increasing revenue as a means to address the city's budgetary problems throughout the year.
As soon as this year, the city will have to make significant cuts to services because of its slow revenue growth.
A specific presentation with revenue increase options is not included. However, a January 2020 report from the Mayor's Finance & Economic Advisory Work Group report outlines what revenue increase options are currently legal under state law.
Options with no state legislative changes:
Option 1: Increasing Payroll and Net Profits Fees from 2.25% - 2.5%.
Would bring approximately $27M in additional revenue into LFUCG.
The average household in Lexington would pay an estimated $137.29 per year in additional taxes.
The Work Group says this could adversely impact Lexington's competitiveness, and it would directly touch each worker in Lexington.
There is no annual deadline for this increase.
Option 2: Raising the Insurance Premium Rate
A tax on all insurance premiums in Fayette County, currently at 5%.
Each additional percent increase in the Premium Tax rate would bring in approximately $7M in revenue for LFUCG.
Each percentage increase would result in an additional $8.00 per year on Lexington's average Auto Insurance policy.
The city must decide to increase this revenue option by Mid-March to comply with State filing deadlines.
Option 3: Franchise Fee Rate (Utility Taxes)
A tax on residential utilities. LFUCG can set these rates as high as 5%. Currently, the rates are 4% for gas and electric and 3% for water.
If set to their highest rates (5%), LFUCG would receive approximately $6M in additional revenue.
Residents would see an average increase of $35.64 per year on their utility bills.
Option 4: Create a Taxing District for the Library
Taxes that go to the Lexington Public Library are collected by LFUCG, per a settlement in the 1990s.
If the Library became its own taxing entity, it would free up approximately $16.8M in the city budget.
This option would likely have to go to a voter referendum.
Option 5: Vehicle Rental Tax
LFUCG would create a tax on all vehicle rentals.
This option would likely generate less than $500k per year.
Option 6: Create a Taxing District for Parks and Recreation
Would create a special taxing district for Parks via Property Taxes.
The recommended tax rate for this district (0.0215) would generate approximately $7M per year for Parks and Recreation, freeing up other revenue for LFUCG services.
This option would result in an average $39.78 increase in the Property Tax bills for homes valued at $185k.
Options with state legislative changes:
Option 1: Restaurant Tax
Larger cities in Kentucky are not allowed to institute a restaurant tax. However, approximately 28 smaller cities in Kentucky have restaurant taxes in place.
A 3% tax on all restaurant transactions could result in as much as $27M in revenue per year for LFUCG.
Option 2: Hotel Tax
Lexington currently has a transient room tax (hotel tax) of 8.5%, but none goes to LFUCG. 4.5% goes to Lexington Convention Center, and 4% goes to VisitLex.
Currently, the only program eligible to be funded by hotel taxes is the Purchase of Development Rights program.
A 1% increase in the hotel tax could bring in $1.9M per year for this program.
Hotel tax increases must be approved by voter referendum.
Option 3: Local Option Sales Tax
LFUCG is not allowed to create local sales taxes.
Giving cities the ability to create a local sales tax would require a state constitutional amendment.
A local sales tax would likely bring in over $20M in revenue.
Budget Process Changes
The COVID-19 pandemic caused several changes to the FY21 budget process, including a delay of the mayor's budget address and removing the council link process.
If approved by Council, LFUCG would delay its budgeting process for FY22 by about one month.
Key Dates:
Budget Address: April 6th - typically in March
Budget Committee of the Whole: April 27
Budget Public Hearing: May 6
Budget Link Recommendations submitted: May 14
Second & Third Budget Committee of the Whole: May 25 & 27
First Reading: June 10
Second Reading: June 15
Council typically meets in Budget "Links" to review individual aspects of the budget. There are usually 5-6 links, with three council members on each.
BFED Committee is recommending a new link structure:
Link 1: Finance, Economic Development, & Planning
Link 2: CAO & Public Safety
Link 3: General & Social Services
Link 4: Environmental Quality & Public Works
Link 5: General Government
Get Involved
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