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Murray City Council Approves Drafting Payroll Tax Ordinance

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Matt Markgraf, WKMS
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Murray city finance director Luke Crawford answers questions about the payroll tax and the initially proposed net sales tax.

The Murray City Council approved Thursday night to draft an ordinance for a one-percent payroll tax, an ordinance to eliminate city stickers and a resolution to lower various taxes (property, vehicle and insurance as recommended by the committee). These ordinances would need to pass twice before they are enacted.

The discussion and debate lasted more than 90 minutes in an often confused and sometimes tense exchange between city council members, committee members and public comments.

Committee Report Overview

Mayor Jack Rose thanked the Mayor’s Committee to Review Needs, Expenditures and Revenue Sources committee for work on their assessment. Committee chair Dan Miller said there was a lack of understanding from the community about why decisions were being made along with “conspiracy theories” about the size and makeup of the committee. He said decisions “did not come lightly” and made a point to mention, which Mayor Rose reiterated throughout the meeting, that many of the questions about various nuances of the proposal were discussed in open meetings that were poorly attended.

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Credit Matt Markgraf, WKMS
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Committee members outline rationale for implementing payroll tax.

Increasing pay for city police officers was chief among city needs identified in the report, which found after discussions with Chief Jeff Liles of the 34 officers that have left over the past 10 years, 22 indicated their reason was for jobs that offered higher wages. The department expressed difficulty recruiting and retaining officers due to low wages compared to the area market rate ($15.65 an hour wage for new candidates. It was described that a 10-year officer in Murray makes $16.61 an hour versus $24.36 in Paducah. The report also noted that Murray’s cost of living index is slightly higher than Paducah’s). The proposal is to bring city police officers to current, or close to current, standards. The first year total budget impact is close to $500,000. Committee member James Gallimore said police officers have expressed gratitude for addressing this issue. Council member Burton Young noted people are working in Murray are ‘getting by’ earning less.

Other needs included improving facilities and capital equipment for the fire department. The Fire Station 1 downtown was described as being old and in need of maintenance. The Fire Station 2 is lacking facilities for female personnel. The proposal was to add $250,000 to the budget.

The number of roads maintained by the street department has increased, according to the report (64 miles in 1988 compared to 120 miles today). The price of asphalt has also increased. The amount of funding in the municipal aid tax program, the committee argued, it isn’t enough to meet current needs. An additional increase of $800,000 to $900,000 is needed to match the level of service from 30 years ago. The committee also proposed to establish $250,000 each year, over five years, to address traffic needs. New sidewalks have lately been funded through grants, but that money doesn’t include the ability to maintain them, the committee found and called for $100,000 to hire people to maintain sidewalks. Council member Burton Young wondered why, despite an increase over decades in the city’s tax base, funds haven’t been added to roads. Committee member Don Elias said the city has only added money “from time to time” when there is a “serious need.”

While the park system’s current budget was described as being stable, future investments would need to come from grants or additional city funding, as reported by the committee This would include either repairing ($400,000) or replacing ($2 million) the public swimming pool as well as updates to the baseball area. The proposal was to put $100,000 annually into a “park enhancement fund” for capital expenditures. Councilman Burton Young suggested the Calloway County Fiscal Court match additional contributions from the city as both currently pay a roughly equal amount (though the city slightly more) to operate the park.

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Credit Matt Markgraf, WKMS
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Committee Chair Dr. Dan Miller

Committee chair Dan Miller said Mayor Jack Rose has cut the budget in several ways over the years, such as outsourcing the sanitation department and leasing cars rather than purchasing them. He also said vacancies have not been immediately filled. Miller joked, “Most people that know Jack Rose knows he’s pretty stingy (audience laughs). And I mean that in a kind way.” Miller said city funding needs were typically addressed from increasing property taxes, though that stopped in recent years (due to shifting funds from the alcohol tax revenue). Miller said Murray has a statistically high property tax rate. He argued this wasn’t fair for retirees on fixed incomes. He said revenues from city stickers have also leveled off at around $1 million.

The legislature has limits on a city’s ability to raise money, Miller said, which include payroll taxes on individuals or a net profits or gross receipts tax on businesses. “For those that insist on let’s do more study, I would just suggest do your study if you want. I mean, most city budgets now with the Freedom of Information Act are available on a computer. You can pull them up and I think you’ll have no better luck than we did. But you’re welcome to try,” he said.

The committee’s recommended proposal was that the city government institute a 1% payroll tax (comparably lower than surrounding cities). A 1% net profits tax on businesses (with the license fee absorbed). Lowering property and insurance taxes were also part of the recommendation. “The committee feels that the current economic model for the City of Murray and for the govern of the City of Murray is frankly broken and we need to find a different way of doing business to grow in the future,” Miller said.

Public Comment Opposition

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Greg Taylor led a Change.org petition against the payroll tax, which garnered more than 2,800 online signatures.

Former Murray City Council member Greg Taylor, who has been a vocal opponent of the tax including forming an online petition, said petition signatures have reached more than 2,800. As a representative of those signees, Taylor acknowledged that those who oppose the tax understand the city has a budget and a “tough job to do” to meet that budget. However, Taylor said, “The message that I have for you from those 2,854 people tonight is a couple things. Number one: the community does not want this payroll tax.” He said despite being a divisive issue, it has brought people together in opposition, including Murray State, Chamber of Commerce, Economic Development Corporation, Fiscal Court, Hospital and Primary Care.

He urged council members to “slow down” and look at the considerations in more detail as a full council. He said no one wants police to be the “lowest paid around” but feels this can be addressed with the current budget.

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Whitney Bryant read numerous court cases arguing that the tax is discriminatory

Whitney Bryant of Dresden, Tennessee, cited numerous Supreme Court cases (such as Comptroller v. Wynne and Armco, Inc. v. Hardesty) to underscore an “unconstitutional” unfairness in imposing a tax on workers across state lines. She said the tax is discriminatory for non-residents as it would amount to a double taxation burden.

Ray Conklin was the third who signed up for public comment. He ran through numerous questions about the proposed taxes, including social security and retirement exemptions, stocks and mutual funds, rental taxes, whether businesses outside of Murray would need a city business license, how noncompliance would be enforced and whether CPAs and cyber security personnel would need to be hired to protect information. Conklin concluded by saying, “Pause, take a breath, reflect. Think about this a little more. The governor and the state government are looking at a complete tax system overhaul. We should first wait to see what this entails before possibly implementing a payroll tax and net profits tax.”

Director of Finance Luke Crawford later sought to answer many of Conklin’s questions. Crawford said 'inactive incomes' (interest from investments, pension payments, social security, etc.) are exempt by state statute. To the confusion of members of the council, Crawford then went on to address many other factors that centered around the details of the initially proposed 1% net profits tax. This garnered some confusion because it had been scrapped and wasn't put forward as a motion (see below). The city has posted an FAQ on their website that answers some of these as well.

The public comments were met with vocal approval from the audience, which appeared to skew against implementing the proposed taxes.

Motions to Move Forward

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Murray Mayor Jack Rose

Mayor Jack Rose backed away from the proposed net profits tax. He said after hearing from employers in the community who felt they couldn’t allocate raises due to the proposed increased tax burden. With consideration of the “business friendliness” of Murray he proposed not including this tax in a motion to move forward.

Council member Burton Young asked if removing net profits tax would preclude the city from meeting the needs outlined by the committee. Another council member said doing away with this tax would amount to $200,000 as estimated by the finance director. (Council member Dan Miller later told WKMS the payroll tax would yield an estimated $4.4 million - see below).

Council member Danny Hudspeth said he felt the committee’s numbers were “a little high.” He said the emotional issue of police salary could be addressed by the council any time without using payroll tax revenue. He suggested looking at the committee proposal closer to assess needs more specifically. He said the city has “bowed down” to the “big players” in the business community who opposed the net profits tax, but said the voices of the “working people” are not being heard with regards to payroll tax. “We’re not listening to the people who it’s going to hurt the most,” Hudspeth said to audience applause.

The first motion was to direct the city attorney and mayor to draft an ordinance imposing a one percent occupational license tax on gross earnings for all persons employed in the City of Murray, effective January 1, 2018.

  • Yes: Billington, Bohannon, Bolin, Miller, Pittman, Shoemaker
  • No: Bell, Cherry, Hudspeth, Roberts, Scott, Young
  • A tiebreaker vote goes to Major Jack Rose who voted in favor.

The second motion was to direct the city attorney to draft an ordinance to repeal the city sticker ordinance effective June 1, 2018. This motion passed.
The third motion was to draft a resolution to expressing an intent to lower property, insurance and other taxes appropriate to the committee's recommendation. This resolution has no legal power, but indicates the council’s intent, though it remains to be seen by how much these can be lowered. This motion passed.

Follow Up

Following the decisions, Greg Taylor told WKMS he felt Councilman Hudspeth was right in that the council were not listening to the “working people of Calloway County.” He said the one-percent payroll tax will be harmful to people trying to make a living working in Murray.

Murray Calloway County Chamber of Commerce President and CEO Aaron Dail told WKMS removing the net profit tax doesn’t change the Chamber’s position. “We were against both the payroll tax and the net profit tax and there was way too much confusion in here tonight, and in the months and almost a year now into it. There’s a lot of confusion still going on,” he said.

Committee chair Dan Miller said moving the net profits tax “is what’s known as compromise.” Miller said the amount of funds the payroll tax will raise aren’t certain, but estimated it around a projected $4.4 million, based on 2014 numbers, and said this could end up being more. The resolution, he said, is to reassure citizens and property taxpayers of the council's intentions to proceed on lowering those taxes depending on the outcome of the projected revenue from the payroll tax.

See a Payroll Tax calculator on the City of Murray website.

Matt Markgraf joined the WKMS team as a student in January 2007. He's served in a variety of roles over the years: as News Director March 2016-September 2019 and previously as the New Media & Promotions Coordinator beginning in 2011. Prior to that, he was a graduate and undergraduate assistant. He is currently the host of the international music show Imported on Sunday nights at 10 p.m.
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