Louisville Metro Council rejected an ordinance Thursday night by an 11 to 15 vote that would have increased the tax rate on most kinds of insurance premiums to 9.5 percent in the next fiscal year.
The rejection of the proposal to raise new tax revenue in the face of a massive budget shortfall means that Metro Council must find $35 million to cut from next year’s city budget, which must be approved at their last meeting in June.
Under the ordinance voted down by the council Thursday, the tax rate on insurance premiums — with the exception of vehicle and health insurance — would have increased from its current 5 percent to 9.5 percent in the next fiscal year beginning July 1, raising over $20 million in revenue. The tax rate would have then increased to 9.75 in the following year and 10 percent in the next two years.
Due to a hard deadline set from state government, Metro Council would not be able to increase the tax rate on insurance premiums until the 2020-2021 fiscal year at the earliest.
The vote Thursday night followed a number of special public meetings on the issue since Feb. 7, when Mayor Greg Fischer first warned of “devastating cuts” to city services and layoffs that would have to take place if the city did not find new tax revenue to plug a $65 million hole within four years.
Fischer first proposed tripling the tax rate on most insurance premiums to 15 percent within five years, saying this was the only way to avoid $65 million of big budget cuts over the next four years would hurt public safety, social services and nonprofits.
The first ordinance proposed in February mirrored the mayor’s plan for a tax increase but did not gain support on the council, which heard strong criticism from constituents. A compromise plan was drafted that proposed a mix of budgets cuts and a smaller tax increase to fill next year’s shortfall, which passed the budget committee last week by a 7 to 4 vote.
All seven Republicans voted against the proposed tax increase Thursday night, while the Democratic caucus was split.
In addition to the five sponsors of the ordinance — David James, Bill Hollander, Markus Winkler, Pat Mulvihill and Barbara Sexton Smith — the Democratic council members who voted for it were Madonna Flood, Kevin Triplett, Nicole George, Barbara Shanklin, Rick Blackwell and Brandon Coan.
The eight Democrats who voted against the tax increase were David Yates, Brent Ackerson, Jessica Green, Donna Purvis, Paula McCraney, Keisha Dorsey, Cindi Fowler and Mark Fox.
There were rumors that another amendment to the ordinance would be filed on the chamber floor Thursday night that would call for increasing the tax rate by a lower amount — in the hope of gaining a few more votes so it would pass — but no such amendment was called.
The mayor will present his proposed city budget for the next fiscal year on April 25, which will then be discussed for two months by Metro Council before an official budget is passed in late June.
After the tax increase was voted down Thursday night, Fischer released a statement that he was “deeply disappointed and saddened for the people of Louisville” by Metro Council’s “vote to cut $65 million in vital services from the city budget.”
“The magnitude of this action by the Council will force cuts to services, including police, fire and EMS, along with cuts to programs that make a difference in the lives of people all over Louisville — libraries, community centers, Meals on Wheels, senior centers, paving projects, programs that work to keep our city healthy and clean, and many, many others,” said Fischer. “My thanks goes to the Council members who had the courage to vote against these cuts.”
Fischer added that he will propose a city budget in April “with the first year of cuts totaling $35 million, reflecting the service cuts that the majority of the Council voted for.”
Noting that the council also voted to reverse their move from two weeks earlier suspending the bond ordinance funding already-approved capital projects, the mayor added that those projects “now must be reviewed in light of their subsequent vote to cut $65 million from Metro Government, to determine whether or not those projects can go forward.”
Greater Louisville Inc. President and CEO Kent Oyler also issued a statement expressing concern about Metro Council’s vote, saying that the local chamber of commerce “has consistently advocated for a balanced approach, centered on reductions to spending and limited tax increases.”
“We are concerned that Metro Council was unable to reach a consensus and find a sustainable path forward,” stated Oyler. “Our local officials must come together to solve this issue and give careful consideration to all options available — which we acknowledge are fewer than we would prefer. GLI remains committed to working with the city to continue moving our economy forward and navigating this new fiscal reality.”
This story has been updated.