March 17, 2018

Kentucky Library Suits Threaten District Tax Funding Statewide

Courtroom setbacks handed out to two Northern Kentucky library districts within 10 days of each other have placed their ability to collect tax revenue in jeopardy. The litigation stems from six members of the Northern Kentucky Tea Party who launched a legal assault against these libraries’ ability to collect tax money without voter approval. If pursued, the tax implications of these cases could imperil district funding for libraries across the state.

Two library districts—in Campbell and Kenton counties—face the frightening prospect of rolling back tax rates to levels from 34 years or more ago, and perhaps even refunding large portions of their existing budgets. The library tax rate in Campbell County, for example, is currently 7.7 cents per $100 of assessed property value. In 1978, when the district was created, the rate was 3.3 cents. If the districts’ planned appeals are unsuccessful, the tax levy would revert back to that level, cutting the overall budget from $4.9 million to $2.2 million, a rollback of 55 percent.

A third library district has been targeted for legal action by the Northern Kentucky Tea Party: a suit was filed against Boone County, also located in Kentucky’s northern tip, on April 3, according to the Cincinnati Enquirer. A court date has yet to be scheduled. Asked why northern Kentucky library districts were singled out by the tea party, Lisa Rice, president of the Kentucky Library Association (KLA), said, “That area of our state tends to have a more conservative base than the rest of the state.”

What the state says

On April 2, Campbell County Circuit Court Judge Julie Reinhardt Ward ruled that because the county’s library district was created by petition in 1978, under a statute known as KRS 173.790, it cannot raise tax revenue except through a similar petition signed by 51 percent of registered voters.  The library district argued that a separate state law passed in 1979, House Bill 44, made it a special taxing district, allowing for limited annual tax increases not subject to voter approval. Ward, in her decision, said HB 44 did not nullify KRS 173.790, in effect rendering invalid every library tax increase in Campbell County over the last three decades.

A little more than a week after Ward’s decision, Circuit Court Judge Patricia Summe ruled that neighboring Kenton County likewise had been improperly raising taxes since its founding in 1967. Right now, the library tax rate is 11.3 cents per $100 of assessed valuation. If Summe’s decision stands, that rate could be rolled back to its 1967 level: 6 cents per $100. The current $11.2 million operating budget would be rolled back to $6 million.

The districts aren’t the only ones to interpret this conundrum differently from the judges. The state itself did, too. “The library district had been setting the tax rate upon the instruction and advice of the Kentucky Department of Library and Archives,” Jeff Mando, attorney for Campbell County’s library district, told LJ. He added that in 34 years, no appointed or elected official, or citizens group, had ever raised an objection or challenged its legal right to do so, until now. Kenton County Library Director Dave Schroeder told LJ, “We’ve been following the procedure the state set out. All of a sudden to be told what you’ve been doing is wrong is frustrating, to say the least.”

Procedural issue or grudge match?

“It’s about a rule of law,” said attorney Brandon Voelker, who represents all three sets of plaintiffs (three individuals in Campbell County, one in Kenton, and two in Boone). “Whether it’s a library or a fire department, there are certain rules that govern how you set a tax rate and they should be followed. It’s not about what the rate should be. It’s not about shutting down libraries. It’s about giving people what they want. People made the library. People should control the size and the scope of the library.”

Voelker said if Campbell County residents are happy with the current tax rate, they could simply sign a petition in favor of it. “It’s a simple fix,” the attorney told LJ. “All you have to do is take it before the people.” Voelker said he’s certain two of the three plaintiffs in Campbell County would sign a petition in favor of keeping the tax rate at its current rate of 7.7 cents.

However, at least one library official questions the plaintiff’s motivations—and their willingness to support library funding.

The Northern Kentucky Tea Party’s website says its lawsuits were prompted by Campbell County’s ultimately unsuccessful effort to fund construction of a fourth library branch through a tax increase. The $5 million project called for a tax increase from 7.4 to 9.4 cents per $100 of property value, or an additional $20 per homeowner on average.

Starting in 2011, six public hearings were held on the project, Campbell County Library Director JC Morgan said, and at each session, about eight to 12 Tea Party members turned out to lobby against the new branch. “It was at that point that these tea party guys started talking about lawsuits,” Morgan said. “They saw that as a wrong–that we had not listened to them. That’s where that vindictiveness comes from.”

Meanwhile, the construction fund proposal was shot down by “the people,” in the form of a ballot initiative defeat in November 2012. But the plaintiffs didn’t wait to see where they people stood: the Campbell and Kenton County lawsuits were filed in January 2012.

A Can of Worms

The cases have the potential to spread far beyond a couple of counties: the plaintiffs’ attorney unearthed a legal trump card that could negate the way 79 of Kentucky’s 106 library districts, created by petition, have been doing business for decades. Rice said the tea party’s recent success in court has libraries across the state fearful they will be targeted as well. “We are absolutely worried about that and do anticipate that,” Rice told LJ.

Next Steps

On April 19, Judge Ward’s courtroom may rule on separate motions. First, Campbell County’s library district attorney Mando has asked the judge to render her April 2 decision “final and appealable,” clearing a necessary legal hurdle for an appeal. “We’d be prepared to appeal immediately,” Mando said. The next step for Campbell County would be the Kentucky Court of Appeals, but Rebecca Kelm, president of the Campbell County library district’s board of trustees, said the district is girding for legal appeals all the way to the Kentucky Supreme Court, if necessary.

Meanwhile, the plaintiffs have filed a motion asking Ward to place more than 50 percent of the library district’s tax revenue—$2.7 million—in an escrow account. Voelker said the intent is to make sure the money isn’t spent while the courts determine whether Campbell County residents are legally owed a refund of tax revenue.

“It would shut the library down immediately,” Morgan told LJ.  “How can that be?” Kelm said of escrowing her library district’s assets. “Our money is in our staff, our buildings, our programs. It’s not there.”