Pulaski County Council to Consider Hiring Outside Help with Adjusting Tax Structure

The Pulaski County Council is not likely to address issues with its local income tax structure in time to have an impact on the 2019 budget. A sudden drop in revenues from the “LIT Levy Freeze” tax was brought to the county council’s attention in September of 2017. In the months that followed, there were some discussions about working with an accounting firm to address the issues, but little progress was made.

However, a couple other governmental units within the county that receive a share of those income tax revenues have continued working with accounting firm Umbaugh and Associates. On Monday, Umbaugh Executive Partner Todd Samuelson was back before the county council and commissioners to review the situation and present some possible options. “There is the ability to “thaw out” or really take off the freeze on your property tax levy,” Samuelson explained, “and the way that that is done is the county would say, ‘Okay, we’re going to keep our Levy Freeze Income Tax rate at 0.4 [percent], but going forward, the amount of increase in the maximum levy that by rule you’re allowed to generate, we’re going to go back and generate that through increases in property taxes.’”

Since Pulaski County already has the highest local income tax rate in the state, council members aren’t keen on the idea of increasing income taxes. But Samuelson said they could shift some of the components of the existing income tax rate, to focus less on property tax relief. “It doesn’t change the total rate,” he said. “The total rate would stay at 3.38 [percent]. But it would generate more revenue for the county and other units within the county. Now, nothing comes for free, right? So what’s the negative of doing that? If you reduce the property tax relief rate, that means the effective property tax rate would go up.”

Council member Ken Boswell said the county needs to work on finding a better balance between income taxes and property taxes. “We have a lot of land here that is owned by people outside of this county, large volumes of land which don’t bring any income revenue, per se, back to the county,” Boswell said. “So one of my thoughts was being able to adjust them two, to be able to get more revenue because we have a small group of people that are income-ready in this county, when we have a lot of land. And if we’re going to raise on one side, I’d like to be able to possibly adjust the other side to give those that are working a break, maybe.”

Most of the county officials in attendance Monday expressed interest in hiring Umbaugh to help look into potential changes. Samuelson stressed that the company wouldn’t tell county officials how to run the government, but they would look at how much Pulaski County spends on a particular service and compare that to what’s spent in other counties with similar characteristics. However, he said the process would have to start soon, since any changes to the county’s tax rates would have to be adopted before the end of October to have an impact on the 2019 budget.

Boswell made a motion to hire Umbaugh for a cost not to exceed $35,000. In the end though, it was decided to wait until next month before making an official decision. That will allow Umbaugh to provide a formal cost estimate first. Council members were also hesitant to move ahead, due to the fact that only four of the seven members were present Monday.