Georgetown Mayor Burney Jenkins listed an insurance premium tax increase as his top priority for increasing revenue at the city council meeting Monday night.
The city’s insurance premium tax is currently at 8 percent after a 3 percent increase was approved by the council in 2021.
The mayor is proposing a 2 percent increase over two years to a 10 percent tax. A 2 percent increase would bring approximately $1.6 million in additional revenue to the city, Jenkins said.
The insurance tax proposal was introduced as Jenkins presented a list of the city’s capital needs, including a fourth city fire station.
The average insurance premium tax for cities the size of Georgetown is 8 percent, said Devon Golden, Georgetown’s chief administrative officer.
“Right now, we are at 8 percent, and we are right at the average, so a 1 percent increase would put us slightly above the average. . . it would be one category where we are a little bit higher than other communities,” Golden said.
Jenkins said he would like the council to approve the tax hike before the budgeting process begins. If the city wants to change the tax rate for the next fiscal year, they need to inform the state Commissioner of Insurance by March 23, according to the Kentucky League of Cities website.
The city must have its budget passed before the next fiscal year begins July 1, 2024.
“I do believe this is the best way we can go, because going in, when we start the budget process, which I want to start in January, early, I want to have an idea of revenue that I know I can put my hands on, and. . . then make some decisions,” Jenkins said.
Jenkins urged the council to work toward increasing the tax.
“This doesn’t sit well with a lot of people, it’s a tough decision, but you have made tough decisions before,” Jenkins said.
Council member Greg Hampton agreed the decision will be tough.
“Well, you know, it’s at the top of the mayor’s list, we’re certainly going to entertain the idea, it still must come up before council again . . . I think we all must be aware of the time we are in right now, it’s going to be a tough decision,” said Hampton, who is on the finance committee.
An insurance tax is an indirect tax as it is collected by the insurance agency but imposed on the taxpayer’s insurance bill.
“The insurance tax affects the consumer, not the insurance agency, and the insurance rates in general have been escalating in the last year or so, due to all the storms and the inflation factors and a lot of other things,” said Mike Hockensmith, the president of the Hockensmith Agency, a Georgetown insurance agency.
In 2021, the Georgetown city council unanimously raised the insurance premium tax from 5 to 8 percent.
A restaurant tax remains on the table as the mayor gathers more information, he said. He said he was unsure when that information might be brought before the city council.
The city council will likely be presented with a contract for a development impact fee consultant soon, Jenkins added during mayor comments.
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