In Campbell County, a lawsuit was filed in January 2012 by attorney Brandon Voelker on behalf of Charlie Coleman, John P. Roth, Jr., and Erik Hermes. The plaintiffs hold that public libraries should be following Kentucky Revised Statute 173.790 while the Libraries have been following KRS 132 (commonly known as House Bill 44) in setting their annual tax rates.
Oral arguments on the case were heard in February 2013 in Campbell Circuit Court. On April 2, 2013 the Library was notified that Judge Julie Reinhart Ward ruled that KRS 173.790 should govern the Library’s tax rate. The Library has filed an appeal with the Kentucky Court of Appeals.
HB445: Legislation Clarifying Library Tax Issue
On March 12, 2014, Kentucky House Bill 445 passed house vote. House Bill 445 is a companion bill to the Kentucky bi-annual budget bill, House Bill 235.
Provisions within this bill clarify the statutes governing the Library's authority to levy tax rates and the correct procedures to use in raising or lowering them.
Campbell County Public Library Board President Cathy Howard issued the following statement, "The Campbell County Public Library Board of Trustees appreciates the proposed legislation reflected in House Bill 445. That bill clarifies that public libraries have always been expected to act in accordance with the laws governing all special taxing districts, cities, and counties. Since 1979, Kentucky's library boards have dutifully followed those laws. We are grateful to house representatives in making that expectation completely clear."
Background on litigation
The Campbell County Public Library was formed by petition under KRS 173.790 in 1978. The petition set a tax rate of 3.0 cents per $100 for the real estate property tax. The Library, however, is recognized as a "special taxing district" by the Kentucky Revised Statutes.
Special taxing districts set their annual tax rates according to KRS 132. The Kentucky General Assembly has, since 1965, held that all special taxing districts follow KRS 132 in setting their annual tax rates. The same law applies to county government, city government, schools, and all other special taxing districts.
The Campbell County Public Library, along with 79 other public libraries in Kentucky, has followed KRS 132 dutifully since 1979. Under this law, the Library's tax rate stayed at or below 3.0 cents until 1993. The rate dropped, without a petition to lower it, because the Library followed KRS 132.
The Kentucky Attorney General, the Department for Local Government, and the Kentucky Department for Libraries and Archives have all agreed that KRS 132 governs the Library's annual tax rate. Importantly, no one disagrees that the petition process still allows the Library's tax rate to be lowered or raised as outlined in KRS 173.790.
Still, the Library firmly believes that the General Assembly could not possibly have intended for public libraries (and ONLY public libraries) to be exempt from the law they intended for ALL other taxing districts. The General Assembly made it clear in 1965 (the "Rollback Law"), 1978 ("House Bill 44"), 1990 (implementation of KERA), and 2013 ("House Bill 1") that all special districts levying local ad valorem taxes were to follow the provisions of KRS 132. Libraries were never exempted.
As of now, the matter is in the hands of the Kentucky Court of Appeals. A decision from this Court will likely come in the late summer of 2014. Until then, the Court of Appeals has ruled that the Library's tax rate remain at the level set in 2012 through the appeals process.
The plaintiffs have asked that the library’s tax rate be rolled back to the rate set in 1978 when the library was founded. This would force the library’s revenue to be reduced by 60 percent, from $4.6 million to $1.9 million.
Ramifications of an unfavorable decision
Should the Courts rule that the Library must return to its 1978 tax rate, the significant loss of revenue would cause the people of Campbell County to feel the impact and loss of current library services. A return to 1978 tax rates would:
- Force the closing of one or more branches, either temporarily, on certain days of the week, or permanently.
- Reduce hours.
- Force staff reductions. Currently the Library has 45 part time staff and 40 full time staff.
- Severely restrict programming for children, teens and adults.
- Collection development expenses would be unsustainable.
- Significantly impact capital expenses such as the replacement of computer equipment or building repairs.
- Loans for past construction and remodeling costs must be repaid, even if a building is no longer in use.
Lawsuit and Other Counties
79 other library systems in Kentucky are set up and funded the same way as the Campbell County Public Library. Similar lawsuits, filed by Mr. Voelker, are pending in other counties.
The loss of revenue for these libraries runs as high as 80%. The tax base of these county library systems, however, is not on the same level as that of Campbell. Many libraries in Kentucky have total operating revenues of less than $500,000. These libraries, for the most part, would simply close if their tax rates could not be restored.