Villa Hills City Council tossed around the idea of implementing a 4% property tax hike in their fiscal year 2025 budget. They say the increase, which was discussed at their quarterly caucus meeting Wednesday evening, would hedge against potential deficits if anticipated revenues were to fall short. The budget draft discussed at the meeting did not include the increase.
Over the past few years, shifts in workforce norms spurred by the pandemic have led more people to work from home. The subsequent increases in payroll taxes collected by the city has created a revenue windfall. Compared to pre pandemic levels, Villa Hills’ revenue from payroll tax has about doubled, said City Administrator Craig Bohman.
The projected revenue from payroll taxes in the draft budget represents a 36% increase from last year’s budget, Councilman Jim Cahill said. He expressed concerns that the surge in revenue from payroll taxes in recent years could recede if people start working in the office more frequently.
“My concern was that more and more people are going to go back to work at an office, and we may be losing some of that revenue. So, those increases surprise me,” Cahill said.
Bohman responded that while budgeting for continued increases in payroll taxes is a risk, he hasn’t seen any indications that the trend is slowing down.
Revenue from insurance premium taxes also increased 20% over last year’s budget, said Cahill. Bohman explained that as car and home prices and insurance rates have increased, income from taxes has followed.
“The benefit that we’ve not enjoyed in the past has been the payroll tax, and now we are reaping the benefits of having a much more significant payroll tax base,” Bohman said. “Now that we have a significant payroll tax balance, both insurance premium tax and payroll tax are going to continue to go up in the future, assuming we hold the work-from-home crowd that we have.”
To guard against undershooting expected tax revenues, council discussed the feasibility of leveling the 4% property tax increase, which Cahill said would amount to roughly $80,000 extra.
Bohman explained that Kentucky cities are entitled to generate at least the same amount of property tax revenue as the previous year, but they are also able to install a 4% increase to bolster revenue. Any increase above 4% would have to be voted on by residents.
Although formal decisions can’t be made at caucus meetings, the council agreed that the tax hike should be integrated into the next draft of the budget.
“Taking the 4% seems to make sense because the future looks questionable. Sourcing is going to be tough unless we raise taxes,” said Councilman Scott Ringo.
