Dear Fort Wright Friends and Neighbors:
I am writing you today to apologize for and inform you about an unfortunate situation that has arisen regarding our recent repeal of our longstanding motor vehicle tax. Please allow me to explain.
The City of Fort Wright has had a motor vehicle tax for many decades at least. The rate has been the same for decades at $0.1977/$100 (for example a $25,000 vehicle was taxed $49.43 per year).
City Council is constantly evaluating our tax burden and is always working hard to keep more of your money in your pocket, especially now with inflation skyrocketing. After reviewing our revenues and expenses and considering our substantial reserves, Council thoughtfully decided that the City can run without the revenue generated by the vehicle tax. As a result, on November 2, 2022, City Council passed Ordinance 11-2022 to repeal the City’s motor vehicle tax. The ordinance was passed, published, and sent to the County Clerk and the Kentucky Finance Cabinet to have their records and systems updated and to stop collection of the tax in 2023.
On November 21, 2022, the City was informed that Ordinance 11-2022 was rejected by the Kentucky Finance Cabinet. The Finance Cabinet has taken the position that a city is not allowed to exempt any type of property from tax, and our ordinance was deemed such an exemption. Apparently, exemption from tax violates a provision of the Kentucky constitution. Their unfortunate rejection of our ordinance was completely and totally unexpected by the City.
Our City Attorney attended a meeting with an administrator and three attorneys from the Finance Cabinet on 11-28-2022, and fully examined the current situation with regard to our tax ordinance and those of other Kentucky cities as they relate to the tax exemption prohibition. It turns out that only 5 of the 19 cities in Kenton County, and only 273 cities of the 407 cities across Kentucky charge a motor vehicle tax. As best anyone can tell, the 134 cities in the state that do not charge the tax have not done so for many decades. Consequently, there was no new ordinance passed to repeal the tax which we were informed would also be rejected.
Despite the fact that a very large number of other cities do not charge this tax, the State will not allow Fort Wright to repeal ours. This seems totally illogical, and an attorney, for the Finance Cabinet, admitted as much, but stated that they cannot sanction an exemption of property. It was explained that the State has simply not pursued enforcement of the violation by the 134 cities in Kentucky who do not charge the tax. Legal action to challenge this illogical position is being considered by Council, and Council has authorized me to work with Staff and our attorney to explore a lawsuit against the state on this matter. More information on litigation may follow.
For the moment we cannot repeal the tax, but we can set a very low tax rate (i.e., 2 cents/$100), which significantly lowers the tax without a violation of the constitutional provision prohibiting the exemption of property from taxes. To change the rate, a city must notify the state of the new rate by October 1 preceding the next calendar year. We are too late to change the rate for 2023 but can do so for 2024 and after which is what we are doing.
At the Council meeting on December 7th, 2022, City Council unanimously passed the first reading of a new Ordinance that amends Ordinance 11-2022 such that the existing tax is still charged for 2023 at the old rate of $0.1977/$1000, because we did not change it in time per the October 1st deadline.
Per the same new ordinance, effective January 1, 2024, the tax is reduced to $0.02/$100, significantly reducing the tax, but not cutting it completely. The tax on a $25,000 vehicle in 2024 will only be $5.00 per year, a 90% reduction from the current rate. $0.02/$100 was chosen because it’s not zero (effectively repealing the tax) and other cities have been successful with this approach. The second reading of the ordinance will be held at a Special Council meeting on December 21st, 2022, at 6:00 PM at the City Building. I fully expect it to pass unanimously.
Assuming the new ordinance passes as written, you will see the tax at the original rate when you register your vehicle with the Clerk in 2023. Then, barring changes that may occur through City-initiated legislation, the tax rate will be set at $0.02/$100 beginning in 2024.
Council has tried to act in good faith on this matter and this is an unfortunate and embarrassing situation we find ourselves in due to the illogical and outrageous position the Kentucky Finance Cabinet has taken on this subject. I accept full responsibility for and sincerely apologize for any confusion or inconvenience that we may have caused for you in this regard, and I can assure you that we will fight this and will continue to work hard to put more money back in your pocket while at the same time making Fort Wright a great, place to live, work and play!
Feel free to reach out to me or Staff any time if you have questions about the motor vehicle tax or anything else. You can reach me at [email protected] or 859-414-4610. You can find contact information for all Staff members on our website: www.fortwright.com.
I wish you and your family a joyous and safe holiday season and a healthy and prosperous New Year!
Best regards,
Mayor Dave Hatter