Lawsuits over taxation could have drastic effect on Whitley Library

The outcome of lawsuits against two public libraries in northern Kentucky could have dire impacts for similar libraries across the state, including in Whitley County where officials estimate it could gut roughly 50 to 75 percent of current budgets.

Whitley County Public Library Executive Director Greg Meadors is keeping a worried eye on appeals filed by the Kenton County Public Library and the Campbell County Public Library – both of whom recently lost lawsuits brought by taxpayers in those counties challenging their current taxing structures.

"It has the potential to be pretty devastating," Meadors said this week. "This has definitely affected our plans right now. We’ve kind of gone into a wait and see mode because we don’t really know what will happen."

The Whitley County Public Library is not alone?

It’s estimated that adverse legal decisions on the issue could cause a total of 54 public libraries across Kentucky to abruptly lose 50 to 83 percent of revenue in one fell swoop.

At issue is how public libraries raise revenue through taxes.

In 1979, HB44 passed the state legislature. It was a bill that overhauled the way so called "special taxing districts" raised revenue. Such districts include things like libraries, sewer districts and fire departments, among others. It allowed the districts to set their own tax rates based on previous year’s revenue.

But in each of the legal challenges, plaintiffs contend that HB44 was never meant to include libraries. Judges in both cases have agreed.

Prior to the law, libraries could only increase tax rates through a ballot referendum.

Plaintiffs in both cases have asked that libraries be forced to "roll back" tax rates to 1979 levels. 

Meadors isn’t even sure what the 1979 level would be for the Whitley County Public Library. The oldest rate he can find is from 1981, which was 1.7 percent on real property and 1.7 percent per $100 value on personal property. Current rates are 5.2 percent per $100 on both real and personal property. The library also receives two percent on the value of all vehicles registered in the county, which would go unchanged.

Meadors said members of the Whitley County Library Board have always followed HB44 when setting tax rates, and ultimately set those rates based on recommendations set by the Kentucky Department of Local Government and the Department of Libraries and Archives.

"This was the way it was supposed to be done, so that’s the way we’ve been doing it," Meadors said.

"If we were forced to go back to 1979, every aspect of the library would go down," he added. "When you look back at 1979 at what they were doing … there was no Internet or any computers … A lot of things they were offering then, there is just no way to compare then to now."

It could be even worse for libraries if the legal battle goes awry.

Plaintiff’s have argued that libraries should be forced to refund taxes collected improperly back to taxpayers. That could create a circular situation where Meadors claims many libraries would be forced to close and sell off all their materials, but would still technically exist. Any tax money garnered would be used to pay off debt and make refunds right back to taxpayers.

The average library district refund for 2012 alone could be around $669,147.

Meadors said he is in the process of planning for worst-case scenarios. He believes the Whitley County Public Library could stay open, but with drastically reduced staff, cutbacks on worker hours and hours of operation, and a significant reduction in money available to purchase new materials.

All of it would come at a time when the library is seeing historic rises in usage by the public.

The Whitley County Public Library gets around 80,000 patron visits per year. And for the first time this year, its circulation has topped 100,000.

The library has an operating budget of roughly $700,000 and holds around $1 million in surplus. Around two thirds of the surplus is an emergency fund set aside to roughly equal one years annual operating budget for the library. The remaining $300,000 to $400,000 is for future capital construction.

The Whitley County Library District also gives 25 percent of its tax revenue to help with the operation of the Corbin Public Library.

Meadors said he’s inquired to see if state legislators are looking at a legislative fix for the problem. He said the word he’s gotten is that lawmakers aren’t likely to intervene until the issue is settled in the courts.

Motions have been filed in both cases to bounce the appeals straight up to the Kentucky Supreme Court.

New lawsuits against two other public libraries, in Anderson and Boone Counties, have recently been filed.