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City considers annexation of nine DCPS properties

May 21, 2019

The Owensboro City Commission will hear the first reading of city ordinances that propose the annexation of nine Daviess County Public School properties. According to City officials, this proposal is both for the provision of services — fire, police and infrastructure — as well as the occupational tax the city could incur from the employees at the nine properties.

DCPS Superintendent Matt Robbins released a statement late Monday evening, stating that if the Owensboro City Commission approves the ordinances, the result would likely involve litigation.

“The forcible annexation of DCPS properties denies the sovereignty of the DCPS Board of Education, which we consider illegal under the statutes as written, and which we believe is unconstitutional when applied to the Board of Education,” he said.

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City Manager Nate Pagan said the nine identified properties pose a funding inequity for the city.

“Those who benefit from the service, should pay for the service,” he said.

Pagan gave the example of Apollo High School, which he referred to as a pocket of county property, surrounded by city property on all four sides. When the contractor working on the new AHS football stadium damaged Gemini Drive adjacent to the school, the City of Owensboro paid for the repair.

“And we will get no revenue from that project,” Pagan said of the stadium. “It skews our infrastructure costs versus our revenues.”

The properties proposed for annexation are Apollo High School, Burns Middle and Elementary Schools, Daviess County High School, Highland Elementary School, the property that will be the future site of Daviess County Middle School not already under City jurisdiction, DCPS Central Office and the maintenance and transportation departments.

Currently, those nine properties are served by Daviess County Fire Department and the Daviess County Sheriff’s Office. City Commissioner Larry Conder said this decision would enhance safety at the schools proposed in the annex, with quicker response times by City fire and police, solely based on closer proximity. He said this would mean school resource officers would transition to Owensboro Police Department also.

City officials confirmed that this decision would not make the six schools in question a part of Owensboro Public Schools, as district boundary lines would not change.

While the schools are tax-exempt, the employees at those schools pay occupational taxes. Should this pass, Pagan said the City plans to implement what he calls an innovative revenue sharing mechanism that would allow the occupational taxes incurred from the employees at those nine properties to be split with Daviess County Fiscal Court.

“We would rebate to the County half of their occupational tax rate, not to exceed 1 percent,” Pagan said. “Our intent was not to take money out of the County’s pocket.”

Pagan said the split is not even, however, as the City will require more money to provide services to those nine properties. He estimates that the City will take in $505,000 in additional occupational taxes, before services are paid out and the County will take in $263,000.

According to Pagan, should the ordinances pass, this will be the first partnership between the City and County governments of its kind.

The City will put the revenue from the additional occupational taxes into a pension reserve account to strengthen pension funding levels.

Conder said with the County’s recent proposal to raise occupational taxes, higher rates at DCPS schools were inevitable. The City’s occupational tax is currently set at 1.78 percent. The County’s rate is currently set at .35 percent with a proposed increase to .70 percent on Jan. 1, 2020 and then to 1 percent on Jan. 1, 2021.

“The gap, regardless, is going to be squeezing dramatically,” Conder said. “This will allow us to come together to provide for our children, but can also address our pension at the same time.”

Robbins, who said was made aware of the “forcible” annexation just 18 days ago, opposes the ordinances. He stated in his release that there are larger consequences and ramifications the City needs to consider.

Robbins said the nine annexations would result in a net cut in pay for employees of 1.43 percent at those the proposed schools and sites and a 408 percent net increase to current occupational taxes paid by DCPS employees. For perspective, he said, an employee earning $25,000 per year now pays $87.50 per year in occupational tax, but with this ordinance, he or she would pay $445 per year.

There are currently three schools that are already considered within city limits — Tamarack Elementary School, Daviess County Middle School and Heritage Park High School. Robbins said the board of education subsidizes employees at those schools, paying the difference between the City and County occupational tax rates.

“I can’t see us continuing that because the cost would be so exorbitant,” he said of subsidizing an additional six schools and three departments. “We would have as many schools in the City as in the County. That would be a tipping point.”

Robbins said should that happen there are only three things he and the board of education can do to offset those costs — tell employees they are responsible for the extra occupational tax, increase property taxes or shut down programs for students.

But he said the half a million dollars it would take to subsidize the occupational tax difference at the nine additional schools and buildings is not feasible for DCPS.

According to the legal representation to DCPS, forcible or non-consensual annexation have two applications — residential and industrial. In residential annexations, like a neighborhood, Robbins said, property owners have 60 days to petition, and can force the decision to be placed on the ballot for the neighborhood to vote. If 55 percent or more vote the annexation down, it can’t be revisited for five years.

In an industrial annexation, if the property owners object to the annexation, Robbins said the law gives them the exemption.

“The law doesn’t address non-residential ownership — in this case schools and office buildings,” he said. “If statutes don’t give clear guidance, it goes into a court of law.”

DCPS is concerned that this decision would set the precedent of annexing property without the request, permission or approval of the property owner.

“This action has the potential to lead to a ‘slippery slope’ that could affect other non-residential properties in the near future,” Robbins wrote in his release, naming farms, businesses and churches that could be affected in the future.

Mayor Tom Watson said the only way the City of Owensboro can grow is through annexation.

“We are land starved,” he said. “I don’t think there is any other way we can grow.”

Robbins said he doesn’t consider annexation as a definition of growth.

“Daviess County High School was built in the 1950s. Apollo High School was built in the 1960s,” he said. “Those are not new properties. There is no growth there. That doesn’t seem logical.”

As of late Monday night, Robbins said he and the board of education plan to attend Tuesday’s City Commission meeting for the first reading of the ordinances. He also sent DCPS employees an email Monday night encouraging those with questions or concerns to also attend the meeting.

A second reading will be held at the commission’s next meeting in two weeks.

May 21, 2019

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