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April 26, 2013

Judge takes Corbin-Knox case under submission

Ruling to be issued on occupational tax suit ‘could take some time’

KNOX COUNTY — The decision on the case involving the occupational tax issue between the City of Corbin and Knox County will wait a while longer.

That’s after the judge hearing the case decided to take the case under submission Thursday morning in Knox Circuit Court.

After hearing attorneys from both sides argue their cases for the two governments for about 90 minutes, Vice-Chief Circuit Judge Gregory A. Lay ended the hearing on cross motions for summary judgement by saying these words:

“I will need to take this under submission and I’ll issue a ruling,” Lay said.

His decision came 10 months after the City of Corbin filed suit against the Knox County Fiscal Court over the issue of getting the occupational tax from residents of Corbin who live on the Knox County side of the city.

The suit was filed in Knox Circuit Court in June 2012, and named the city and then-Corbin City Commissioner Joe “Butch” White as petitioners.

White was named as a petitioner in the suit because his home and business are located in the part of Corbin located in Knox County, and is subject to the occupational license fee ordinances of both Corbin and Knox County.

The lawsuit challenges the constitutionality of one section of a bill passed during the state legislature in March 2012. During that session of the General Assembly, Senate Floor Amendment 1, authored by State Senator Robert Stivers (R-Manchester), was attached to House Bill 499.

The amendment to HB 499 would require any set-off or credit of city license fees against county license fees existing between a city and county as of March 15, 2012 to remain in effect as it was on that date. It would also prohibit the provisions of a state statute from applying to a city and county, unless the city and county have both levied and are collecting license fees on March 15, 2012.

Gov. Steve Beshear signed the bill with the amendment attached to it in April 2012, after calling the state legislature into special session. In an April 2012 interview, Corbin Mayor Willard McBurney said the bill was an emergency bill dealing with the state getting more revenue, and because it was not a regular bill, could not be line-item vetoed.

Corbin officials say 23 percent of the city’s residents live on the Knox County side. State law allows counties with populations of 30,000 or more to levy occupational taxes, and allows cities inside those counties to keep a portion of the tax. Corbin currently has an agreement with Whitley County to retain 75 percent of the Whitley County tax.

Corbin has stated it would like to have an agreement with Knox County that is similar to the one with Whitley County.  Knox County presently has an agreement with the City of Barbourville where 25 percent of that county’s occupational tax goes to that city. It went down from the 32 percent Barbourville was getting from Knox County a year ago.

McBurney said in April 2012 the agreement between Barbourville and Knox County, as well as Knox County’s refusal to let Corbin keep a portion of the occupational tax levied on residents of Corbin, means city taxpayers are contributing to Barbourville’s budget while their taxes are denied to Corbin.

McBurney was in the courtroom with White and current Corbin City Commissioner Ed Tye watching attorney Nick Birkenhauer of the Crestview Hills law firm Dressman Benzinger LaVelle take Corbin’s position on the case Thursday. Across the other side, Knox County Judge/Executive J.M. Hall and Deputy Judge/Executive Jim Tye were behind the county’s legal team, made-up of Doug McSwain and Leila O’Carra, both of the Lexington law firm Wyatt, Tarrant & Combs.

Early in the hearing, Birkenhauer argued legal issues were raised in the case by White and the City of Corbin, with one being special legislation, and another being the amendment tacked on to House Bill 499, as he called it, “the Stivers Amendment is not germane to the tax amnesty act.”

“I would submit this ‘logrolling’ process, sub-section 8, has nothing to do with the tax amnesty act. Sen. Stivers just stuck it in the legislation. It has nothing to do with city and county occupational tax credits,” said Birkenhauer.

O’Carra came out next to defend Knox County’s side of the hearing.

“Your Honor, it’s within your discretion not to decide the case. There’s a number of unconstitutional grounds. None of these standards have been met. We’re not for sure if Corbin will ever decide to collect their tax. …Mr.White hasn’t been able to establish a case here. The petitioners have failed to comply to the issue. …Knox County did not enact this statute. We are struggling why we’re here to defend ourselves. We’re asking you to dismiss this judgmental action issue,” she told Judge Lay.

McSwain gave a substantive response to those inside the courtroom on behalf of Knox County, adding “Knox County imposed its occupational tax in 1999. At the end of the day, it is not our burden, but the petitioner’s burden to prove the constitutionality of the statute.”

Birkenhauer replied to the arguments after McSwain brought up some counties — Clark and Nelson counties — had an interest in the case, due to the cities of Bardstown and Bloomfield being in Nelson County, and Winchester being in Clark County.

“What if there are other cities and counties that this legislation applies to? Your Honor, there’s no ‘What if’s?’ There has been no interest in the state on this case, except the two parties right here. The fact that we haven’t heard this is an issue elsewhere in this Commonwealth speaks volumes,” he told Judge Lay.

The hearing ended with the Judge thanking both sides for being at the hearing, telling both Knox County and Corbin lawyers and people watching, “It’s been a well-argued case.”

When the hearing ended, Birkenhauer noted, “I’ll let the record stand for itself. It’s hard to say how long the summary judgement opinion will come out. There’s a lot of complex issues to look over. It could take some time.”

“I think the judge has got the matter explained to him. Depending on how much research he’s done, it may take a month or longer for a decision. I think it went well today. I think we haven’t heard the last of it,” McSwain said after the hearing.

The first lawsuit between Corbin and White against Knox County goes back to April 2008, when Circuit Court Judge Roderick Messer ruled in favor of Corbin letting its residents credit the amount they pay to Corbin against the Knox County tax. In April 2010, a second suit was filed in the state Court of Appeals, which also named White and Corbin as plaintiffs in the lawsuit with Knox County. The appeals court ruled that Corbin had no standing in the case, only White, in Otober of that same year.

Knox County filed with the Kentucky Supreme Court a motion for discretionary review of the appeals court’s standing in January 2011. In February 2012, both sides were notified by the state Supreme Court, saying they would refuse to make a decision, which left the appeals court’s ruling intact.

On Aug. 28, 2012, two months after the City of Corbin filed their current suit in Knox Circuit Court, Corbin filed a motion for a summary judgement at that court, asking to make Senate Floor Amendment 1 unconstitutional.

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