Since Kentucky’s Office of Property Valuation issued their assessment of Harlan County on July 15, local government leaders have been warning the public to expect tax increases this year and hinting that the years ahead may present even more challenges.
The reason for the current increase is a large drop of nearly $92 million in the value of unmined coal from the prior year. The state’s report shows the value of that major source of local revenue dropped from slightly more than $323 million in 2014 to just over $231.
By approving the compensating rate – the state’s estimate of what is needed to collect the same amount as last year – the county’s government and school district, along with the library, health department, soil conservation district and extension service, kept the increases at the lowest level.
Based on property valued at $100,000, a Harlan County taxpayer can expect their bill to be $185 more this year. Added together, the rates approved by the countywide taxing entities for 2015 added up to 18.5 cents per hundred more than in 2014.
In the city of Harlan, according to the report provided to the council by finance officer Charles Guyn, the compensating rate increase in their property taxes would be enough to cover only $16,000 in potential lost revenue. When spread over the number of property owners within city boundaries, it amounts to very little money per person.
Each of the other cities in Harlan County chose to keep the tax rates the same as the previous year. Cities here see little if any revenue from unmined coal revenues and the value of real estate within their boundaries had only marginal changes, if any, so the amounts they collect this year should be the same as in 2014.
The city’s independent school district, hard-pressed for funds to construct a new cafeteria and other projects, approved a higher rate in 2015, increasing from 42.9 cents per $100 to 48.6 cents in order to qualify for matching building funds from the state.
For their part, the county school board was divided on the issue of a tax increase large enough to qualify for those state funds, ultimately choosing to stick to the lowest amount in the compensating rate of 49.4 cents per $100, which is still significantly higher than the 43.3 cents per $100 set for 2014.
According to Harlan County Clerk Donna Hoskins, one area of concern for tax revenues will be in the percentage of delinquent taxes being collected. Last year, the county was approximately $22,000 short of collecting $1 million in delinquent taxes. This year, Hoskins says she expects to collect no more than half as much.
The need for higher property tax rates has resulted from the decrease in value of Harlan County’s unmined coal.
The value of unmined coal here had been steadily increasing in each of the past ten years. The drop this year returns those coal values back to an amount that is still greater than the $211 million assessment given in 2010.
This is different from severance taxes that are collected in addition once the coal is removed, or severed, from its underground deposits. Another aspect of the property tax law regarding unmined coal is that if the mineral is left untouched and it is documented that deposits are not actively mined for 10 years, the value of that underground deposit returns to zero.
As local coal operations continue to shut down and prospects for active mining remain slim, the value of unmined coal will continue to drop and the possibility exists that over the next decade Harlan County could have a majority of its coal reserves completely removed from the tax rolls, but severance dollars would disappear first as production stops.
In Kentucky, local governments and schools depend upon property tax revenue, and since the mid-1980s that has included an assessment of unmined minerals, which in Harlan County means coal.
While all property available for taxation exceeds $1 billion in value, the total value of real estate in the county is now valued at $392.6 million, which is only slightly less than the $393.4 million assessment from 2014.
As with unmined coal, the value of Harlan County real estate had been steadily increasing each of the past ten years, from $346.0 million in 2006 to today’s totals without a decline until now.
Local tax bills are due to hit the mail later this week, and residents will finally see how much this one result of the ongoing shutdown in coal mining operations has cost them.
Odd as it may seem, the value of oil and mineral rights increased from $36.3 million in 2014 to $42.7 million this year. But that type of property generates only a marginal amount of tax revenue.
The value of real estate, farm property, commercial buildings and industrial facilities largely remained the same in terms of the local tax revenue it generated.