Thethird meeting of the Interim Joint Committee on Judiciary was held on Tuesday, September 16, 2008, at 10:00 AM, in West Liberty, Kentucky. Senator Robert Stivers II, Chair, called the meeting to order, but delayed the call of the roll until later; a quorum was not present. Chairman Stivers recognized Bob Nickell, mayor of West Liberty, Tim Conway, County Judge/Executive of Morgan County, and Joanne Tobin with the MSU Center at West Liberty, who each spoke and welcomed the committee to the locality.
Members: Senator Robert Stivers II, Co-Chair; Representative Kathy W. Stein, Co-Chair; Senators Perry B. Clark, Carroll Gibson, Ray S. Jones II, Dan Seum and Katie Stine; Representatives Joseph M. Fischer, Derrick Graham, Darryl T. Owens, Arnold Simpson, Greg Stumbo and Robin L. Webb.
Guests: J. Michael Foster, President-Elect, Kentucky Association of Counties, Brucie Moore, President of the Kentucky County Attorneys Association and Tom Crawford from the Dept. of Revenue who later joined the panel. Rebecca K. Phillips, Circuit Judge from the 37th Judicial Circuit was the final guest speaker.
LRC Staff: Norman W. Lawson, Committee Staff Administrator; Ray Debolt, Jon Grate, Joanna Decker and Carolyn Gaines, Secretary.
Chairman Stivers moved to the first presentation on the agenda, which related to property tax bills. The two invited speakers were J. Michael Foster, President-elect of KACO, and Brucie Moore, President of the Kentucky County Attorneys Association. Tom Crawford from the Dept. of Revenue later joined the panel.
Mr. Foster began his presentation by noting that county offices in Kentucky are fee based, with fees generated in the course of that office’s business being used to support the operation of the office as it provides services to the citizens. Also, in relation to tax bills, when the county attorney works to collect a bill, the county attorney does so pursuant to a contract with the Revenue Cabinet, and receives a commission for that work. Mr. Foster related that the collection of unpaid property tax bills has traditionally provided fee and commission income for county attorneys, county clerks, and sheriffs, but that increasingly the tax bills are being purchased and collected by private third party purchasers. By removing the tax bills from the public officers’ collection process, those officers are being deprived of the fee revenue that has been traditionally generated by the collection of those tax bills. Mr. Foster related his belief that the tax bills are being purchased by private third party purchasers due to the fact that they carry 12% interest, and that the purchaser may also collect penalties and fees, including an attorney fee. He also related that he understands that while many of these purchasers are legitimate businesses who operate reasonably, he has heard that a number of the purchasers fail to work with or even communicate with the delinquent taxpayer in the hope of prolonging the time of the indebtedness with an eye toward maximizing the time that the 12% interest runs.
Mr. Foster further informed the committee that recent legislation allows the Commonwealth to purchase delinquent property tax bills. This allows the Commonwealth to benefit from the 12% interest, although the state is limited to holding a maximum of $25 million in delinquent tax bills at any one time.
Mr. Foster also spoke to a developing problem that is occurring as the number of third party purchasers increases. That problem centers on determining who may purchase the tax bills when there are competing prospective purchasers. There is little statutory guidance as to who the bills should be sold to if multiple purchasers appear at the same time to purchase the bills.
In light of the foregoing, Mr. Foster informed the committee that Kentucky Association of Counties, the Dept. of Revenue, and other interested stakeholders were engaged in an ongoing effort to develop a comprehensive reform of the property tax bill process currently in place. The goals of the legislation are to retain fee funding for county offices, to eliminate unnecessary steps in the system, and to make the system more taxpayer friendly with additional consumer protection systems built into the system. As an example, one change would be to eliminate the sheriff’s sale of the delinquent bills, and just place the bills with the county clerk. Another would be the creation of some type of vetting process for the third party purchasers. Mr. Foster informed the committee that the hope was to have legislation ready for the upcoming session of the General Assembly.
Rep. Stumbo asked about the degree of latitude given to local officials when collecting delinquent property tax bills, with the response being that latitude exists with regard to penalties and interest but not as to the amount of the actual tax itself. Rep. Stumbo asked the same question in regard to third party purchasers, with the response being that latitude also exists there as to all amounts, but that it is seldom used.
Sen. Jones related that a problem he sees has to do with purchasers of a new property not receiving the tax bill for the property when it is purchased mid-year. Further, when the new owner attempts to contact a third party purchaser of the tax bill to pay it, there is a great deal of difficulty in having the phone answered. Sen. Jones offered that perhaps a better system of notifying new property purchasers of existing tax bills would be of assistance, and that the state may want a requirement that third party purchasers actually communicate with property owners. In response to Sen. Jones’ question regarding fees and consumer protection, Mr. Foster reiterated that the ongoing drafting process was looking at all fees and that they desired to build consumer protection provisions into the legislation.
In response to committee concerns, Mr. Foster stated that third party purchasers had to wait 12 months before they could begin the process of initiating a sale of the property. Ms. Moore also informed the committee that legislation coming into effect this year requires that deeds contain information as to who will be responsible for the property tax bill. A non-compliant deed will be non-recordable.
Rep. Webb stated her desire to have the committee hear from the Attorney General and the Dept. of Revenue in regard to the property tax issue.
Sen. Seum asked if a mortgage company gets notified of unpaid tax bills. Mr. Foster replied that the answer was legally no, but that some county attorneys made that contact to assist in collection. Sen. Seum offered the thought that perhaps that contact should be required in light of HB 182 which requires that consideration be given to “in care of” addresses. Sen. Seum then asked about the calculation of the $25 million cap imposed on the state’s purchase of property tax bills, since they would seem to be a good investment vehicle that the taxpayers could benefit from instead of private third party purchasers. Mr. Foster did not know how the $25 million cap had been arrived at, and agreed that the bills could be a good investment for the state. Sen. Seum finished by observing that the system’s current design made things unnecessarily complicated for ordinary citizens.
Rep. Owens inquired about the problems created by multiple potential third party purchasers attempting to purchase the same set of tax bills. Mr. Foster stated that the legislation being drafted would clarify how that situation would be resolved.
Rep. Simpson shared his experience from Northern Kentucky, that being that contact problems with third party purchasers are rare because the companies want the contact to occur so that they can be paid. He also alerted the committee to a statute that gives a purchaser from a prior year a preference in purchasing the bill for the same property the next year, since that process bypasses many of the local fees that would otherwise be imposed on the new tax bill. Lastly, Rep. Simpson also expressed displeasure in regard to the process of having relatively small bills became rather large in a short amount of time, stating that the property tax bill process was never intended to become an investment vehicle for large corporations.
Rep. Stumbo confirmed with the guests that eliminating the sheriffs’ sale of delinquent bills is part of the legislative package being developed and further suggested looking at ways to have more collection done at the local level with those officials being perhaps given a little more latitude in the process of collecting.
Sen. Jones confirmed that even if the sheriffs’ sale is eliminated that the bills would still be offered for sale, just at the county clerk’s office. Sen. Jones also expressed his hope that the legislation would balance the need of local government to collect taxes needed by the government for public services with fairness to local residents.
Sen. Stivers asked about the fees currently allowed, and factors that drove the amount due on a delinquent tax bill. Ms. Moore went over the fees chargeable, including various administrative fees, attorney's fees, and interest. With regard to fees charged by local public officials in the collection process, Ms. Moore pointed out that with funding cuts made by the General Assembly, those fees are more important now than before if those offices are to continue to provide the same level of service.
Sen. Stivers stated that the issue of property tax bill collection was an important issue, and thanked the witnesses for the quality of their presentation and their effort in coming across the state to make that presentation before the committee.
Sen. Stivers next called Rebecca K. Phillips, Circuit Judge from the 37th Judicial Circuit, who presented the committee with information on the formation and operation of the new drug court in that circuit and with information on the operation of drug courts generally.
Judge Phillips informed the committee that the local drug court had been in operation in one county in the circuit for less than two years, and that it was in the process of expanding into the remaining two counties. The judge stated that in dealing with criminal defendants, part of her philosophy had to center on the idea of exacting punishment for a crime and in protecting society from future crime. In terms of protection, the judge stated that incarceration may not always be the best solution because of a lack of treatment programs, or that the person’s sentence may be too short to qualify them for treatment while incarcerated.
In terms of treatment, Judge Phillips informed the committee that drug court participants undergo testing far more frequently than would occur in a typical probation or parole situation, with testing taking place even on holidays and weekends. Drug court treatment also tries to address post-treatment support issues to help prevent relapse. Part of this process can focus on lifestyle choices of the participants, with one example being persons who have never held employment. Drug court requires employment or the active seeking of employment. Participants also regularly journal and do homework assignments as a means of education and learning to self-identify problems and solutions.
An additional emphasis in drug court is requiring honesty from the participants, with penalties for dishonesty being as severe as those for using drugs. The judge stated that being honest can be a new experience for participants, who have led a life of making excuses to avoid responsibility. Another aspect of treatment has to do with identifying mental or emotional triggers for drug use. The judge stated that many participants used drugs as a way of dealing with these issues, such as boredom, anger, depression, etc. Drug court tries to teach people to deal with these issues through some means other than drug use.
The judge informed the committee that the drug court in her circuit had not run long enough to say if it had been a success, but that it looked like it would turn out that way as they had people who were succeeding in the program, and that drug court in Kentucky as a whole has been a success. To illustrate the point, the judge informed the committee that Kentucky now had 411 drug free babies born to drug court participants; babies that would have otherwise been born to a drug using parent.
In terms of needs, the judge related that in her area the biggest problem was transportation. Her circuit is comprised of three rural areas, and many participants do not have a driver’s license, and do not have access to buses or taxis. She also thought that more treatment options and more capacity at existing drug treatment programs would be of assistance.
The judge also addressed a perception that drug court might be something of a “get out of jail free” card. With program participants beginning their day at 5:30 AM, being required to work, having to actively engage in treatment programs and drug court activities, and then having an 8:00 PM curfew, the judge’s opinion was that a participant’s daily life was not an easy one.
At the conclusion of the judge’s remarks, Rep. Webb recognized and thanked the judge and audience member David Flatt, the Commonwealth’s Attorney for the judge’s circuit, for the hard work that they do in operating the drug court and working to get appropriate people placed into the program. Rep. Webb reiterated her view that drug court in Kentucky has proven to be a success.
Sen. Jones shared with the committee his experience gained from 14 years of practice that drug abuse is an ever increasing problem. He stated that he was looking forward to the work of the penal code subcommittee regarding the drug problem given the fiscal and human costs of drug addiction. Finally, he expressed hope that attention could be given to catching people earlier in the addiction cycle, such as when a person is charged with driving under the influence of a drug.
In response to a question from Rep. Graham, the judge stated that almost all of Kentucky’s circuits now had drug courts operating in them. In response to further questioning, the judge informed Rep. Graham that drug testing is done in the drug court’s offices, and that the circuits did collaborate on best practices. Each of the circuits uses a standard model with required protocols, but that local adaptations are encouraged to fit the needs and preferences of the community.
The meeting was adjourned at 12:05 PM.