Jeff Rogers, courtesy of Lexington Convention and Visitors BureauA view of the downtown Lexington skyline.
Jeff Rogers, courtesy of Lexington Convention and Visitors Bureau
A view of the downtown Lexington skyline.

In the early 1970s, Lexington, Ky., had what was likely one of the most irregular boundary lines in the country.

The population had grown by 32 percent over the previous 10 years, bringing the total number of people living there to 174,323 by the start of the decade.

The ensuing sprawl brought along with it a haphazard extension of utilities to newly developed areas. Sewers and street lights stretched down some roads on Lexington's fringes while circumventing others, many times doing so regardless of where the city limits lay.

Looking to bring order to the chaos, a group of residents hit on the idea of merging the Lexington government with Fayette County. The change, the group reasoned, would make community planning a far easier task, foremost by ending the countless annexation attempts that always followed any extension of services.

"We had a very jagged line between the city and the county," recalled Bill McCann, a former state lawmaker who helped sponsor the legislation that allowed the merger of Lexington and Fayette County.

"The police and fire couldn't tell if they were in the city or the county."

But those sharing McCann's opinions had to overcome one chief obstacle: the fears of non-city residents who thought the merger would be nothing more than a scheme to make them subsidize urban services — sewers, lights and street cleaning — without receiving benefits in return.

Their response came in the form of a tax system founded on a simple idea: charge residents only for the services they receive.

Simplicity wasn't enough, though. For the merger to succeed, the proposed tax system had to win over skeptical voters.

And it did, if the results of ballots cast on Nov. 7, 1972, are any indication. That day, 69.8 percent of the 62,197 voters who turned out to the polls cast ballots in favor of the merger.

McCann said it would be going too far to attribute the victory to any one policy. But he doubted success would have been possible without the proposed tax system.

"It gave an answer to those in the county who were concerned about 'You are going to tax us heavier,'" he said.

In Evansville and Vanderburgh County, those who favor consolidation hope to quell the same fears in a similar manner.

Ed Hafer Jr., chairman of the local consolidation committee's finance and tax subcommittee, said the creation of a tax system aimed at charging residents for no more than they receive will be an essential part of any proposal put before voters.

Hafer said, "It is fundamental to what we have heard from people. 'Don't tax me for things I don't benefit from or don't receive or didn't get a chance to vote on.'"

That said, he thinks some argue for drawing too marked of a line between city and county services. He has heard some noncity residents say they shouldn't have to pay for parks or roads in Evansville.

"That's not really right," he said. "Everybody benefits from those services."

A good reason to worry

William E. Lyons, who helped lead the Lexington-Fayette County merger campaign while a University of Kentucky professor of political science, believed noncity residents had a good reason to be worried about the loss of their separate government.

Lyons, now deceased, often is cited in discussions on the Lexington-Fayette County consolidation, both because of his direct involvement in bringing about the change and because of his subsequent academic writings on the issue.

In his book "The Politics of City-County Merger: The Lexington-Fayette County Experience," he took note of the far lower taxes paid by those living outside the city just before the merger occurred.

Noncity residents then owed 16.65 cents for every $100 of their properties' assessed values. Lexington residents, meanwhile, paid a far higher rate of 61.7 cents for every $100 of assessed value.

Making the tax difference even greater was the existence within Lexington of an occupational license tax, an income tax by a different name. In the early 1970s, it was applied only to the earnings of people who worked in the city or to the profits of businesses in operation there. The merger would cause it to be collected throughout the county.

"It would not be easy to demonstrate that the imposition of these additional 'taxes' under merger would bring these businesses or their employees any additions or improvements in the local government service package they were already receiving," Lyons wrote.

Lyons and others set about to formulate a new taxing system.

Studying the places where city services had been extended, they quickly saw Lexington and Fayette County could be divided into two districts. There was a "general service district," where residents had the use of parks, libraries, courts, mass transit, airports, roads, basic police and fire protection, code enforcement and various welfare and social services. It encompassed the entire county and, merger proponents concluded, should be supported by all local property taxpayers.

Then there was the "full urban service district," which corresponded roughly to the Lexington city limits. Those living within it enjoyed the additional benefits of street lights, street cleaning, garbage collection and greater police and fire protection.

In discussing how those urban services would be extended to new subdivisions or businesses, the merger planners made provisions to allow residents or companies to get only what they wanted. They could take street cleaning combined with street lights, or street lights with garbage collection, or garbage collection by itself.

"Indeed, the Lexington proposal went beyond other consolidation charters by providing that no additional property taxes would be imposed on fringe residents until additional urban services were actually installed," Lyons wrote.

Complicated, initially

The system turned out to be a bit more complicated than first designed, but not as much as some might assume.

Bill O'Mara, director of revenue for the Lexington-Fayette Urban County Government, said the various service combinations offered to residents resulted in the creation of eight tax districts.

Each was given its own tax rate designed to produce the revenue needed to pay for the services provided to those living there. Residents who wanted their streets cleaned or garbage collected could petition the government for those additional benefits. And the requests, so long as they didn't come from a small group of homeowners living in an isolated part of the county, were usually granted.

O'Mara conceded that the districts do look a bit like a patchwork when represented on a map. But despite the apparent complexity, the task of applying the individual tax rates correctly is something he can entrust to a single employee. Rather than working on property taxes, most of the 30 or so workers on his staff busy themselves with the local occupational license tax, which now produces the bulk of the revenue needed by local government.

To be sure, advances in technology have made administering the local property tax districts far easier than in the past. Spreadsheets present a much improved means of keeping track of the various tax rates when compared with the old pen-and-paper method.

"Once it's up and going, it's easy," O'Mara said. "I'm inheriting it 36 years later."

O'Mara said complaints about the system are rare, which isn't to say it is without faults.

One weakness becomes evident when public officials can't provide services, usually street lights, within the same year that they voted for an extension. Under the law, residents approved to receive those services must pay for them even if they haven't begun to enjoy them. The solution, O'Mara said, is to refund the money after it has been collected. That practice adds complexity but is necessary if the principle of payments-for-services-received is to be kept, he said.

But what about the effect on the taxes actually paid by residents?

In talking about the advantages of a merger, proponents often say the elimination of redundant services will lower the cost of government. If it won't lead to lower taxes, they say, it will at least cause taxes to rise slower than they would otherwise.

O'Mara said he can't attest to so direct a cause-and-effect in the Lexington experience. But he can point to a decline in local tax rates over nearly 40 years.

The basic rate charged to all owners of property within Fayette County was at 14.65 cents for every $100 of assessed value in 1975, the year after the merger went into effect. By 2009, it had fallen to 8 cents for each $100 of assessed value.

O'Mara said it would be inaccurate to attribute the entire decline to efficiencies brought about by the merger. He noted sewer services had been paid for with property taxes in the 1970s, but now are supported by fees charged to households in proportion to the amount of water used.

That, along with an increasing reliance on the occupational license tax, is no doubt responsible in part for the fall in rates. Still, he'd be surprised if an increase in government efficiency hadn't contributed.

Department consolidations

One certain result of the merger has been a trimming of certain government departments, if not of government employees.

Soon after the success at the polls in 1972, the Lexington Police Department began to assume the law enforcement duties performed by the Fayette County Sheriff's Department. Consolidation followed soon afterward for local fire departments, which also were brought under the leadership of city officials.

Lexington didn't get everything, though. Merger for the local parks went in the opposite direction, bestowing the responsibilities on county officials.

The full range of necessary changes took nearly three years to bring about, Lyons wrote. During that time, staff sizes were reduced mainly by a freeze on hiring used to replace employees who had left, instead of layoffs.

Some positions, though perhaps seen as unnecessary after the merger, were protected by the state constitution and couldn't be eliminated.

The sheriff was shorn of law-enforcement duties but continued to be responsible for serving legal summonses, collecting property taxes, transporting prisoners and providing security at the courthouse. The constitution also protected the position of county judge-executive, which has duties similar to those of the county commissioners in Indiana. The holder of that title stayed on as a sort of figurehead, possessed of little power but still entitled to a paycheck.

All along, merger proponents had expected to see the chief benefits of their proposals come from better planning, not a shortening of government payrolls. And the results of their labors show no evidence that they were overly modest in their expectations.

By June of this year, the Lexington-Fayette Urban County Government had 2,853 full-time workers on its payrolls. According to the latest census figures, 296,545 people were living in the county in 2009. If the population didn't grow much in a year, the numbers indicate Lexington-Fayette County has one full-time public employee for every 104 residents.

Evansville and Vanderburgh County together employ 1,949 full-time workers to serve a population the census put at 175,434 in 2009. That comes to one full-time worker for about every 90 residents. (Darmstadt, the only incorporated municipality in Vanderburgh County besides Evansville, has two full-time employees.)

Even so, direct comparisons between the staffing of various governments are tenuous. One government might, for instance, hire consultants to perform a service done in-house by another, with the result that the first appears to have a lower number of full-time employees on the payroll.

Cooperation before merger

Although the merger between Lexington and Fayette County became official in 1974, cooperation between the two governments had begun well before then. The local planning departments, responsible for establishing and enforcing zoning codes throughout the county, were among the earliest to undergo consolidation.

By 1958, local officials had drawn a line around the city and deemed everything inside to be within the "urban services area" — not to be confused with the services district used for tax purposes. Their primary goal was to protect the rural horse farms often associated with Lexington and nearby parts of Kentucky.

Chris King, director of the Lexington-Fayette Urban County Government division of planning, said unified planning was a step forward in its first form, but the reforms should have gone further. Planners still had to answer to two sets of bosses. For rezonings sought inside Lexington proper, they had to approach the city council; for rezonings outside, they had to go to the comparable body serving the county.

King said the merger has both eliminated the confusion caused by letting more than one group of decision makers set policy and made it easier to achieve consistency in planning over long stretches of time. The benefits of having only one set of bosses became especially evident during a recent revision of local zoning rules.

King said the mixture of population growth and construction led to a scarcity of land within Lexington. After "a lot of soul searching," local officials decided to add 5,400 acres to the land encompassed by the urban services area, King said.

About the same time, local officials adopted policies meant to reaffirm their commitment to protecting horse farms. By the 1990s, they found that their policies meant to prevent developers from building subdivisions outside the urban district were too weak. So they began mandating that new residences be built on 40 acres of agricultural land, rather than the 10 acres required by the old rule.

A second change was used to compensate farmers for the loss of their ability to cash in on their land. King said local government started a policy of buying "development rights" for rural acreage, which had the twin benefit of keeping the subdivisions at bay while putting money into farmers' pockets.

King doubted policymakers could have proceeded so quickly toward a common set of goals "without the centralized planning to build consensus and decisions around."

The same scarcity of land that led to the expansion of the urban services area also has contributed to a rise in local property values. That, in turn, has provoked worries about a lack of affordable housing within the county, King said.

"We don't want to get to the point where folks who work here can't live here," he said.

William Caudill found himself in that situation several years ago. The 47-year-old native of eastern Kentucky first came to Lexington in 1994 to take a job with the local Ruskin Co. plant, which produces parts for air conditioners.

But he later found the cost of living too great and decided to move about 20 miles south to Nicholasville. In his new home, more lax zoning rules have allowed shopping centers and businesses to be built along the main highway connecting Nicholasville to Lexington.

Caudill said he now must endure a 30- to 45-minute commute and contend with traffic when he returns home from work. But he doesn't regret his move to Nicholasville.

"All in all, it was cheaper," he said. "There aren't a whole lot of crimes going on around here. It's quiet, and I like up here better."

Is it a boon or disadvantage?

What some deem a disadvantage, others see as a boon. Ed Lane, who serves on the Urban County Council and publishes the local business magazine The Lane Report, said the rules forcing most new construction to occur within the urban services area cause developers to make use of vacant lots or tracts within blighted sections of the city, sites they might not otherwise be inclined to go near.

"This is not all bad," said Lane, who also runs a firm dealing in commercial real estate. "When you have higher values, you can justify the redevelopment of property. There is an incentive to recycle existing properties in order to get higher values out of them."

For many Evansville officials, the problems associated with high property values are problems they would love to have. Evansville Mayor Jonathan Weinzapfel and others have pushed forward with a number of plans meant to draw investment to parts of the city neglected by the private sector. Their policies have included offers of grants to developers who open lofts in abandoned buildings on Main Street, the construction of houses in blighted neighborhoods and the replacement of Roberts Stadium with a Downtown arena.

In trying to measure their success against that of other cities, Evansville officials have reason to look upon Lexington-Fayette County with envy. Officials there recently embarked on $1.1 million worth of improvements to the city's Main Street, widening sidewalks and adding both bike and parking lanes along certain stretches.

The work is being done in preparation for the 2010 World Equestrian Games, an event that will last more than two weeks, from late September to early October. A half-million people are expected to attend, most of them horse enthusiasts coming to watch eight types of equestrian competition.

The city also just completed a $17 million renovation of downtown blocks in the area between the campuses of University of Kentucky and Transylvania University. Accompanying that work have been the openings of about 20 restaurants, bars and nightclubs in the same area.

Signs of the recent recession remain fairly rare. One sign is an empty block in the middle of downtown Lexington where several buildings were razed to make way for a project that was to combine hotels, condominiums, offices and stores but didn't come to fruition.

Economic advantage?

Bob Quick, the president and chief executive officer of Commerce Lexington, said it's hard to say with certainty how much of Lexington-Fayette County's prosperity is owed to a system of government. But he has little doubt that Evansville would benefit from a merger.

And he is in as good of a position as anyone to say that, having been the director of the Chamber of Commerce of Southwest Indiana from 1994 to 2001.

Quick wasn't able to cite a particular case in which merged government has played an essential role in his work to attract companies.

Probably more important in the eyes of most businessmen, he said, is Lexington-Fayette County's proximity to Interstate 64, which runs west to Louisville and St. Louis, and Interstate 75, which goes north to Cincinnati and south to Atlanta.

But when discussing the region's attributes with companies, Quick said he often is the one who first mentions the merged government.

"Most of the time, they will acknowledge that they have heard of it," he said. "But I can't tell you that's the one thing that puts anybody over the edge."

It helps with planning, he said, because the merged government ensures that fewer decision makers have control over important decisions. And, for Quick, that means less bureaucracy to go through to get approvals for the various incentives often offered to companies, or for the permits companies must obtain before opening their doors.

That, Quick said, is perhaps the chief advantage Evansville and Vanderburgh County officials can expect from following Lexington-Fayette County's example.

"For us, it's a confidence issue," Quick said. "Because we know our process is easy to navigate. Or most of the time it's easy to navigate."

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