Mayor Greg Fischer wants to triple the tax on insurance premiums over the next four years to fund the increase in the city's pension obligations and avoid substantial budget cuts.

The tax increase, which would be the first since the merger of city and county governments in 2003, would target home, marine and life insurance, among other miscellaneous insurance, but not vehicle insurance, so to avoid disproportionately taxing the poorest residents of the city. .

Taxes on insurance premiums, a poorly noted levy included in insurance payments, would increase from 5% to 12.5% ​​in the next budget, then increase to 13.5% in fiscal year 2022 and 15% during the 2023 financial year.

The proposal would increase the average homeowner's insurance in Louisville from $ 12 to $ 13 a month, according to a report from the mayor's office.

At a press conference held Wednesday by a dozen city employees, Mr. Fischer presented his tax hike in order to avoid "specific, painful and damaging" budget cuts for all. the neighborhoods of Louisville.

City officials estimated that there would be a budget deficit of about $ 35 million over the next fiscal year, due to retirements, rising health care costs and lower incomes than planned. Fischer's administration anticipates that the proposed tax increase will generate $ 37 million over the next fiscal year.

"We must fight for the future of our city and invest in the future of our city," said Fischer. "That's what I'm asking Metro Council to do, and that's what I'm asking the people of Louisville to do." Join us. "

On the subject: What does the possible increase in the tax on insurance premiums mean in Louisville?

Members of the Louisville Metro Council will have until March 21 to pass an order increasing the tax, due to a deadline set by the state's insurance department. Council Chair David James, one of the sponsors, said it would be tabled Monday and sent to the budget committee.

Initial discussions on the increase of the insurance premium tax among city officials have proposed the idea of ​​an increase of 5 to 10% for each type of insurance, but critics are opposed to the inclusion of auto insurance due to cost disparities between cities based on zip code.

City Councilor Jessica Green, D-1st, said Wednesday that raising auto insurance rates would be tantamount to "giving back insurance" because insurance rates are disproportionately higher in the region. 39, west of Louisville.

"And so, the poorest people, the blackest people, those with the lowest incomes, would have to pay the highest amount," she said. "(This) is unacceptable to me."

Increases in vehicle insurance were excluded from Fischer's final plan because of how these changes "have a regressive impact" on people in economic difficulty, he said at the conference. press.

The revenue plan proposed by Fischer's office Wednesday was released almost a week after the publication of a series of "devastating" potential cuts that would be needed to fill the expected fiscal gap of $ 65 million at the time. over the next four years without any new source of income.

This proposal included staff reductions in almost every department of the city, as well as the closure of two of the city's 21 fire stations, four of the five public pools, four of the ten public golf courses, and from one of the city's 18 public library branches. This would also eliminate three upcoming Louisville Metropolitan Police recruitment classes.

Chief LMPD weighs in: Budget cuts would be a "slow train accident" for Louisville police

Fischer said at the time that his staff was working with Metro Council on other options to avoid cuts.

"While we have been discussing this in public for over a year, some people still do not seem to be aware of the seriousness of the situation," Fischer said. "I share this list of specific potential cuts so everyone can understand the deep pain that they would cause."

Members of the Metro Council say: Mayor of Louisville gets his "ambush" with budget advocacy

Some critics have responded that the city should have talked about the upcoming fiscal crisis longer. Fischer's office said he and others had raised the impending budget deficit over the past year, including his April budget speech and a question asked during his speech on the state of the city in January.

Nevertheless, discussions on specific solutions, including the increase in the tax on insurance premiums, were held in camera until Wednesday.

Asked what he would like to say to those who would like the discussions to have been public in recent months, Mr Fischer replied: "People have been well informed."

The Fischer administration estimates that the increase in taxes would generate an additional $ 63 million by the year 2023. Each percentage increase in the tax on insurance premiums would generate an estimated $ 12 million in revenue per annum. year, if all lines of insurance increased at equal rates and in the periphery. cities are applying the same increase as the Louisville metro.

If the cities of the suburbs do not increase their rates so as to correspond to the end of March deadline, the amount thus increased will rather go to the metro of Louisville. Several cities have announced plans to model their rates based on the Louisville increase and have drafted such legislation.

The last tax hike in Louisville goes back more than forty years, when the mayor of the day, Harvey Sloane, had organized a referendum on the increase of the business tax in order to contribute to the financing. public transport.

According to Fischer's office, the last tax on insurance rose for the last time in Louisville several decades ago, from 2.5% to 5% currently. He is currently reporting about $ 63.6 million, or 10 percent of the city's general fund revenue, according to the mayor's office.

The mayor's office said the Louisville pension obligation should increase by 12% each year until 2023. That's $ 86 million during the current fiscal year, which ends June 30, to $ 136 million by 2023.

More coverage: Kentucky's cities have their backs to the wall with their retirement obligations

Darcy Costello: 502-582-4834; dcostello@courier-journal.com; Twitter: @dctello. Support local journalism by subscribing today: www.courier-journal.com/darcyc.