KRS 81A.429: Payments following annexation of territory that contains active

residential, commercial, or industrial uses -- Cost-sharing agreements --

Reporting to the Department for Local Government -- Administrative

regulations.

(1) When a city annexes territory in a county that contains active residential,

commercial, or industrial uses on a substantial part of the territory, and the crediting

provisions set forth in KRS 68.197 apply to the county, the city shall remit

payments to the county on January 1 of each year for a period of ten (10) years

following the enactment of the ordinance finally annexing territory into the city,

pursuant to the following formula unless the city and county otherwise agree in

writing:

(a) The county shall calculate the amo unts of ad valorem property, occupational

licensure, and insurance premium taxes the county collected within the

territory in the year prior to the proposed annexation;

(b) The county shall then add to the total amount of ad valorem property tax one

hundred fifty percent (150%) of the occupational licensure tax and one

hundred fifty percent (150%) of the insurance premium tax collected in the

year prior to annexation; and

(c) The county shall then subtract from the figure calculated in paragraph (b) of

this subsection the property tax, occupational licensure tax, and insurance

premium tax revenue it has collected or anticipates it will be able to collect for

each year following the annexation, which figure will represent the remittance

payment required to be paid by the city to the county.

The county shall update its calculation of the figure in paragraph (c) of this

subsection on a yearly basis, and shall provide the figure to the city at least thirty

(30) days prior to the date on which payment is required to be made by the city. A

city shall not be required to remit payments unless the county has provided the city

with documentation confirming the figure calculated in paragraph (c) of this

subsection.

(2) (a) When a city proposes to annex territory that do es not contain active

residential, commercial, or industrial uses on a substantial part of the territory,

the crediting provisions set forth in KRS 68.197 apply to the county in which

the territory is located, and:

1. The territory is not immediately contiguous to the existing city boundary

and is connected only by a corridor, unless:

a. Existing water and sewer services were provided by the city to the

territory on or before January 1, 2024; and

b. The county has not made a previous investment in infrastructure in

the territory, not including routine road maintenance; or

2. The territory is contiguous to the existing city boundary, but the city is

not able to provide tangible benefits or services as a result of the

annexation, including but not limited to:

a. Specialized infrastructure or utilities that the county itself cannot

feasibly provide at the time of the annexation;

b. The provision of public safety or emergency response services that

the county itself cannot feasibly provide at the time of annexation;

or

c. The ability to sell alcoholic beverages in the territory to be

annexed;

the county may, within fifteen (15) days after receiving written notice of the

annexation from the city as required by KRS 81A.412(2) or 81A.420(1), enact

a resolution stating that the county desires to negotiate with the city regarding

the creation of an i nterlocal agreement for revenue and cost sharing related to

development of the territory to be annexed. A copy of the resolution shall be

immediately transmitted to the city.

(b) If a city receives the resolution, it shall negotiate with the county to form an

interlocal agreement that addresses participation between the county and city

in:

1. Cost sharing for public investment in the development of the area;

2. Cost sharing for provision of municipal services within the area; and

3. Revenue sharing of occup ational tax revenue collected from the

territory.

(c) The negotiations shall be completed within sixty (60) days of the enactment of

the resolution by the county, and the city shall not enact an ordinance finally

annexing the territory into the city during that period.

(d) If the parties fail to reach an agreement within the sixty (60) day period

described in paragraph (c) of this subsection:

1. The city may enact an ordinance finally annexing the territory into the

city; and

2. The county may elect to:

a. Not participate in the development of the territory; or

b. Participate with the city in the development of the territory.

(e) If the county elects to participate with the city in development of the territory

pursuant to subsection (2)(d)2.b. of this secti on, a cost and revenue sharing

default option shall apply, under which the county shall provide funding for:

1. Fifty percent (50%) of the costs associated with the public investment

made in developing the territory; and

2. Fifty percent (50%) of the costs associated with the provision of

additional municipal services in the territory.

The city shall be required to remit to the county, on a yearly basis, fifty

percent (50%) of the occupational tax revenue generated in the territory, or an

amount of occupat ional tax revenue that would equal the amount that the

county would collect from the territory pursuant to its countywide

occupational tax rate in the absence of crediting, whichever is less. In no

instance shall a county receive payments under this sectio n that would exceed

the amount it would collect from the territory pursuant to its countywide

occupational tax rate in the absence of crediting. If a county would receive an

amount of revenue that is less than fifty percent (50%) of the occupational tax

revenue generated in the territory pursuant to this paragraph, then its

responsibility for funding pursuant to subparagraphs 1. and 2. of this

paragraph shall be changed to a percentage equal to the percentage of revenue

that the county would receive under t his paragraph. A county may, during the

sixty (60) day period discussed in paragraph (c) of this subsection, elect to

impose a countywide occupational tax or raise its countywide occupational

tax rate in conformance with statute.

(f) Any agreement made pur suant to this subsection, including a default

agreement under subsection (2)(e) of this section, shall be considered an

interlocal agreement and be subject to the provisions of the Interlocal

Cooperation Act, including the reporting requirements set forth in KRS

65.260.

(3) When a city proposes to annex territory in a county in which the crediting

provisions set forth in KRS 68.197 apply, the provisions of subsections (1) and (2)

of this section shall not apply if the city and county are parties to an inter local

agreement concerning the sharing of occupational tax revenue between the city and

county, and that agreement would apply to the proposed annexation.

(4) (a) When a city completes an annexation of territory in a county in which the

crediting provisions set forth in KRS 68.197 apply, the city shall submit to the

Department for Local Government the information required by this

subsection. The information shall be submitted within sixty (60) days

following the enactment of the ordinance finally annexing t he territory into

the city, and shall include the following:

1. The information required in KRS 81A.470(1)(a) and (b);

2. A statement indicating whether the annexation was subject to subsection

(1), (2), or (3) of this section, or if the annexation was one in which the

city provided tangible benefits or services as a result of the annexation

pursuant to subsection (2)(a)2. of this section; and

3. A copy of any interlocal agreement created as a result of compliance

with this section or that applies as described in subsection (3) of this

section.

(b) The Department for Local Government may make reporting forms consistent

with this subsection, and may promulgate administrative regulations pursuant

to KRS Chapter 13A to implement the provisions of this subsection.