{"data":{"id":"us-ky/krs-81a.429","jurisdiction":"us-ky","citation":"KRS 81A.429","heading":"Payments following annexation of territory that contains active","body":"residential, commercial, or industrial uses -- Cost-sharing agreements --\nReporting to the Department for Local Government -- Administrative\nregulations.\n(1) When a city annexes territory in a county that contains active residential,\ncommercial, or industrial uses on a substantial part of the territory, and the crediting\nprovisions set forth in KRS 68.197 apply to the county, the city shall remit\npayments to the county on January 1 of each year for a period of ten (10) years\nfollowing the enactment of the ordinance finally annexing territory into the city,\npursuant to the following formula unless the city and county otherwise agree in\nwriting:\n(a) The county shall calculate the amo unts of ad valorem property, occupational\nlicensure, and insurance premium taxes the county collected within the\nterritory in the year prior to the proposed annexation;\n(b) The county shall then add to the total amount of ad valorem property tax one\nhundred fifty percent (150%) of the occupational licensure tax and one\nhundred fifty percent (150%) of the insurance premium tax collected in the\nyear prior to annexation; and\n(c) The county shall then subtract from the figure calculated in paragraph (b) of\nthis subsection the property tax, occupational licensure tax, and insurance\npremium tax revenue it has collected or anticipates it will be able to collect for\neach year following the annexation, which figure will represent the remittance\npayment required to be paid by the city to the county.\nThe county shall update its calculation of the figure in paragraph (c) of this\nsubsection on a yearly basis, and shall provide the figure to the city at least thirty\n(30) days prior to the date on which payment is required  to be made by the city. A\ncity shall not be required to remit payments unless the county has provided the city\nwith documentation confirming the figure calculated in paragraph (c) of this\nsubsection.\n(2) (a) When a city proposes to annex territory that do es not contain active\nresidential, commercial, or industrial uses on a substantial part of the territory,\nthe crediting provisions set forth in KRS 68.197 apply to the county in which\nthe territory is located, and:\n1. The territory is not immediately contiguous to the existing city boundary\nand is connected only by a corridor, unless:\na. Existing water and sewer services were provided by the city to the\nterritory on or before January 1, 2024; and\nb. The county has not made a previous investment in infrastructure in\nthe territory, not including routine road maintenance; or\n2. The territory is contiguous to the existing city boundary, but the city is\nnot able to provide tangible benefits or services as a result of the\nannexation, including but not limited to:\na. Specialized infrastructure or utilities that the county itself cannot\nfeasibly provide at the time of the annexation;\nb. The provision of public safety or emergency response services that\nthe county itself cannot feasibly provide at the time of annexation;\nor\nc. The ability to sell alcoholic beverages in the territory to be\nannexed;\nthe county may, within fifteen (15) days after receiving written notice of the\nannexation from the city as required by KRS 81A.412(2) or 81A.420(1), enact\na resolution stating that the county desires to negotiate with the city regarding\nthe creation of an i nterlocal agreement for revenue and cost sharing related to\ndevelopment of the territory to be annexed. A copy of the resolution shall be\nimmediately transmitted to the city.\n(b) If a city receives the resolution, it shall negotiate with the county to form  an\ninterlocal agreement that addresses participation between the county and city\nin:\n1. Cost sharing for public investment in the development of the area;\n2. Cost sharing for provision of municipal services within the area; and\n3. Revenue sharing of occup ational tax revenue collected from the\nterritory.\n(c) The negotiations shall be completed within sixty (60) days of the enactment of\nthe resolution by the county, and the city shall not enact an ordinance finally\nannexing the territory into the city during that period.\n(d) If the parties fail to reach an agreement within the sixty (60) day period\ndescribed in paragraph (c) of this subsection:\n1. The city may enact an ordinance finally annexing the territory into the\ncity; and\n2. The county may elect to:\na. Not participate in the development of the territory; or\nb. Participate with the city in the development of the territory.\n(e) If the county elects to participate with the city in development of the territory\npursuant to subsection (2)(d)2.b. of this secti on, a cost and revenue sharing\ndefault option shall apply, under which the county shall provide funding for:\n1. Fifty percent (50%) of the costs associated with the public investment\nmade in developing the territory; and\n2. Fifty percent (50%) of the costs  associated with the provision of\nadditional municipal services in the territory.\nThe city shall be required to remit to the county, on a yearly basis, fifty\npercent (50%) of the occupational tax revenue generated in the territory, or an\namount of occupat ional tax revenue that would equal the amount that the\ncounty would collect from the territory pursuant to its countywide\noccupational tax rate in the absence of crediting, whichever is less. In no\ninstance shall a county receive payments under this sectio n that would exceed\nthe amount it would collect from the territory pursuant to its countywide\noccupational tax rate in the absence of crediting. If a county would receive an\namount of revenue that is less than fifty percent (50%) of the occupational tax\nrevenue generated in the territory pursuant to this paragraph, then its\nresponsibility for funding pursuant to subparagraphs 1. and 2. of this\nparagraph shall be changed to a percentage equal to the percentage of revenue\nthat the county would receive under t his paragraph. A county may, during the\nsixty (60) day period discussed in paragraph (c) of this subsection, elect to\nimpose a countywide occupational tax or raise its countywide occupational\ntax rate in conformance with statute.\n(f) Any agreement made pur suant to this subsection, including a default\nagreement under subsection (2)(e) of this section, shall be considered an\ninterlocal agreement and be subject to the provisions of the Interlocal\nCooperation Act, including the reporting requirements set forth in KRS\n65.260.\n(3) When a city proposes to annex territory in a county in which the crediting\nprovisions set forth in KRS 68.197 apply, the provisions of subsections (1) and (2)\nof this section shall not apply if the city and county are parties to an inter local\nagreement concerning the sharing of occupational tax revenue between the city and\ncounty, and that agreement would apply to the proposed annexation.\n(4) (a) When a city completes an annexation of territory in a county in which the\ncrediting provisions set forth in KRS 68.197 apply, the city shall submit to the\nDepartment for Local Government the information required by this\nsubsection. The information shall be submitted within sixty (60) days\nfollowing the enactment of the ordinance finally annexing t he territory into\nthe city, and shall include the following:\n1. The information required in KRS 81A.470(1)(a) and (b);\n2. A statement indicating whether the annexation was subject to subsection\n(1), (2), or (3) of this section, or if the annexation was one in which the\ncity provided tangible benefits or services as a result of the annexation\npursuant to subsection (2)(a)2. of this section; and\n3. A copy of any interlocal agreement created as a result of compliance\nwith this section or that applies as described in subsection (3) of this\nsection.\n(b) The Department for Local Government may make reporting forms consistent\nwith this subsection, and may promulgate administrative regulations pursuant\nto KRS Chapter 13A to implement the provisions of this subsection.","path":["KRS Chapter 81A"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=55345","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:42Z","sha256":"17c77b7877dea60b5c6fa642155828bdd77cfe74994dd935c574202fb3d100f5","source_id":"us-ky","stale":false,"prev":"us-ky/krs-81a.427","next":"us-ky/krs-81a.430"},"notice":"GroundRules: Original legal text. Not legal advice."}