Horse Cave resident Sarah Barker recently embarked on a months-long investigation after a casual comparison of employment advantages with her neighbors revealed a significant difference in taxes.

Horse Cave residents who worked at Dart paid a 1.8% occupational tax while T. Marzetti employees paid 2.3%.

The Dart employees’ taxes came from Hart County’s 0.8% occupational tax and Horse Cave’s 1% occupational tax. T. Marzetti’s employees were exempt from the Horse Cave tax, but paid the county tax plus a 1.5% Industrial Park occupational tax.

Barker found it curious that the variation was so large across property lines, she said. It seemed like a portion of T. Marzetti employees’ money was going “down the drain,” she said.

She found it even stranger when she couldn’t seem to track down the specific ordinances establishing the industrial park occupational tax.

Horse Cave’s industrial park was established in 2005, and now is home to the Lancaster Colony Corporation, which includes T. Marzetti and Sister Schubert’s. Just a few months ago, the official employee tally across the park was 852, about 40% of whom lived in Horse Cave, said Hart County Judge-Executive Joe Choate.

“This park has been really good for the county and the region,” Choate said.

Barker found historical clips from the Hart County News Herald that stated that the 1.5% tax was a Tax Increment Financing fee. TIF district creation is a strategy to raise revenue for development.

At the time of creation, the property taxes of the entities in the TIF district are frozen. As the years go on, and property taxes increase, a portion of the extra property tax is directed specifically to maintain and develop the industrial area.

TIF districts have a specified endpoint, usually a few decades after their creation.

Hart County’s industrial park TIF generates approximately $500,000 a year, according to a 2020 Hart County Industrial Authority loan application.

But Barker couldn’t find a Hart County ordinance laying out the existence and terms of the industrial park occupational tax. She uncovered that the tax had been established in 2005 through a private contract between T. Marzetti and Hart County.

Barker went down the rabbit hole looking for a reason. According to Kentucky law, each county’s occupational taxes are required to have a corresponding ordinance passed by the fiscal court that spells out what the tax revenue will be used for specifically (KRS 68.100).

There are also several statutes that state that the total combined occupational tax from any governing body like a city or county cannot be over 2% (KRS 65.7056 and KRS 65.6853).

It seemed like both of these requirements were not being fulfilled. Plus, there were no filings with the Kentucky Secretary of State mentioning the industrial park occupational tax, just the 0.8% Hart County occupational tax.

Choate said he showed Barker the fiscal court meeting minutes from 2005, which show the creation of the industrial district. An ordinance passed on June 2, 2005, gave the Hart County judge-executive the authority “to negotiate a contract relating to the industrial district, with the Hart County Industrial Authority, for services and development expenses.”

Then Judge-Executive Terry Martin announced the 2.3% occupational tax at a July 7, 2005, fiscal court meeting. Martin reported that the tax revenue would go toward paying off the KIA (Kentucky Infrastructure Authority) loan, according to the meeting minutes.

Choate said that the tax was being considered as early as 2003 as an incentive for T. Marzetti to come to Horse Cave, since the company was considering other states.

“Even before there was a job there, this was set up,” Choate said.

But what about the 2% occupational tax cap? According to a statement by Jeffrey McKenzie, an attorney hired by Hart County, the 2% tax cap does not apply to the industrial park because the cap was established by the Kentucky legislature in 2008, several years after the industrial park tax was already in place.

The limit cannot be applied retroactively, McKenzie stated.

“The Rate Cap Statute fails to expressly communicate a legislative intent of retroactive application, so it is thus barred by Kentucky law from applying retroactively to the 2005 Hart County Occupational Tax,” he wrote.

Another Kentucky law states that no statutes should be assumed to be retroactive unless that intent was specified by the legislature.

Either way, the 1.5% industrial tax is set to sunset in June 2023 after a vote by the fiscal court on Nov. 10, 2022. The renegotiations had been in the works since early 2020, Choate said.

At the end of her investigation, Barker said she feels like there could have been more transparency.

“(T. Marzetti employees) should be able to easily find where their money is and what it’s paying for,” Barker said. “I hope it enlightens employees to request to know where their money is going.”