Mayor Greg Fischer wants to triple Louisville's insurance premium tax over the next four years to fund the city's rising pension obligations and avoid major cuts to the budget.

The tax increase, which would be the first since city and county governments merged in 2003, would be levied on home, marine and life insurances, among other miscellaneous policies, but not on vehicle insurance, in order to avoid disproportionately taxing the city's poorest residents.

Insurance premium taxes, a little-noticed levy included in insurance payments, would rise from 5 percent to 12.5 percent in the upcoming budget and the next, then would rise to 13.5 percent in fiscal year 2022 and to 15 percent by fiscal year 2023.

The proposal would increase an average Louisville family's home insurance by $12 to $13 per month, according to a report from the mayor's office.

At a press conference Wednesday flanked by dozens of city employees and advocates of programs potentially being cut, Fischer pitched his tax hike as a way to avoid cuts to the city budget that would be "specific, painful and damaging" to every neighborhood in Louisville.

City officials have estimated there will be a budget gap of roughly $35 million in the upcoming fiscal year, attributable to pensions, increased health care costs and lower-than-projected revenues. Fischer's administration projects the proposed tax hike to generate $37 million in the upcoming fiscal year.

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

On the topic:What does Louisville's possible insurance premium tax increase mean?

Louisville Metro Council members will have until March 21 to pass an ordinance hiking the tax, because of a deadline set by the state's insurance department. Council President David James, one of the sponsors, said it will be filed Monday and sent to the budget committee.

Initial discussions about the insurance premium tax increase among city officials floated the idea of an increase from 5 to 10 percent on each insurance type, but critics opposed including vehicle insurance because of cost disparities across the city based on zip code.

Councilwoman Jessica Green, D-1st, said Wednesday that raising rates on vehicle insurance would be like "insurance redlining" because insurance rates are disproportionately higher in west Louisville.

"And so, the poorest of people, the brownest people, those with the lowest income, would be forced to pay the highest amount," she said. "(That) is unacceptable to me."

Increases to vehicle insurance were excluded in Fischer's final plan because of how those changes "regressively impact" people who are struggling economically, he said at the press conference.

The revenue plan offered by Fischer's office Wednesday came nearly a week after it released a series of "devastating" potential cuts that would be necessary to cover the expected $65 million budget gap over the next four years, absent a new revenue source.

That proposal included staffing reductions in nearly every city department, as well as the closing of two of the city's 21 fire stations, four of the five public pools, four of the 10 public golf courses and one of the city's 18 public library branches. It would also eliminate three upcoming Louisville Metro Police recruiting classes.

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

"While we've been discussing this publicly for over a year, there are some people who still don't seem to realize the seriousness of the situation," Fischer said. "I'm sharing this list of specific potential cuts now so that everyone can understand the deep pain they would cause."

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In response, some critics said the city should have been talking about the upcoming budget crisis for longer. Fischer's office has pointed out that he and others have mentioned the looming budget gap on several occasions in the past year, including his budget address in April and in response to a question at his State of the City address in January.

Still, conversations about specific solutions, including the insurance premium tax hike, were held behind closed doors until Wednesday.

Asked what he would say to those who wish the discussions had been public over the past several months, Fischer said: "People have had plenty of notice."

Fischer's administration estimates the tax increase would generate an additional $63 million by fiscal year 2023. Each percentage increase of the insurance premium tax would generate an estimated $12 million in revenue a year, if all lines of insurance were to increase at an equal rate and suburban cities implement the same increase as Louisville Metro.

If suburban cities don't raise their rates to match in time for the end of March deadline, that increased amount would go to Louisville Metro instead. Several cities have said they plan to model their rates on Louisville's increase and have drafted such legislation.

The last major tax hike in Louisville was more than four decades ago, when then-Mayor Harvey Sloane spearheaded a referendum to increase the occupational tax to help pay for public transportation.

Louisville last increased the insurance tax decades ago, according to Fischer's office, from 2.5 percent to the current 5 percent. It currently rakes in 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 Louisville's pension obligation is expected to grow by 12 percent each year until 2023. That amounts to an $86 million tab in the current fiscal year, which ends June 30, to $136 million by fiscal year 2023.

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