This month, your City Commission voted to approve the city’s real property tax rate. The new rate is 19.5 cents per $100 of assessed value, a slight decrease from last year.
That decrease comes even as most property owners saw higher assessments this year. When property values rise, Kentucky law requires local governments to adjust rates downward to limit total revenue growth. So, even though your home’s assessed value may have increased, the rate per thousand dollars of value will actually drop.
How Frankfort Compares
At 19.5 cents, Frankfort’s rate remains squarely in the middle of the pack among both neighboring and peer Kentucky cities.
As you can see, our rate remains competitive, particularly when you consider the significant amount of property within city limits that is untaxed due to Frankfort’s role as the home of Kentucky’s state government.
The Impact of Untaxed Property
As Kentucky’s Capital City, Frankfort is home to a large amount of state-owned and other tax-exempt property, including government offices, nonprofits, schools, and churches. These institutions are essential to our identity and economy, but because they don’t pay property taxes, they reduce the city’s taxable base.
To help offset this, the state provides the city an exceptional contribution each year, essentially a Payment in Lieu of Tax (PILOT) contribution. This was begun in the mid-1970s with the intent that the funds be used for public safety, specifically for the city’s government buildings. While that contribution helps, it does not fully compensate for the amount of untaxed property within city limits.
We are actively working with legislators to address this imbalance, framing the conversation around a broader vision: Frankfort should be a showcase capital city, one that the entire Commonwealth can be proud of. This is Kentucky’s shared capital, and investing in it benefits every Kentuckian. We need a steady, appropriate pilot payment to help us achieve the city we want to be.
Putting Property Taxes in Perspective
It’s common to think that property taxes are a major driver of city operations. In reality, they account for only about 8% of the City’s overall projected 2026 general fund budget.
The occupational tax is by far our largest source of revenue. This small percentage collected on wages earned within the city provides 46% of the City’s projected revenue for Fiscal Year 2026. The insurance premium tax is the next-largest contributor.
Together, these revenue sources fund the majority of the services residents depend on: police and fire protection, street maintenance, parks, and more.
This makes clear why new jobs and employers matter so much. When we recruit new businesses or support redevelopment projects, it’s not just about the buildings; it’s about the payroll. Each new job helps fund city services, strengthen our budget, and keep tax rates stable.
In short, property tax plays a relatively minor role, while job growth and payroll drive the majority of our city’s funding.
Property Taxes vs. the City School Tax
Many Frankfort residents receive a property tax bill that includes two separate taxes: one for the City of Frankfort and another for the Frankfort Independent School District. These are distinct levies, each set by different governing bodies.
The City’s portion funds local government operations, while the school tax supports education. It’s easy to conflate the two, but when comparing tax rates or reviewing your bill, it’s important to note which portion applies to which.
Staying Informed
I appreciate the many encouraging messages from residents who find these newsletters helpful in understanding how the city government operates and how their tax dollars are used. Accurate communication is essential, and I remain committed to providing it.
As always, please reach out with any questions or feedback. Thank you for staying engaged. Together, we’re building a better Frankfort.
All the best,
