Over a decade ago, leaders in Owensboro and Daviess County made a landmark decision to raise insurance premium taxes to help fund an $80 million downtown revitalisation project. This move spurred the development of the Owensboro Convention Centre and Smothers Park, but the tax also left both local governments on different financial paths in the years since.
These paths have become even more significant as property values continue to rise, and insurers warn of higher rates driven by natural disasters. Finance officials acknowledge that while most residents might not feel the impact of the tax directly—since insurance premiums are often paid through escrow accounts—the combination of rising property values and the looming increases in insurance premiums is making the tax increasingly noticeable.
Currently, the City of Owensboro has a 10% insurance premium licence fee, with much of the revenue used to service long-term bonds related to the downtown development. Meanwhile, Daviess County reduced its levy to 6% in 2024 to support its volunteer fire system after eliminating flat fees on property tax bills.
Angela Waninger, the City Finance Director, explained that Owensboro initially collected 4% for its general fund before the downtown revitalisation project was launched. The City then added another 4% between 2009 and 2010 to fund the project. Daviess County had pledged $20 million but exempted health insurance from its tax base. The original cost estimate for the Convention Centre was $21 million, but it soon ballooned to $55 million, with the overall project reaching $100 million. To cover the growing costs, Owensboro had to issue 30-year bonds instead of the planned 20-year bonds, running through to fiscal year 2043.
Waninger added that, despite the higher costs, the decision has been worth it. “By doing this, we’ve increased private investment in the downtown area by over $200 million. Smothers Park was named the No. 1 playground in the world, and we’ve seen significant tourism and economic development. The revitalisation truly transformed the City’s downtown.”
However, Daviess County’s experience has been more complicated. The county first introduced a 4.9% insurance premium tax in 1973 to fund paid fire departments. In 2009, it added another 4% to fund the downtown project, bringing the total to 8.9%. By 2020, it became clear that the extra 4% would exceed the amount needed to pay for the downtown bonds. In response, the County reduced the tax to 7.2% in 2021, before rolling it back further to 4.9% the following year.
By 2023, however, the county faced a new financial challenge: the growing cost of maintaining its volunteer fire stations. Since 2003, the stations had been funded by flat dues on property tax bills, but those dues had not been adjusted to keep pace with rising costs for trucks and rescue equipment. In some areas of low growth, the fire stations were struggling financially.
To resolve this, the County introduced a “repeal-and-replace plan,” eliminating fire dues from tax bills in 2024 and raising the insurance premium tax to 6% to fund the volunteer fire system. County Treasurer Jordan Johnson explained, “This method more fairly distributes the tax burden for fire protection, tying revenue to the value of insured assets rather than flat fees. Larger commercial buildings, which require more resources to protect, will contribute more, while residential customers will see minimal changes.”
Importantly, both the City and County rates are separate, so residents only pay the applicable tax depending on where they live.
As both local governments continue to use the insurance premium tax to finance downtown development and maintain fire services, the levy has become a cornerstone of the region’s local finance system. For residents, this means that what began as a tax for urban renewal is now also essential for public safety. With insurance premiums expected to continue rising, the tax may become even more noticeable in the years ahead.