INDEPENDENCE — The tax that awaits its day in court is slamming the door shut — at least temporarily — on the new Kenton County jail.

        Kenton Fiscal Court will refund a disputed payroll tax increase next year, even as county officials continue their appeal of the ruling that effectively eliminates funding for a new jail.

        A final ruling on the legality of the contested tax increase could take two to three years, Kenton County Judge-Executive Dick Murgatroyd said at a press conference Wednesday.

        Without money, he said, it makes no sense to choose a site for a new jail to replace the overcrowded facility in downtown Covington.

        “So for now, the jail construction issue will go where it has been for 10 years or more — on the back burner,” Mr. Murgatroyd said. “Believe me, that is not because of a lack of effort or determination on the part of this fiscal court ...”

        Next Tuesday, the fiscal court is expected to direct County Treasurer Ivan Frye to stop collecting the contested part of the county's payroll tax increase — the transportation component — on Jan. 1, pending a final ruling by the courts. Revenue from the increased tax was to have freed up general funds for construction of a controversial jail that authorities say is much needed.

        By Jan. 8, Mr. Frye also will be directed to give county officials a plan for refunding the disputed portion of the tax with as-yet-undetermined interest.

        Payroll tax revenues for senior services and mental health/retardation programs will continue to be collected, as they “aren't called into question by the circuit court's ruling,” Mr. Murgatroyd said.

        Opponents of the payroll tax cap hike were quick to respond.

        “They may be doing the right thing, but they're doing it under a whole lot of pressure — legal and political,” said Kenton County Democratic strategist Mark Guilfoyle.

        Mr. Guilfoyle is advising the campaign of Mr. Murgatroyd's opponent for judge-executive, Patrick Hughes, and he also represents two parties who intervened in the payroll tax cap challenge: SECO Electric in Covington and the Greater Cincinnati Building and Trades Council.

        Last week, Mr. Guilfoyle called for the refund of the disputed tax money in newspaper articles, and he submitted an Open Records request to Mr. Frye.

        “While in “escrow” the tax money is not being spent to provide any county service,” Mr. Dressman said...“Would it not be more prudent to let the taxpayers keep their money whie the case is appealed? Taxpayers could earn interest on the money or spend it and thereby help to keep our local economy on the move,” he wrote.

        Under the current payroll tax rates, a worker in Covington earning $80,400 would pay the city $2,010 in annual payroll taxes, versus $683.43 to the county, Mr. Murgatroyd said. The annual county tax for that worker will drop to $270.60 with the refund.

        Covington Mayor Butch Callery and other city officials had argued that the county tax cap increase — which raised some workers' tax by 220 percent — would hinder Kenton County companies' efforts to attract and keep good workers.

        He added the county now collects more than $3 million a year from Covington businesses, a figure he says would have jumped to $5.5 million if Covington had not challenged the payroll tax increase.

        “We're the economic engine that generates revenue for the county, and we get very little services in return, Mr. Callery said Wednesday. He called for county officials to drop their lawsuit.

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