Faced with rising pension costs and the loss of a major employer, Covington City Commission approved a property tax hike.
The commission, after about 40 minutes of debate, raised the tax to bring in 4 percent more revenue than last year, the maximum amount allowed by law not subject to voter referendum.
The vote was narrow, 3-2. Mayor Joe Meyer and Commissioners Tim Downing and Michelle Williams voted for the increase. Commissioners Jordan Huizenga and Bill Wells opposed it.
City officials warned Covington will face a $4.5 million budget hole from pension costs and the loss of the IRS facility on the river.
“This is much better to do a small increase a little bit at a time than it is to deal with a crisis and perhaps deal with draconian layoffs or a combination of a significant tax increase and still wind up with layoffs,” Meyer said.
If you own a $100,000 home in Covington, you’ll pay $14 more, with the rate going from $313 to $327.
What would cause a $4.5 million hole? About $2 million of it will come from the planned closure in 2019 of the Internal Revenue Service’s bulk mail facilities on the riverfront, eliminating 1,800 jobs.
The state pension problem also looms large. Kentucky Gov. Matt Bevin is expected to call a special session in October to address the state’s $40 billion pension debt. Johnston and other city officials, based on some estimates, fear the city’s pension costs might rise by more than $2.6 million a year.
“(The) $2.6 million is a huge and real increase that was not foreseeable” Meyer said. “We have to be responsible for that.”
The two commissioners who voted against the increase, Huizenga and Wells, both felt the city should address the crisis through budget cuts and “sound fiscal policy.”
Wells mentions several cuts he’d like to see, including a line item in the budget for $721,000 that was labeled for Covington’s bicentennial celebration, which happened two years ago.
“There’s no reason for that to be in the budget,” Wells said.
City Manager David Johnston said the line item for the bicentennial was not actually for the bicentennial. Staff forgot to change the name after the commission three months ago did a budget adjustment. It’s for various contractual services, he said.
Wells also suggested removing the constituent services representative in the city manager’s office that would save another $100,000.
Wells believed his budget changes would save the city $1 million. Huizenga spoke out in support of Wells and said the city should live within its means.
“The revenue that this tax increase would create is inconsequential in my mind and therefore not worth the additional burden on Covington residents,” Huizenga said.
The tax increase will generate an additional $340,000 a year. Over 10 years, that’s $3.4 million, Meyer said.
Downing echoed the mayor in support of the increase.
“This is part of a life raft,” Downing said. “It is not what we need to get us to shore, but part of what we need.”
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