The City of Covington’s Department of Finance reported on the first quarter of fiscal year 2024, which went from July 1 to Sept. 30, at Tuesday’s board of commissioners meeting.
The city’s budget director, Joel Baker, presented the figures to the commission and meeting attendees. All of the figures presented were unaudited–cities must audit their bookkeeping through an independent investigator every year–so the exact figures may change as the city continues to shore up its accounting, but the current reconciliations offer insight into broad trends on the city’s spending.
“The general fund expenditures… exceeded revenue…by $856,000 due to the timing of annual revenue sources, such as property taxes, which are due Oct. 15, and net profits [taxes], which are due in April,” Baker said during his presentation.
Baker reiterated a point that Steve Webb, the city’s finance director, made in May that changing labor arrangements, such as work from home, at the city’s largest employers had caused a decline in payroll tax revenues. This led to a deficit in the city’s general fund. Other funds, which were not reliant on payroll taxes, were not affected.
Specifically, Baker called out Fidelity, the city’s largest employer as of the end of fiscal year 2022.
“Compared to the prior year Q1, we are down $1 million, primarily due to the decline in Fidelity Investments, which is $1.3 million short of last year due to remote work quarter over quarter,” Baker said.
Fidelity issued a statement on the matter last summer, confirming that it had changed its employee office attendance requirements to allow for hybrid work. As a result, Fidelity began remitting payroll taxes to the jurisdiction where the workers were actually completing their duties. This meant that an employee who worked primarily from home and didn’t live in Covington was taxed based on their city of residence, even though Fidelity’s offices are in Covington. In the same statement, Fidelity said they had about 5,500 employees based out of their Covington location.
Payroll taxes are the primary source of the city’s general fund revenue, accounting for about 50% of revenue in the first quarter. Most of the general fund’s expenses are associated with public safety, such as fire and police.
Baker said that the increase in payroll tax revenue from Kroger offset the loss a little, but revenue still saw an overall decrease of about $1 million.
For other funds dedicated to special projects, usually funded through contracts, grants and other funding unrelated to local taxation, incurred expenditures “higher than prior year by $688,000,” Baker said. Overall, this led to a situation where the expenses for the rest of the city’s funds exceeded their revenue.
This is due to two reasons: unrealized losses in the city’s pension fund and the timing in payouts for federal programs, which mandate the city request reimbursements for expenses incurred.
“You have to spend it to earn it,” Baker said, and, as a result, this situation with the other funds was “temporary.”
The commissioners did not comment on the presentation.
View the city’s full budget for the 2024 fiscal year here. You can also see the finance department’s complete presentation from Tuesday by clicking here.
The next meeting of the Covington Board of Commissioners will take place on Tuesday, Nov. 28 at 6 p.m. at Covington City Hall on Pike Street.
