The Covington Board of Commissioners voted to approve the city’s budget for the fiscal year 2024, which begins July 1, at their regular meeting on Tuesday.
The vote was contextualized by an unexpected decline in payroll taxes over the last fiscal year, which city officials attributed to the ongoing proliferation of work-from-home policies, especially at the city’s larger employers like Fidelity, which currently employs over 5,000 people out of its local office.
There was little discussion among commissioners about the budget at the meeting.
The commission also approved the transfer of $1.5 million in federal American Rescue Plan Act, or ARPA, funds to this fiscal year’s budget, which ends June 30, to cover expenses related to city employee health care coverage. This year’s budget amendments included re-appropriations for firefighter overtime pay and Kenton County’s housing voucher program.
The decline in payroll taxes led to a deficit in the city’s general fund, as indicated by quarterly financial reports from the city. Although this is not the first time the general fund has experienced such a shortfall, the continued work-from-home policies in the city have prompted city staff to rethink their strategy for managing its money in the future.
Other funds, which are often born out of grant monies and other revenue streams unrelated to businesses taxes, have not experienced similar downturns. According to the approved budget for fiscal year 2024, the general fund is projected to bring in $71,124,801.
Meanwhile, the other funds are projected to bring in $85,848,692.
City officials and commissioners discussed ways to cover the decline in revenue at both a special budget meeting and normal commission meetings earlier this month. Steve Webb, Covington’s Finance director, described the new budget as a “current level of service” budget in a phone call with LINK nky, designed to account for the worst-case scenario. In other words, the budget will enable the city to continue to operate at its current level if revenues and policies remain unchanged from last year.
To make up for the decline in payroll tax revenue, which is expected to drop from the $30,846,438 budgeted in fiscal year 2023 to $24,485,054 in fiscal year 2024, the city will transfer about $11 million from its ARPA fund to cover expenses.
Although this will enable the continued smooth operation of the city, it will mean that special projects on which the city had initially intended to spend the money, which included everything from expanded technological infrastructure to affordable housing initiatives, will be frozen indefinitely or need to get funding from other sources.
Mayor Joe Meyer had expressed disappointment at this turn of events at the budget meeting on June 3. Projects currently using ARPA funds will not be affected.
The news wasn’t all bad. According to Webb, the revenue from net profit taxes for this year exceeded expectations. This will help offset future expenses, he said. He also stated that, upon further inspection, the city would only need to draw upon $3 million in ARPA funds to backfill expenses for this year, a $4 million reduction in what the finance department had originally anticipated at the beginning of June.
The new budget will also see some new investments for the city, including hiring a dedicated budget director, who will work under the city manager. It will also fund the expansion of the city’s police car and public works vehicle fleets and dedicate about $1.3 million for road resurfacing projects.
With new developments at the former IRS site and elsewhere in the city, City Manager Ken Smith expressed his hopes for a more diversified portfolio of payroll tax revenue at the budget meeting on June 6.
“Things are trending very well for the city of Covington… ,” Smith said. “This is just one anomaly that can change tomorrow.”
The new fiscal year begins on July 1 and will continue until June 30, 2025. View the amendments to the 2023 fiscal year’s budget and a summary of the 2024 fiscal year’s budget at the City of Covington’s website.