The Covington Board of Commissioners unanimously voted to increase both real and personal property tax rates at a commission meeting Tuesday night.
This increases the city’s real estate property tax rate from 0.271 cents to 0.277 cents per $100 of property valuation. It also increases the personal property tax rate from 0.328 cents to 0.359 cents per $100 of property valuation.
Mayor Joe Meyer told LINK nky after the vote that the rate increases equaled about “50 cents” more a month for homeowners whose property is worth about $100,000.
The commission members did not discuss the tax rates during the meeting itself, but the votes occurred in the shadow of dwindling revenues from payroll taxes.
City staff first noticed the problem earlier this year. At the time, Covington Finance Director Steve Webb openly attributed the revenue shortfall to the proliferation of work-from-home policies that blossomed throughout the pandemic.
“We fall off the pace due to the implications of remote work situation with our largest employers,” said Webb in May. “As remote work has become normalized, these employers are now withholding and remitting portions of the occupational license tax to the jurisdictions where their employees are physically working.”
In other words, companies are now withholding payroll and other occupational taxes based on the actual location of their workers. Thus, if someone is employed by a Covington-based company but works from home outside of the city, the jurisdiction where the worker actually completes their job is the one collecting payroll tax.
For Covington, this meant that the city’s largest employers, such as Fidelity, whose Covington office employs about 5,500 people, were no longer generating the amount of tax money for the city as they had in the past.
Covington’s general fund has historically relied on payroll tax for much of its income. As more and more employers switched to work-from-home work arrangements, this led to a situation where expenses in the general fund exceeded revenues. Other funds in the city budget were not affected.
The reality of this change in labor conditions has influenced many of the budgetary decisions of the past few months.
To cover the shortfall, the city authorized the moving of about $11 million in COVID rescue funds, officially called American Rescue Plan Act funds, into the general fund to keep the city operating at its current level of service. Although this allowed for continued city operations, it put a hold on any new projects the city wanted to fund with federal COVID dollars.
Still, the increase for real property is small compared to previous years’ rates. Covington lowered its property tax in 2022, but before that, the real property tax rate had been frozen since 2017 at 0.327 cents per $100 of property valuation, higher than the rate set this week. The personal property tax rate, on the other hand, sat at 0.349 cents per $100 of valuation, which is only slightly lower than the new personal property tax rate.
“It’s still the second-lowest tax rate in the city’s identifiable history,” Meyer said.
Property tax bills for Covington are due Oct. 16. Visit the city’s website for instructions on how to pay your bill.
The next meeting of the Covington Board of Commissioners will take place on Sept. 12 at 6 p.m. at Covington City Hall on Pike Street.
Need a refresher on tax terminology and procedures? Read our tax explainer.