Property tax increase finds no favor with Covington leaders

The Covington City Commission has rejected a recommendation from city staff to increase real estate property taxes, first proposed last month, and amended the proposed ordinance to keep the real property tax rate unchanged from last year.

The commission will vote on the revised ordinance at their meeting on Sept. 10.

“Essentially, this is a symbolic gesture about who we are and where we’re going and how we’re managing the city,” said Mayor Joe Meyer. “My personal feeling [is] that it’s in the best interest of the city, if you’re balancing the equities, to maintain our property tax rate where it is at 0.277 cents.”

Meyer made his statements at a specially scheduled public hearing on Thursday aimed at allowing members of the public to share their thoughts about the proposed rates. Meyer proposed the amendment, even though no members of the public spoke at the meeting. The amendment was followed by a first reading of the ordinance.

August’s proposal called for $0.286 for every $100 of assessed real property, which Finance Director Steve Webb estimated would add $9 a year onto the tax bill of a home worth $100,000.

The proposed personal property rate, on the other hand, called for $0.336 for every $100 of personal, or tangible, property. The commission decided to keep the $0.336 recommendation for the personal property taxes. Last fiscal year’s tangible rate was $0.359.

Property taxes apply to each fiscal year, which runs from July 1 to June 30. Fiscal years are named after the years in which they end, so the tax rates discussed apply to fiscal year 2025.

Property taxes are broken down into several categories. The first and usually largest chunk of your tax bill is real property tax, sometimes referred to as real estate property tax. This is essentially a tax on everything you own that’s nailed down. For residents, this means houses and other real estate property. For businesses, this means office buildings and other buildings and facilities used to conduct business.

Tangible personal property, on the other hand, generally refers to property that isn’t real estate. This mostly applies to businesses and includes machinery and other movable equipment and supplies.

Meyer called Webb to the dais to ask him questions about the amount of money the proposals would bring in. Webb put the additional revenue from the raised rates at about $400,000. Meyer’s reckoning put the amount closer to $280,000. At any rate, Meyer viewed the amount as “inconsequential,” especially in the face of the region’s anxieties about housing.

Additionally, Meyer said, the city was already bringing in more payroll tax than expected.

“So with this sort of increase in our payroll tax collections, I need to balance the equity between the amount of this small tax increase versus keeping the property tax rate at a time when a lot of people are struggling, at a time when we’re getting a lot of discussion about housing affordability and issues associated with it,” Meyer said, even if it meant the city “forego about $280,000.”

Moreover, Meyer argued, even without the rate change, “we will be collecting about $270,000 more than we did last year.”

Covington property taxes were high in the 1970s–the real property tax rate was $0.78 in 1975–and began to decline in 1977. Rates fluctuated throughout the subsequent decades, and most recently leveled off in fiscal year 2018 with a real property rate of $0.327 and a tangible rate of $0.349. Those rates persisted until fiscal year 2023.

The city is still in the throes of a deficit in its general fund, from which it draws most of its operations budget. The deficit comes from reduced payroll tax revenue from the city's largest employers, particularly Fidelity, which revised their tax withholding policies when employees (many of whom do not live in Covington) began to work more frequently from home during the pandemic.

Payroll tax makes up the lion's share of the city's tax revenue, and the city's elected officials have put their hopes of recovering their revenue streams in potential payroll taxes generated from businesses at the Central Riverfront Development.

The other commissioners were quick to support the amendment.

"I fully support this logic," said Commissioner Steve Hayden.

"It just makes sense," Commission Tim Downing said.

The commission will cast a final vote on the proposed tax rates at their meeting on Tuesday, Sept. 10, beginning at 6 p.m. at Covington City Hall on Pike Street.