Covington’s budget for the next fiscal year, the first reading of which took place this week, is shaping up to be slim and conservative as the city attempts to steady itself amidst the prospect of continued federal job loss and other economic uncertainties.
“This year’s [fiscal year 2026] budget maintains the status quo approach, reflecting stability in our funding priorities,” said Covington’s Finance Director Bre Gaffney at the city commission meeting on Tuesday.
The fiscal year runs from July 1 to June 30, and Gaffney’s comments reflect comments made by Mayor Ron Washington and City Manager Ken Smith during the budget planning process last month. Smith reiterated the need for caution at this week’s meeting.
“It’s a conservative budget, and, honestly, that’s because we aren’t projecting an increase in revenue,” Smith said.
The city’s budget has several key sections, the most prominent of which is the general fund, largely paid for with tax revenue.
A shortfall within the general fund emerged during the pandemic, and although the city’s most recent financial audit indicated the deficit was closing, the city is still largely reliant on reallocated COVID-19 emergency funding to fill the gap. The city’s other funds, which are not paid for with tax revenue, were not affected by the decline in payroll tax revenue that struck the general fund.
The city has about a year and a half’s worth of COVID funding remaining and is banking on the city’s economic development to solve the problem long-term. Smith stated at the meeting that there is still about a $4 million gap in the general fund.
Even if the city passed a 4% property tax increase, budget projections from the city’s finance department predicted a decline in property taxes. Other predicted declines included city franchise fees (often collected from utility and telecom companies) and various other forms of non-tax revenue.
On the other hand, net profits taxes and payroll taxes, the latter of which is the largest chunk of the general fund’s revenue, were predicted to increase slightly.
Increases in predicted general fund expenditures were largely the result of typical year-over-year increases in expenditures for maintaining city services, rather than large-scale changes, according to the city’s Budget Director, Brandy Ott.
City department heads had made asks of the commissioners in May to augment their department operations. Notable asks included the addition of a police social worker, a dedicated economic development director for the IRS development, investment into a license plate-reading traffic camera system and, finally, a $1 million ask from the fire department to create a training chief position and to add a single safety officer per shift to Fire Rescue Truck 1, which is currently only staffed with two firefighters.
Smith said the city would need to reassess its spending after the first quarter of the fiscal year, and Gaffney informed LINK nky that the departmental asks would not be considered during the first quarter.
The general fund’s shortfall occurred after the city’s larger employers, specifically Fidelity, allowed people to work from home (and be taxed from home) during the pandemic. Since many of the employees lived outside of Covington, the city’s payroll tax revenue declined during that time. Yet, Smith’s comments at the meeting suggest another looming problem, the possibility of more cuts to federal jobs within the city.
There are over 2,000 federal employees within Covington, Smith said, “If 1,000 of those 2000 were let go, that’s probably one and a half million dollars in payroll [tax]. Heaven forbid, 2000 of those people, obviously, would be $3 million.”
Smith also confirmed there would not be cost-of-living increases for the city’s non-unionized employees.
While there was no discussion about the budget among the commissioners on Tuesday, one resident, Borden Gewin, spoke out against the use of a system called Cellebrite, an Israeli digital forensics platform, the Covington Police had used in the past, and which Kenton County Police still use. Gewin had spoken out in favor of a resolution supporting a ceasefire in Gaza last year, and expressed concern that the city may still be paying for Israeli systems out of the city budget.
Covington Police Chief Brian Valenti confirmed with LINK nky that the department now uses a system called Oxygen Forensics, a company based in the U.S.
The city will cast a final vote on the budget in two weeks and can amend the budget throughout the fiscal year with a majority vote.
You can read the proposed budget ordinance with figures for each of the city’s funds, as well as the finance director’s presentation from Tuesday, below.