New Economic Development Fund Mechanism Divides Covington Commission
The Covington City Commission on Thursday passed the community reinvestment fund by a vote of 3-2.
After a first reading of the new ordinance on Tuesday, the item was part of Thursday's special meeting that also saw approval of changes to the year's budget, a new pay scale schedule for non-union employees, a zoning change for the Greater Cincinnati Railway Museum in Latonia, and the promotion of police officers.
The community reinvestment fund commits proceeds related to lease agreements from pending economic development projects to be restricted and earmarked for use on additional needed infrastructure to support future economic development.
"This allows us to continue to invest in other economic development projects through infrastructure," Assistant City Manager Larisa Sims explained on Tuesday. Some of the projects underway that could generate the initial proceeds that would be invested elsewhere for future projects include the Waterfront restaurant and the Devou Park Events Center.
It was during the first city commission meeting of the week that clear disagreements over the proposal emerged, leading to Thursday's divided vote.
"Why not just take it from the general fund?," asked Commissioner Michelle Williams. "This money should be used to pay back bonds."
"We're looking for ways to help economic development projects with infrastructure improvements," Sims said.
Commisioner Chuck Eilerman offered his support. "We have monies in our budget to deal with the debt service," he siad.
"The idea is to grow the general fund revenue through economic development," City Manager Larry Klein explained. "These investments will grow our general fund revenue."
Williams wanted to know if there were any specific plans already laid out for the funds and Sims said that one would be put together with the city commission involved and could involve sidewalks and fiber optics among other improvements.
"How are we going to increase payroll taxes with these projects?," Williams asked.
Klein explained that deals like the Waterfront will bring 150 new jobs to the city adding to the collected payroll taxes.
"Shouldn't the money go back to paying the bonds?," Williams asked. "This sounds like double-dipping to me."
Commissioner Mildred Rains joined Williams in dissent, asking a question to the city's finance director, Bob Due. "Don't we have several bonds issued, Bob?"
Due explained that the annual budget usually has between $4.8 and $5.5 million dedicated to debt service payment. "It's not a huge burden on the general fund," he said, adding that Covington is below the regional mean and median amount of debt held by cities.
"It's great to not have any debt but then you're not investing in your community," Due said. "In some cases, if you really want to grow and make the community a better place you have to make the investment."
"(But) isn't that paying off one credit card with another?," Rains asked.
"No," Due said, "because we're keeping that payment the same."
Commissioner Steve Frank supported the idea. "If you build this up in a side account, you have the cash next time a (project) rolls around," he said. "Your capital expenses need to be held separate from your operational expenses."
"The city has a habit of not maintaining what it has. I'd rather have cash for things than have to borrow."
"Can't you just take the bond money and put it in the fund?," Williams asked.
"No," Due said. "It's illegal."
On Thursday, during the special city commission meeting, the community reinvestment fund was passed 3-2 with Mayor Sherry Carran and Commissioners Eilerman and Frank supporting it. Commissioners Rains and Williams opposed.
"This community reinvestment fund did not have this name when we started this," Williams said before casting her "no" vote Thursday. "It was called the economic development fund and then all of a sudden it became the community investment fund. I just really don't agree with that. These lease payments need to go toward paying the bonds."
Written by Michael Monks, editor & publisher of The River City News
Photo: Covington Landing, the future site of the to-be re-opened Waterfront restaurant/RCN file