All of the Covington city commissioners acknowledged the expected budget shortfall facing City Hall.
They all agreed that new revenue needed to be created as a $1.4 million deficit looms in a city budget that has been cut to the bone over the past five years.
They even all agree that the proposed increase in the insurance rate tax was one that could be supported in this difficult financial time.
But when the roll was called the vote was 4 to 1 in favor of raising the rate from 10% to 12%, a move that is expected to generate $1 million annually for the city until the increase expires six years from now.
The lone vote against the new revenue was three-term commissioner Steve Frank. "It's just, my way of doing business is to figure out what we're doing first before I commit to the money," Frank said in casting his no vote. "It's just how I do business."
That explanation followed a presentation by City Manager Larry Klein that offered the general needs of the city faces and while it was determined that all new revenue from the insurance rate increase would be dedicated to capital expenditures and not the general fund budget, no specific spending plan was ready.
"Don't think I'm fundamentally opposed to what people are doing with this vote," Frank continued. He said that he would rather know the specifics of the spending plan before voting in favor of the measure but noted that any city's plan to raise the insurance rate tax requires a strict timeline because the Commonwealth of Kentucky must be notified by March 23, as previously reported by The River City News when the increase was first proposed in February. With the deadline looming, a special meeting was called for the purpose of approving the increase on Thursday.
Frank spoke of what he called "the cash crunch" coming to the city, said that perhaps the payroll tax should be returned to 2.5% from the 2.45% to which it was lowered in 2012. An increase in revenue "is going to be required at some point," Frank said, adding that he was not casting aspersions on the others who voted for the increase.
Mayor Sherry Carran was joined in supporting the increase by Commissioners Chuck Eilerman, Jordan Huizenga, and Bill Wells.
"There has been an enormous amount of very good, intelligent thought on this," said Huizenga, who is serving his first term. "In my mind, seeing as how the revenues for the city have been flat for the last five to six years and declining in some years, we really have two options. If you look at the list of what was put in there for capital projects, we need to find new revenue or we're going to have to continue to cut more. That looks like police, fire, fleet, closing parks, pools. All those things become real possibilities if we don't do that."
"In my thought process in trying to come to an intelligent conclusion, you weigh your positives and negatives."
Wells said that the increase in revenue was important because it would give the city a plan, something, he said, it has never had in terms of taking care of its infrastructure. "A few commissions ago they came up with the catchphrase, C+V=G," he said, reminding those in attendance of the Courage-plus-Vision-equals-Growth mantra developed under Mayor Chuck Scheper's short reign. "I've lost a lot of sleep over this decision but without the courage to have the vision, we're not going to have any growth. We must invest in the city. For twenty or thirty years we declined. For 200 years we haven't had a plan. This will put a plan in place."
"I think we're all disappointed to be here today," Eilerman said. The disappointment, he said, was after crafting a budget last year the commission finds itself in a bind requiring a tax increase. "There is no one here that likes tax increases and we have raised a lot of questions about why we're doing this and I think we've had some good explanations as to why."
Those explanations from Klein included the statutory requirement to have a structurally balanced budget, flat revenues from property and payroll taxes in the city, accommodating contractual pay increases for union employees, and a reduction in the municipal road aid fund from the state due to lower gas prices. The commission all agreed that business growth in the city and the organic rise in payroll tax revenue is the ideal manner in which the city's financial woes are alleviated, but they all also agreed that investments must be made in infrastructure to make the city more attractive for those who would set up shop.
Klein noted a decision by the commission two years ago to make more long-term capital investments in an effort to grow revenue. "The premise of this decision was that these investments would grow the base of the city's economy and that the longer we wait, the higher the cost," he said. "The city's focus began to move from addressing only short term needs to influencing long-term growth."
Most of the projects identified at the time have been completed or are underway, he said, thanks to the bond funding the city utilized. Those projects include the Caroline Underpass in Latonia, sidewalks in Latonia and South Covington, the Kentucky Career Center, the Pike Street Triangle, levee repairs, Southern and Latonia Avenues reconstruction, the acquisition of troubled properties on Fifth Street, landscaping on Martin Luther King Boulevard, the Eastern Avenue landslide, and improvements to Goebel Park, among others for a total investment of $10.3 million according to a city document.
In progress: Riverfront Commons design and concept plans for the former Waterfront restaurant site, correcting erosion problems on Riverside Drive, phase 3 of the Licking River Greenway & Trails, storm water improvements, demolitions of dilapidated houses, improvements to Gus Sheehan Park and other parts of Devou Park, among others, for a total investment of $3.4 million according to a city document.
There are $13 million in projects that are in the planning phase: more levee repairs, Electric Alley behind Gateway College's Urban Center, improvements to the intersection at Pike & Main Streets, landscaping Sixth Street to better connect Downtown to Mainstrasse Village. sidewalk improvements in north Covington, a portion of the proposed healthy living center that would likely be built in Latonia, Randolph Park improvements, a BMX bike complex, Devou Golf clubhouse and hole realignment, urban agriculture initiatives, and a ladder truck for the fire department if a matching grant is found.
The city also wants a new firehouse to replace the one in Botany Hills. Four large pieces of the fire fleet are also beyond their expected shelf life and there is a need for nearly two dozen new police cruisers. The cost for police and fire vehicles: $3.9 million over the next five years.
Any project receiving funds from the increased insurance tax rate would be approved by the city commission. "Taking the increase now would allow some time for the process to progress and the fund to build up," Klein said.
Most of the criticism of the plan at Thursday's meeting came from candidates who were defeated in last year's city commission race. Speaking against or questioning the measure were ousted commissioner Michelle Williams and failed candidates Christi Blair and Brandon Mims. Former commissioner Mildred Rains, who also lost in last year's election, attended the meeting, too, but did not speak.
Klein offered a pair of examples on how citizens would be affected. A single family home (with a replacement value of $120,000) with two cars would see a total household impact of $42 per year while a renter with one car would see an impact of $13 annually.
"Without an additional funding source, the city will be forced to rely on grants or other unreliable sources of funding," Klein said. There are currently no general fund dollars available for capital improvements and there is no additional debt capacity.
Klein presented the insurance rate tax as the only option and all of the commissioners agreed that it was necessary, but only four voted in favor of it.
"We have cut and cut and cut," Steve Frank said. "If you're looking for efficient government, this is pretty much the definition of it. At some point we are absolutely going to have to raise taxes and revenue if we cannot get organic growth. The only answer is through organic growth. You have to get the streets hopping and things going and generate revenue. Sometimes you have to spend money to make money. My issue is, we're starting to have good conversations with what we're going to do with the money. I think that what happened is that we got backed into the tax by the date because there is a deadline to pass the increase. If we don't do it by a certain date then it can't be done for this year.
"I'd rather have a certain plan in place before I sign off on the dotted line. Reluctantly, I vote no."
Story & photo by Michael Monks, editor & publisher of The River City News