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River Cities Differ on Tax Increases this Year

Northern Kentucky's River Cities of Covington, Newport, Bellevue, Dayton, and Ludlow are not taking the same action this year on property taxes this year.

Each city is either finished with or close to finalizing their rates for the new year. 

The Covington city commission voted to freeze property taxes while the Dayton city council voted 4-2 only to take what is known as the compensating rate, which adjusts the previous year's rate to ensure that the city collects at least the same amount of revenue this year as in the previous year.

The Newport city commission voted to take the compensating rate plus a 4 percent increase in its property tax rate, and the Bellevue and Ludlow city councils are expected to do the same in the coming weeks.

"This is just to keep pace with costs," said Newport City Manager Tom Fromme. He and other city leaders have grave concerns about the municipal contribution to the state pension system, which continues to rise. "Over whatever years they are being implemented, we are going to have an increase of over $2 million of pension contributions."

Fromme said the city is facing an annual increase to its pension contributions of $350,000 to $400,000.

Cities are also seeing fewer dollars sent their way from Frankfort in the form of road funds. Fromme said Newport is receiving around $100,000 less from the state than it used to.

"It's very difficult," he said.

For many years, Newport maintained its property tax rate without an increase, Fromme said. "We cut our own throat, really," he said. The city's biggest revenue generator is payroll tax, not property tax, which represents only about 12 to 13 percent of the city budget, he said.

In Bellevue, similar concerns were expressed: mounting costs and less revenue to address them.

"We've got about a $5 million budget and we have a $6 million FEMA wall to build," said Bellevue City Administrator Frank Warnock. "We have $100,000-plus for (pension) payments. Lincoln Road is estimated at $2.5 million and at this point we don't have that money in the bank to pay for it. There is $10, 20, 30 million in need for infrastructure improvements in the city and we don't have that money.

"We're trying the best we can."

In the meantime, the city is seeking grant funding where available for eligible projects. "Nobody likes raising taxes," Warnock said. "I've been a resident of Bellevue since 1984 and I am fine with the compensating rate plus four, personally. But this is not my city. This is our city, so everybody's voice is important in that discussion."

Cities are required to hold a public hearing about proposed increases to property tax rates. In Bellevue, no one showed up.

However, at last week's city council meeting, resident Bill Woody expressed concern. He said that years ago, when the city was beginning to turn around its image, residents were told that certain investments made by way of tax increases would eventually pay off. "We were given promises if we invested in the riverfront and took on the debt and did the tough things we had to to do to create the foundation - and now we're worried about water fountains and Red Bikes, and I think that's great, but there comes a time where we have to let private enterprise (work)," Woody said. 

He noted that he has not received a cost-of-living increase to his Social Security payments, but his taxes continue to rise. 

Ludlow has been dealing with financial difficulties since the beginning of the year, and interim City Administrator Scott Smith, who also serves as police chief, has led the effort with city council to find new streams of revenue through collection of back taxes, implementation of additional taxes on certain enterprises, and laying off some city employees. City council will vote this week on accepting the proposed compensating rate plus 4 percent increase to its property tax.

The city council also voted over the summer to increase its payroll tax.

This, Smith said, is all part of the long-range plan to right the city's financial ship.

"This is really the last stages of our financial strategy to get back into shape," Smith said. "We're doing really well."

The city had not accepted the compensating rate or an increase in the tax in four years, Smith said. "It's kind of set them back from where they should have been," he said. "The spending was increasing but the revenue sources were getting lower. Now we're doing what should have been done."

"Nobody wants to increase taxes," Smith said. "I didn't want to increase the payroll tax. We didn't want to do any of that. But we had to make these increases. There was a lot of serious discussion about it."

With Ludlow's financial house appearing to be closer to in order, the city is able to move forward on some needed infrastructure improvements, like the long-awaited Adela Street project. The street is expected to be completely redone from Elm Street to Sleepy Hollow at a cost of more than $300,000. While the Kentucky Transportation Cabinet will ultimately cover 80 percent of that cost, the City of Ludlow has to pay for it all up front and will be reimbursed later.

Smith also said that the city may be able to revisit its share of the Riverfront Commons project, which links the Northern Kentucky River Cities, some time next year. Ludlow is the only city with no active part of the system. Covington, Newport, Bellevue, and Dayton all have completed sections of the riverfront trail project that will eventually connect all five cities over more than eleven miles.

In Covington, the taxes were frozen by the city commission, though City Hall is fully aware of its own financial challenges related to increased pension costs and the closure of the Internal Revenue Service's flat-top building this month. 

"Our department heads have made a number of decisions to hold the line on spending, so we can make our budget work this year without asking for an increase from our residents," City Manager David Johnston said. "Tax increases should be reserved for desperate, last-resort situations - and if we ever ask for one, it's because we're in such a situation."

But Covington, the largest city in Northern Kentucky, which has the largest municipal workforce in the region, saw its pension contributions increase $700,000 last fiscal year. This year, that cost will more than double to an additional $1.52 million, bringing its total pension expenses this year to more than $8 million.

The city may be on the hook for around $2.1 million in additional pension costs in the next fiscal year, according to numbers provided by the city.

By 2025, the city projects that without relief from the state, Covington's total pension contributions could reach almost $14 million a year.

"That represents about one-fourth of Covington's general fund budget," Mayor Joe Meyer said. "That's unsustainable, unaffordable, and unreasonable."

In Dayton, city council voted 4-2 to accept the compensating rate only. Council members Joe Neary and Tammy Cornett dissented.

Mayor Ben Baker said there was no need for a full 4 percent increase.

"We don't see that being necessary at this point," he said. "We wanted to make sure we weren't taking in less."

Baker also said the city will soon benefit from its burgeoning riverfront where to projects are slated to bring hundreds of new apartments online. When those developments start to pay their share of property taxes, the city may be able to lower its property tax rate, the mayor said.

"We'll have some new neighbors here sooner than later," Baker said.

Written by Michael Monks, editor & publisher