COVINGTON, KY – At Tuesday’s Board of Commissioners meeting, the FY 2016-2017 Recommended Budget was approved reaffirming the City’s commitment to its future throughout the next fiscal year and in moving forward.
Covington Director of Finance & Operations Lisa Desmarais presented the second reading of the FY 2016-2017 Recommended Budget for the Board of Commissioner’s consideration Tuesday night.
Approved unanimously, the City’s plans to achieve the following goals throughout the fiscal year: a structurally balanced budget; establishment of a rolling Five-Year Capital Plan leveraging non-City funds; reducing reliance on long-term debt; establishment of a Capital Reserve Fund; establishment of a long-term debt policy; continued effort to improve the City’s credit rating; a long-term tax reduction plan.
City Manager Larry Klein stated, “The budget is not only about numbers. Rather, it demonstrates the City’s values and priorities. It is based on a vision, a plan, and a direction of where a community wants to go.”
This historic FY 2016-2017 Budget reflects the City’s ongoing commitment to sound financial practices and is built on the principles of responsibility, sustainability and investment.
It is the first time since 1976 that the City’s budget does not require issuance of short-term debt for the City to pay its payroll and benefits and other operating costs. The FY 2016-2017 Budget sets a course to reduce reliance on long-term debt to finance capital projects by establishing a Capital Reserve Fund equal to 1% of General Fund revenues.
Due to modest revenue growth and excellent Departmental budget expense management, it is also the first time in seven years that the budget is structurally balanced without reducing departmental budgets or staffing as has been necessary in the past due to budgetary constraints, said Klein. Also, the budget includes no tax or fee increases.
Additionally, there are several areas of funding for new or enhanced programs and services. Click here for a list of new City projects included in the FY 2016-2017 Budget.
The approved budget features a robust $31 million capital budget leveraging state, federal and other non-City funding sources, reinvesting in the City’s infrastructure, parks, riverfronts, neighborhoods, and economic development. Furthermore, the budget includes more than $1 million for a Police, Fire and Public Improvements Fleet and Equipment Replacement Plan.
It is a budget that includes the four additional police officers authorized by the Mayor and Commission in October of 2015, and also a new position in the Police Department, a Computer Forensic Analyst. The budget also continues the City’s commitment to the monthly pensions of its 105 retired Police, Fire and other City employees by increasing the funding again this year, and sets a trajectory that in three years the City will be funding 100% of the annual actuarial report recommendation.
Klein said, “Arguably, both the City’s financial condition, and its prospect for growth and improvement, is the best it has been in decades. Our fiscal discipline is paying off by giving us fiscal stability and growth.”
New this year, City staff has attempted to make the FY 2016-2017 Budget even more transparent than FY 2015-2016, by introducing an All City Funds Budget Summary. This allows the viewer the opportunity to take a closer look into all City funds, beginning and ending balances, revenues and expenses by department and line item of the total City budget.
The FY 2016-2017 Budget is available at City Hall’s Finance window and on the City’s website on their interactive transparency platform OpenGov.
Also this evening, Desmarais presented the first reading of a proposed ordinance approving the issuance of General Obligation Refunding Bonds, Series 2016. The purpose of this new bond issue will effectively refinance $9,395,000 of the City’s debt obligations from the current variable rates, to much lower fixed interest rates.
The Series 2016 bonds are currently refunding the following outstanding issues: 2002 Fort Mitchell Pool Variable Rate Bonds, 2009 501 Main Street Loan Variable Rate Bonds, and 2010 Recovery Zone Economic Development Bonds. As a result, the City is estimated to save $1,143,920 over the remaining terms of those three bond issues.
Furthermore, the new issuance would allow the City to refund other debt obligations at lower fixed rates as well, saving even more money in the future.
Through Moody’s Investors Service’s recommendations, the City is taking progressive steps forward in increasing its overall credit rating. These actions display strong debt service management and contribute to the City’s overall efforts to refinance long term debt.
In following these recommendations, Moody’s recently assigned a Baa1 underlying rating changing the City’s bond rating from Negative to Positive.
Moody’s unveiled an optimistic outlook for future fiscal performance and offers confidence the City’s General Fund reserves and liquidity will continue to improve at fiscal year-end 2016. The firm believes years of materially improved financial operations could lead to another upgrade in the rating as typically a change from a negative outlook to a positive one indicates a higher likelihood of a rating change in the near term.
Additionally, the Franxman property map amendment was approved unanimously changing the zoning classification of 303 Madison Pike from Suburban Residential (RS-7.5) to a General Commercial Zone (CG-2A). This paves the way for a substantial commercial development.
Earlier last week, a Public Hearing was held at the Kenton County Detention Center allowing Covington residents the opportunity to learn about the requested zoning map amendment and express their support, opposition or neutrality.
The 37.4 acres of land is located to the East of KY 17, between Hands Pike to the North and Fowler Creek to the South. The approved zoning amendment will allow for future development projects in South Covington.
While there are no specific plans or targeted tenants, the proposed project may include a large scale grocery store and other various retail options.
Tonight the Mayor and Commissioners approved the requested funding to contract with Viox and Viox for the Crystal Lake/Bluffside Drive Storm Sewer project in South Covington.
Currently there are no drainage structures located at the South Covington intersection of Crystal Lake and Bluffside Drive. As a result, this leads to an increase in flooding, drainage problems including failure in the pavement.
The approval of this request allows the City to move forward with engineering designs to reduce these issues potentially adding underdrains, new street pavement, catch basins, and storm pipe systems near the intersection.
The City will apply to Sanitation District No. 1 (SD1) to fund 50% of the Storm Sewer project using the 50/50 program. Once the storm sewer improvements are made, the City’s Public Improvements Department will complete the reconstruction of the intersection at Crystal Lake and Bluffside Drive.
Tuesday night’s meeting concluded with a presentation from Covington Director of Finance & Operations Lisa Desmarais further elaborating the City’s recent change in Moody’s Investors Service Bond Rating from negative to positive.
Although Moody’s affirmed the City’s Baa1 rating, it changed the former negative outlook to positive primarily due to the City’s strengthened financial management and improved fiscal planning.
Desmarais explained Moody’s based the City’s rating on various detailed considerations including a large stable tax base, departmental cost savings, recent policy implementations, and the elimination of the City’s reliance on short-term debt.
The Moody’s report points to this change and affirms that this contributes to, “a continued positive trend of improving financial performance and metrics as reflected in the positive outlook.”