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New Covington budget: ‘Return on investment’

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COVINGTON, Ky. - Covington’s new budget for the fiscal year that begins Sunday takes decisive action to strengthen the City and enhance the lives of its residents.
 
Operating on the premise that a City Government should be evaluated by the services it provides, the 2018-19 budget allocates money to programs, priorities, and people that give taxpayers results instead of excuses.
 
“This budget is about increasing ROI - return on investment - for our residents and our businesses,” City Manager David Johnston said. “As Covington continues to transform itself into a community that grabs attention, we need to provide high-level services that accelerate our momentum and help all of our people share in the benefit.”
 
The Covington City Commission approved the budget by a 4-1 vote in a special meeting tonight. This was the final reading; a first reading was given on Tuesday.
 
“There’s a lot to like in this plan,” Mayor Joe Meyer said. “It’s structurally balanced. It increases reserves. It expands and improves basic services. It emphasizes customer service. And it lays the groundwork for a more strategic approach to both economic development and housing.”
 
The figures: The Fiscal Year 2019 budget totals $97,295,979. It contains two parts: 
  • A General Fund budget of $52,754,434, which uses revenue from familiar tax streams and allocates money primarily for staff and operations. 
  • And an “All Other Funds” budget of $44,541,545, which includes almost two dozen dedicated funds. These funds get revenue from a wide variety of sources, including federal and state grants, old bond proceeds, General Fund transfers, trusts, and other dedicated sources. They’re used for a wide variety of expenditures, such as Devou Park improvements, housing subsidies for individuals, vehicles and equipment, pension costs, and health insurance. 
But those budget figures do not include parking revenues and expenses, which were split off into a separate, independent fund for the first time this year with the creation by ordinance of the Covington Motor Vehicle Parking Authority. The authority’s budget for Fiscal Year 2019 is $1,804,000.

Rainy Day Fund: That $97 million figure also does not include the City’s Minimum Reserve Balance, commonly called the emergency fund or Rainy Day Fund.
 
The 2018-19 budget adds over $1.9 million to that account, bringing it to $7,389,017. Because that fund is restricted, the City’s accountants separated it from the budget, Johnston said.
 
The Government Finance Officers Association recommends that cities like Covington set aside at least two months’ budgeted operating revenues in reserve. “With this new allocation, Covington is on the path to hitting that threshold next year,” said Covington’s recently hired Finance Director, Muhammed Owusu. “But we likely will keep saving and aim for $10 million.”
 
Better services and service: Much of budget’s “return on investment” will be easy to see. It expands programs that help small businesses survive and thrive ... hires new staff to improve code enforcement, waste collection and parks/recreation programming ... adds police officers to respond to increased call volume and evolving drug threats ... sets aside more resources to help people buy homes ... and carves out money to help neighborhoods outside the downtown area develop vibrant business districts.
 
Just as importantly, Johnston said, the budget makes investments inside City Hall that will make it more efficient, responsive, and strategic - all critical elements of better customer service.
 
For example, the budget creates a new constituent services position to direct residents’ inquiries in a City Hall building largely devoid of receptionists and secretaries ... hires a grant writer to secure non-traditional funds ... invests in training to keep Finance staff up to date on significant changes in state and federal tax law ... and creates a new administrative position shared by the Neighborhood Services and Economic Development departments, where no such position exists.
 
“For years, the City was forced to cut staff and training, and as a result, customer service and services in general have suffered - residents have told us that repeatedly,” Johnston said. “We’re addressing this weakness.”
 
In that way, Johnston said, the budget continues the giant steps toward increasing efficiency, professionalism, and responsiveness that City Hall began taking last fall.
 
“We’re walking the proverbial walk in visible, tangible ways,” he said. “Last fall we began reorganizing departments to create direct lines of responsibility and accountability - I now have a team in place whose members own the services they provide. We also created a Public Works work-order management system that empowers residents to report problems and track them. We wrote an investment policy that puts taxpayer funds to work earning interest instead of letting them sit idle. We’ve hired a communications director who takes an almost 24-hour news approach to informing the public. And we have a numbers guru who has both opened data up to the public like never before and who helps our department heads use that data to improve service delivery.”
 
This budget also invests in taking a thoughtful and measured approach to continuing the economic momentum sweeping through Covington’s urban core. It funds both an update of the City’s economic development strategy and a move toward what’s called a “form-based development code.” The latter initiative seeks to align zoning and historic preservation guidelines within a single document that better reflects the development patterns of Covington and focuses on the type of development the community wants in its neighborhoods and business districts.
 
It also funds a study of the sprawling IRS site between Third and Fourth streets to look at options for development after the IRS leaves in late 2019. Responding to an increase in online tax filings, the IRS announced that it will close the facility and eliminate more than 1,600 jobs.
 
The loss of the tax revenue from those jobs will hurt, Johnston said. But the size and location of the 23-acre site opens interesting possibilities for strategically connecting the Northern Kentucky Convention Center and the RiverCenter office tower and hotel complex (which are just to the east and north of the site) and the City’s hotel district and MainStrasse Village (which are a few blocks west), he said.
 
Looming pressures: That loss in payroll tax revenue - estimated at $1.8 million a year - represents one of the budget pressures facing the City.
 
Another looming hit relates to pensions. The City faces a $755,000 hit to the budget this fiscal year and expects that hit to grow 12 percent annually for a few years as state government continues to bill local governments for higher costs related to employee pensions.
 
Furthermore, while Covington is enjoying growth of about 3 percent in its top tax revenue streams (payroll, property, insurance premium and net profits taxes), much of the financial benefit of that growth is reduced by the generous incentive packages awarded by the City in previous years.
 
Consequently, the 2018-19 budget suspends for one year the Fiscal Stability Ordinance passed in 2015. The ordinance requires the City - via complex formulas relying on numbers that won’t be ready for several more months - to use best guesses to make a series of interfund transfers at the beginning of the budget cycle to various funds set up to capture those transfers.
 
Some of the original intent of the ordinance was to mandate conservative fiscal principles, and the City is fulfilling that intent by making the large allocation to the minimum reserve fund and by making several of the mandated interfund transfers, Johnston said. But to preserve flexibility and to stop putting off needed investments in better services, a couple of the transfers will be suspended for a year until the overall financial picture can be better known.
 
Recognizing the unwieldiness of the original Fiscal Stability ordinance, two separate City Commissions have previously made major changes to it in the 2½ years since it passed, so the suspension is in line with the ongoing search for flexibility.
 
“In almost 30 years of managing public spending, I’ve never seen anything like it,” Owusu said.
 
The current City Commission approved that suspension by a voice vote on Tuesday and reiterated its support for that strategy with its vote tonight.
 
“We’ll return to this discussion during the year,” Johnston said.
 
Details: Public safety continues to represent the top priority in the General Fund budget, with the combined police and fire budgets representing 55 percent. Next highest is Public Works at 15.5 percent, and all other services at under 4 percent each.
 
Here are some of the new programs and priorities in the 2018-19 budget:
 
ECONOMIC DEVELOPMENT
  • Increases from $75,000 to $150,000 money to help small businesses with their first-year rent and help commercial building owners improve their facades.
  • Adds the position of full-time administrative assistant (shared with Neighborhood Services).
  • Sets aside $100,000 to update the City’s economic development strategy, specifically for consultants and public engagement.
  • Sets aside $100,000 to create the form-based development code (explained above). 
POLICE
  • Adds three patrol officers.
  • Adds a crime lab technician.
  • Funds pay raises for 108 FOP members as outlined in the new contract.
  • Restores the tuition reimbursement program for cadets.
  • Upgrades radios.
  • Repairs and improves the shooting range. 
FIRE
  • Adds position of day captain.
  • Upgrades radios. 
NEIGHBORHOOD SERVICES
  • $60,000 for partnering with neighborhood groups on community projects.
  • $75,000 to help residents navigate the process of rehabbing a home in Covington. 
PUBLIC WORKS
  • Funds pay raises for 45 AFSCME members as outlined in the new contract.
  • Upgrades radios.
  • Continues funding of the iWorQ Service Request App/online portal.
  • Funds an array of sidewalk, resurfacing, streetscape and street reconstruction projects. 
CODE ENFORCEMENT
  • Adds two new part-time inspectors as the City continues to evaluate its operations. 
SOLID WASTE & RECYLING
  • Adds the position of solid-waste supervisor to work in the field handling complaints and enforcing contracts related to garbage and recycling. 
PARKS AND RECREATION
  • Adds a seasonal part-time laborer to maintain shelters and help set up events.
  • Adds money for programming, with plans for a basketball tournament in Eastside neighborhood and making permanent the outdoor movie series. 
CITY MANAGER
  • Creates position of grant writer.
  • Creates position of constituent services representative to give residents and businesses a clear place to go for questions and concerns.
  • Funds raises for non-union members.
  • Sets aside $250,000 for the IRS site study. 
HUMAN RESOURCES
  • Adds an HR “generalist” position to focus on recruiting, personnel records management, and other administrative duties.
INFORMATION TECHNOLOGY
  • Adds a part-time position to reduce reliance on outside computer services. 
MAYOR-COMMISSIONERS
  • Funds an appreciation reception for volunteer members of boards and commissions. 
CAPITAL IMPROVEMENTS
  • Allocates new or carryover money for 40 different projects and line items, including annual programs funded by grants and multi-year projects that are underway or in the planning stages. These include things like street resurfacing, sidewalks, street reconstruction, radios, vehicles, park improvements, computers and technology, and Riverfront Commons. The total of these projects and programs is $22.3 million. 
  • But with this budget the City is not proposing to take on any new debt, since payments on previous borrowings and bond sales represent almost 8.7 percent of the General Fund expenditures.
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