The Covington City Commission briefly discussed the programs and services the city would be unable to fund as a result of declining payroll tax revenue at their meeting on Tuesday.
Although discussions of this matter have been ongoing since last year, Tuesday’s meeting saw the commission discuss the cut programs in detail.
The effects of tax revenue decline have been known since at least last year, when the city confronted work-from-home arrangements among its larger employers, namely Fidelity, which employs about 5,500 people out of its Covington office complex. As a result of work-from-home arrangements, Fidelity began remitting payroll taxes to the jurisdiction where the employees were completing their work rather than the offices’ location. This meant that if an employee worked from home outside of Covington, they were getting taxed in their home cities, even though they were officially employed out of the Covington complex. An October letter Fidelity sent to the city indicated that the company had no plans to require that people permanently return to the office.
To mitigate this, the city redirected federal funds it had received from the American Rescue Plan Act, often shortened to ARPA, which the federal government disbursed to cities to help them deal with the economic stresses of the COVID pandemic. This helped the city keep operating, but effectively killed the programs in which the city had initially hoped to use the money to invest. According to a city memo from City Manager Ken Smith, the amount of ARPA funds that had to be redirected to maintain basic services was about $16.7 million.
“All that money has been used to keep the budget whole and keep the services flowing,” Smith said.
The following programs were eliminated as a result of the ARPA fund redirection, according to the city memo:
$3.1 million in affordable housing initiatives
$650,000 for a permanent Covington farmers market
$7 million for a new parking garage
$451,000 for the expansion of Covington Connect, the city’s public Wi-Fi network
$400,000 in small business supports
$475,000 aimed at helping the elderly and residents with low incomes make house repairs
$2.55 million in various initiatives for the Parks & Recreation department
The memo also laid out other actions city staff had taken to control costs. These measures included hiring freezes, cut positions–namely, a grant writer and safety/risk specialist positions– deferred investments into IT, non-renewal of a contract with a rental inspection specialist, declining of equipment purchases for the public works department and freezes to spending on continuing education and professional development for city staff members.
“Any allegations about the fantasy of these budget cuts not being real should be put to rest,” Mayor Joe Meyer said.
There was little discussion of the budget cuts among the commission members beyond this.
The next meeting of the Covington City Commission will take place on Tuesday, March 12 at 6 p.m. at Covington City Hall on Pike Street.
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