SPECIFICS WILL COME LATER FOR COVINGTON'S NEW BUDGET

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by Michael Monks 

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City Manager Larry Klein

"It rains an awful lot and having a rainy day fund that is less than one week's payroll is not much of a rainy day fund," said Covington Mayor Chuck Scheper at Thursday night's special meeting of the City Commission. "A city our size should have a reserve of five-percent of its general fund, or $2.5 million." But as the 2011-12 fiscal year comes to a close at the end of this month, there is far less than two-and-a-half million dollars. There is a paltry $449,080 or less than one week of the City's payroll expenses. Worse still, had the City not adopted Commissioner Shawn Masters's long proposed tax amnesty plan which generated roughly $400,000, there would be less than fifty-thousand dollars in the City's checking account.

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While there was a technical vote on the agenda to approve the moving-around of some line-items from the 2011-12 budget, this meeting was about the approval of next year's budget, one that hopes to bear little resemblance to the shaky one that ends Sunday. But before the new budget could be presented, the old financial wounds of the past year were reopened and reexamined one last time. City Commissioner Steve Frank even dusted off his familiar refrain about what inspired him to run for the office, a stint on the City's audit committee. 

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"We saw this train wreck coming and our warnings were not heeded," Frank said. "It's unsustainable what we've been doing for many, many, many years. We're going to put this last travesty of a budget to bed." And then, nearly one year to the day that the budget was originally passed, the 2011-12 budget was voted on and approved one last time. 

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Specifics will come later

The new budget for fiscal year 2012-13 was unanimously and enthusiastically adopted by the City Commission following its presentation by City Manager Larry Klein and finance director Bob Due. This is a budget that aims to do more with less, so that more will be available to the City in the coming years. Klein emphasized that there are no and will be no tax increases. In fact, the City's payroll tax will be lowered from 2.5% to 2.45% and while Covington's coffers will likely collect $600,000 less in that area than it did last year, to Klein, it is a good thing, for now. "Payroll tax rates play a role in where companies look to locate," Klein said. 

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Additionally, the budget calls for $2 million in infrastructure spending, which is $500,000 more than last year. Members of the current City Commission have frequently accused previous administrations of not spending enough in that area in order to balance their books. The numbers back up that accusation. From 2007 through 2011, only half a million was spent annually on road repairs and the like. The amount was increased to $1.5 million in 2012. 

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But what about the other anticipated cuts and the recommended reorganization of City Hall and its departments presented by an outside consulting firm Tuesday night? No one knows for sure. The budget was passed with a high amount of generalities and a low amount of specifics. What is known for sure is that 2012-13's budget is projected to have $2 million less than 2011-12's and that cuts are going to come from somewhere, including personnel. 

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"I feel sorry for the people in a state of limbo because it's a time of uncertainty and we will be deliberate about that," Mayor Scheper said. "We're going to do it with open eyes and open ears." To filter out the consultants' recommendations and planned cuts the mayor promises to meet with department heads in the next two weeks, and to schedule public hearings within the next thirty days, and then within the next sixty days more specific details will be known. "We still have work to do and we're going to do it as quickly and thoughtfully as possible to put this city on a better path to the future. Doing more of the same won't solve the problems of today or tomorrow."

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Commissioner Steve Casper referenced this week's bankruptcy filing by the City of Stockton, California, the nation's largest municipal bankruptcy ever. "We here in Covington are not letting it happen. It is tough, but for you all to have jobs and streets to work on we have to do this and we'll be better for it in the long run," Casper said to the city employees at the meeting. He invited suggestions from all employees. "We're all ears," Casper said. 

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Commissioner Sherry Carran also described the forthcoming decisions as tough, but said that she is confident in the changes that are to happen. "(NKU President) James Votruba was at a legislative caucus earlier this year and said the number one responsibility of leadership is to accept reality and that's what this is, this is reality," Carran said. "This budget is addressing infrastructure needs and at the same time, is getting us to a better spot where we'll be providing services more effectively. We have to change in order to stay ahead of the times. In a year or two years from now we're probably going to be better than we've ever been."

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SEE SLIDES FROM THE BUDGET PRESENTATION BELOW, JUST CLICK THE LINK!

QUESTIONS AND UNCERTAINTY AT CITY HALL AS BUDGET VOTE LOOMS

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by Michael Monks 

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The speech that established him as Covington's new leader in January will have an encore presentation in two weeks, Mayor Chuck Scheper announced at Tuesday night's City Commission meeting. Returning to the Madison Event Center and the same stage he delivered his first and only State of the City address and introduced his ambitious 10-point plan to change the course Covington was on, Scheper will update the citizens on the progress he has made and the steps to be taken to accomplish the rest. The June 26 speech will replace the scheduled city commission meeting. Two days later the commission will vote on the 2012-2013 budget, the topic that dominated its business Tuesday night. 

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In an unusual move, Scheper left his seat at the dais and took to the podium at City Hall's commission chambers to present part of the goals of next year's budget, one that demands large cuts from each department including a million dollars from police and fire. "We're running out of runway," Scheper said, pointing to slide after slide on the projector screen that demonstrated how the City had balanced budgets for years by ignoring infrastructure needs and other issues. There are now thirty million dollars in needed infrastructure, the mayor said. 

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He compared Covington's spending and budgeting habits to those of surrounding cities like Louisville, Indianapolis, and Cincinnati (Covington's payroll tax is higher, it pays more per capita for public safety, and spends far less on other important needs) before returning to his now familiar mantra that C+V=G: courage plus vision equals growth and then to his traditional seat at the dais. 

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What followed was a display of uncertainty about how the cuts to the budget would occur, uncertainty that even reached the usually quiet department heads.
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"The numbers started at a million, they've been as low as five-hundred thousand, they've been six-fifty, eight hundred, and I don't know where we're going to find that money," said a visibly frustrated Fire Chief Chuck Norris. "My hole now is nine-hundred forty-one thousand. I didn't know where I was going to get five hundred, I don't know where I'm going to get nine hundred!" 

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Norris took issue with part of the proposed budget presented by finance director Bob Due that indicated the City would seek more cash by ensuring that it is collecting all that it can from its ambulance runs, an amount that could bring in more than four hundred forty thousand dollars more than it did last year. Norris, in meetings with his staff, anticipated using the same tool to offset his own looming five hundred thousand dollar cuts and instead saw it as being added to his burden. 

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"Here in the last two hours, it doubled," Norris said. "Please don't dig my hole any deeper. It doubled tonight."
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But maybe not. There was confusion over which coffer benefits from the anticipated increase in ambulance run funds. There were a lot of numbers rolling out all at once. The fire department is being asked to cut $500,000 from its budget, but the proposed city budget indicates that $796,000 less will be designated for the fire department as compared to last year, and there is this potential increase in funds coming in from ambulance runs.
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A similar case is true for the police department which is being asked to cut $500,000 but will see $860,000 less than it did last year. City Manager Larry Klein explained that some of those cost reductions are from the decrease in the expense of health benefits charged to the city following new agreements with the unions representing police officers and firefighters. 

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But Norris was not the lone department head in fear over the proposed cuts, whatever they may be and whatever they may add up to. Keith Bales, director of code enforcement, predicted the end of his department which this year had a budget of more than $3.1 million and next year will have $2.7 million, a reduction of more than $350,000. "Two million of that three million is a solid waste contract," Bales said. "$350,000 is a death sentence. The department will be no more." 

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More on the budget, including slides from the presentation that describe it in detail, below -- just click the link. 

LONG NIGHT AT CITY HALL INCLUDES MORE TALK OF LAYOFFS

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by Michael Monks 

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Bob Due, Covington finance director

Covington finance director Bob Due promised a budget presentation "long on narrative and short on numbers" and promptly delivered just that. "At this time last year we were finishing up the budget road shows," Due said of his joint appearances with City Manager Larry Klein at various neighborhood stops to promote their position that city employees needed to pay more for health care benefits in order to balance the city's budget. But even with those health care concessions from the city's public labor unions now achieved and other expected savings from the closure of the emergency dispatch center, the tax amnesty program, and the internal reviews being conducted in every city department, Covington will still face a $2 million-plus budget shortfall and likely more job reductions next year.

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"There is still a huge gap between what we should be doing and what we are," Due said. "There's been a number of significant positive changes for our financial health. Our task is not complete, however." Though the financial picture for Covington was far bleaker several months ago when a $20 million deficit was projected by 2017, that number now stands at less than $5 million with nearly half that needing to be addressed immediately.

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Next year's budget will be the first in which the city feels the full effect of the departure of Omnicare and The Nielsen Company, two large corporations vacating tax payer-subsidized RiverCenter office space for tax payer-subsidized office space in Cincinnati. Add that burden to the decrease in payroll tax revenue elsewhere, the ever-shrinking "rainy day fund", and a recent assessment by the Kenton County property value administrator that lessened the worth of Covington real estate by roughly $60 million (bringing the total value just below $2 billion), and the City of Covington could be out of money early next year. "If we have a year like fiscal year '10 or '11 we'll be in a negative fund balance," Due warned. 

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That so-called rainy day fund has consistently dwindled since 2009, following twenty-five years of steady growth in the city. In 2009, the end of year fund balance was more than $2.5 million. At the end of June, that figure will stand at just $438,000. 

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Due, who said the finance department took the lead on the budget (the first time the City engaged in zero-based budgeting in which every item over $5,000 required justification), explained that he and Klein aim to cut 5% from public safety and 5% from all other departments. Those amounts total $1.6 million and nearly $700,000, respectively. In order to achieve cuts of that scale, layoffs would likely occur. 

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There is much more work to be done over the coming days before the final budget is voted on by the city commission by the end of June. The new fiscal year starts July 1. "There is a large amount of interest coming of late with people wanting to locate here, or new restaurants opening," Mayor Chuck Scheper said. "There's a lot of energy coming, a lot of folks looking at opportunities. But that's not going to solve the problems of today. We have to grow in order to be competitive."

HOUSING AUTHORITY VOWS TO BETTER COMMUNICATION WITH CITY HALL

by Michael Monks 

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The physically obsolete condition of City Heights, a mystery operation known as the Neighborhood Investment Partners, and the federal Moving To Work program dominated discussion at the joint caucus meeting between the Housing Authority of Covington and the Covington City Commission. At least two City Commissioners have spoken publicly about the poor working relationship that exists between the City and HAC and some of that frustration was vented at Tuesday night's two-hour meeting. "There is a need to improve the relationship between the Housing Authority and the City, a need to improve communication," said Glenn Kukla, chairman of HAC's board of commissioners, appointed by the city commission. 

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Though the joint caucus was set up so that HAC could more easily explain its setup, its challenges, and its goals, the meeting happened just days after City Hall received an independent report on the bidding process for HAC's largest project, River's Edge at Eastside Pointe, in which the conclusion was that the bidding process should be reopened since there were several irregularities. "We don't want to see that land sitting there empty for a long period of time," said Eastside resident Bennie Doggett during the caucus. "Our neighborhood has been so isolated in this process. We want you to concentrate on how to get this project done. We need you to do this quickly. We've been talking about this since 2002 and now we get right to the starting point and we have a problem." 

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"Our reputation as a community in regards to the future of Housing & Urban Development's future projects is dependent upon how we do on (River's Edge)," said HAC board member JT Spence. 

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Though there are worries about River's Edge, more concern was focused Tuesday night on something called Neighborhood Investment Partners, an operation that is separate of HAC but shares board members and an executive director in Aaron Wolfe-Bertling, a fact that drew gasps from the crowd and comments from baffled City staff. "(HAC's) annual audit made no mention of NIP, but clearly there is a relationship if employees of HAC are also employees of NIP," said City Manager Larry Klein. 

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NIP was created by HAC to prepare for an uncertain future in which the federal Department of Housing & Urban Development (HAC'S source of funding) no longer exists. If and when that happens, HAC would no longer exist, but an operation like NIP could bank on private investments to maintain the organization's legacy of helping low-income residents find suitable housing. Spence described NIP as an entity that would have a collaborative relationship with the City, the federal government, nonprofits, and also the private sector to allow for multiple funding opportunities. "Functions we could not do if we were just the Housing Authority," Spence said.

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"We're moving toward more diversified housing, the population is better served if it is more diverse," he said. "We need NIP to be able to act as our agent in Washington to bring this collaborative financial relationship, to bring housing back to Covington."

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"You want to be as transparent as possible," said Covington finance director Bob Due. "I do not see in footnote (anout NIP in the annual audit). For the benefit of the agency going forward it's best to disclose these things. If I were an investor, I'd want to know about these relationships."

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HAC's legal counsel present at the meeting said that there was no conflict legally, though it may not be the best set-up structurally. "To have two executive directors you would have a pretty top-heavy organization," explained board chairman Kukla. 

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Another sticking point between the Housing Authority and Covington is the federal Moving To Work program. In order for HAC to participate, control of Section 8 housing would have to be turned over to it from the City. City Commissioner Steve Frank was angry about what he described as HAC's behind the back move to gain support for Moving to Work from the Northern Kentucky Chamber of Commerce, of which Frank is a board member, for a proposed pitch of the program in DC. 

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Testy exchange between Commissioner Steve Frank and Housing Authority board member JT Spence:

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"People would be able to move to where they wanted to live but would have a voucher from NIP or HAC," explained Spence, who then went on to lay out the three possible future for the Housing Authority. In order for HAC to remain viable it must move to the Moving to Work program, he said. "We could sell City Heights and use money from that deal to move people back into the city and also use the money as leverage to bring more private investment in other areas of the city." The other two scenarios involve the status quo, which would lead to further neglect of City Heights's much-needed maintentance or to merge with a neighboring Housing Authority such as Newport. 

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Though the joint caucus was at times tense, the Housing Authority and the City Commission have vowed to meet similarly each quarter. Also, Executive Director Aaron Wolfe-Bertling will meet more frequently with City Manager Larry Klein.

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After a separate testy exchange, Mayor Chuck Scheper is able to calm the situation:

$2.5 MILLION DEFICIT PROJECTED & OTHER NOTES FROM TUESDAY

by Michael Monks 

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Part of Mayor Chuck Scheper's 10-point plan for the City of Covington includes zero-based budgeting in which every line item of the budget must be justified by each department. Covington finance director Bob Due spoke on the process Tuesday night during a caucus meeting of the Covington City Commission and warned that the City will likely face a $2.5 million deficit for the next fiscal year, citing rising health care and pension costs. "One of our first challenges is to find opportunities to reduce the expenditures base now," Due said. "We'll be asking, what do you get for that investment (in line item reviews)? This is a process you don't get through overnight but it's one we have to begin."

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During the meeting, the agenda included an update on each of the ten points proposed by the mayor. The commission only went through a few that had immediate news including the designation of one staff member to serve as a point-person for new businesses trying to open in Covington. "There's a lot of City staff that isn't sure who's in charge of things," said recreation director Natalie Gardner, speaking as a member of the so-called 'barrier removal team'. "They might call recreation with a question about zoning." The designated point-person, who has not been named publicly yet, will work on educating the staff and will help to streamline the communication required by prospective new businesses.

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City Manager Larry Klein explained that the position will be filled by an existing staff member. "One of their primary jobs would be to shepherd people through the process as a single point of contact."

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In other updates from the plan, the mayor said that as many as twenty-five people may be part of his proposed community advisory board which he hopes to announce next week. Additionally, Scheper expects to name ten people to the City's marketing team. The mayor and commission began their visits to neighborhood associations Monday with a trip to Rosedale and will meet with the Covington Youth Commission on February 28. Also, the new email, "CVGvoices", is starting to get some input from citizens. 

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OTHER NOTES: 

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Brent Spence Bridge

The commission listened to a presentation by the Kentucky Transportation Cabinet on the latest developments involving the Brent Spence Bridge. Of the many proposed plans for the bridge project, two are left with one being preferred by Covington. The project involves 5.1 miles of road in Kentucky and 2.7 miles in Ohio. (Midway through the presentation, the projector at City Hall failed making it difficult to visualize the plans and their effects on Covington. Bob Due said that the City is looking to replace it.)

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Here's the gist: Mainstrasse's Goebel Park will lose its current basketball court but it will be replaced. More importantly, it looks like Covington will be accessed through connectors and that if you are traveling from Cincinnati to Covington, a decision will have to be made much earlier if you wish to leave the interstate in Covington. A connector from the interstate's northbound side will involve points of departure at 5th, Pike, 9th, and 12th Streets. Crescent Avenue would be closed. None of this matters however until funding is achieved.

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Daytime curfew update

Since the enactment of a daytime curfew in Covington, fourteen juveniles have been cited by police. Chief Lee Russo said that the program is going well and there are no real operational concerns or adverse impacts on the departments. Interestingly, all the citations have happened from Latonia to the northern part of the City. South Covington has not had one juvenile cited. 

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TANK resolution

The Transit Authority of Northern Kentucky is seeking support from the city commission in the form of a resolution that would affirm TANK's desire to have the tax that funds it controlled by the fiscal court instead of the state.

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Tax amnesty

Covington's proposed tax amnesty plan had its first reading during the caucus meeting.

COMMISSION RECAP: 7 FEBRUARY 2012

by Michael Monks 
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A proposed tax amnesty plan, intentions to beautify part of Downtown, and the resignation of three City board chairmen highlighted Tuesday night's meeting of the Covington City Commission.

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Tax Amnesty Proposal

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Commissioner Shawn Masters championed this effort during the height of last summer's intense budget debates and eight months later a tax amnesty program may appear as a piece of City legislation. "In the economic time that we're facing, it's getting harder to collect, especially on abandoned or blighted properties," Covington finance director Bob Due said during a presentation on what the program would look like. Under the plan discussed Tuesday night, the tax amnesty period would last sixty days and would eliminate interest and penalty fees on back real estate and payroll taxes as well as parking tickets issued by Covington Police (though not tickets issued by AMPCO).

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The City offered a similar program in 2004 when $400,000 was collected by those owing back taxes. However, Covington spent $100,000 promoting the effort. "One thing we learned from 2004 is that we collected primarily from individuals we had been talking to for some time from our delinquent list," Due said. Typically, over a ten year period Covington would be owed $800,000 in back taxes, but right now the City is waiting on $1.3 million, Due said. 

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The finance director said the program should start close to March 1 pending approval from the city commission and would coincide with the traditional tax day in mid-April. Any funds collected through the amnesty program could be used to fund one-time projects, reinforce the City's rainy day fund, or be allocated toward infrastructure or technology needs. Once the program ends Due insisted that the City strengthen its effort in going after the taxes owed it.

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"This deviation from our policy is only for the period of the amnesty program," Due said, indicating that Covington may turn to collection agencies and credit reporting to combat delays in payment. "As a gesture to business or property owners paying their fair share, I think this is an appropriate gesture."

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Times Star Commons lives!

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Well, not really but Covington apparently still has funds left over from the original money awarded for the doomed project six years ago. Now the city commission has approved reallocating $1 million from the funds toward improving the streetscape on the blocks between 4th & 5th Streets on Madison Avenue and Scott Boulevard. The move would require approval from the legislature. The proposed reallocation tied in with another item from Tuesday night's agenda: approving the streetscape along Madison Avenue up to 8th Street. 

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Already the City has completed two phases of improvements along Madison Avenue and this latest effort is dubbed Phase III which would fill in gaps left over from the first two. Some of the basements underneath the buildings in the improvement area posed problems to sidewalk work because they stretch out underneath the walkways. Further plans include putting utility items underground, though traffic lights would remain overhead.

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Board chairmen resign to prepare for Commission races

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Three men running for Covington City Commission this year had their resignations from City boards accepted by the current commission. Ed Faulkner resigned from the Board of Adjustments and the Linden Grove Cemetery Board; Matt Dressman stepped down from the Audit Committee; and Neil Gilreath left the Code Enforcement Board.

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Other notes:

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*Unanimous approval to spend $351,000 for thirteen new police vehicles

*Matthew Dowling resigned from the legal department to take a position with Sanitation District 1

*Unanimous adoption of two resolutions: one honoring the Holy Cross boys basketball team on its Kentucky All A Classic state title and another in honor of National Parianasthesia Nurses Week

*A presentation to update the Commission on Church Street's one-way status (For a full report on that issue, click here)

*Howard Russell resigned from the Devou Park Rangers

*Commissioner Sherry Carran was appointed to the NKY Home Consortium Board

*Greg Manning was reappointed to the Code Enforcement Board

*Pay raises were granted to Juanita Renaker and Nate Sorrell of the public improvements department and Jason Carter and Amanda Allen of the police department

*Mayor Chuck Scheper noted that the new C+V=G branding is not a new logo for the City but rather for his 10-point plan to keep Covington moving in the right direction

COVINGTON LAYS OUT PRECARIOUS FINANCIAL OUTLOOK, PREPARES FOR FUTURE

by Michael Monks 
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It was a return to last summer's bleak discussions of Covington's finances at City Hall Tuesday night. A report by the audit committee during the City Commission meeting laid out a troubling message: Covington could run out of cash in the early weeks of the new fiscal year that will begin in July. Worse still, the stark projections have yet to factor in the economic impact of the departures of Omnicare and The Nielsen Company from RiverCenter Boulevard, an expected $1 million blow to the budget. "Come June 30, 2012, we may have athree or four hundred thousand dollar general fund balance and we'll have a million dollars less in revenue on July 1 and our health care and pension costs are going up," said Bob Due, Covington's finance director.

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The audit report demonstrated that forty-nine percent of the city's revenue comes from payroll taxes and business license fees. Seventy-three percent of the city's expenses is salary and benefits for employees. 

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"It's important to note that there is an emerging deficit and that's something we've talked about over the past three months and something we will be commenting on in the coming weeks to reverse that trend because that is not sustainable," said Mayor Chuck Scheper who will begin to lay out some of this plans during a Thursday speech to the Covington Business Council. The mayor's full State of the City address will further explore Scheper's plans next Tuesday night at the Madison at 6:00PM in a free event open to the public.

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"We're getting pretty lean and the challenges that we face, we need to address them head-on," Scheper said. "This doesn't reflect the loss of two major employers yet which are still forthcoming. Our infrastructure needs are over thirty million dollars so budgeting two to three million is not letting us make the progress that we need to make."

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Commissioner Steve Frank credited last year's budget cuts with saving the City from an even worse outlook by the audit committee. "Had cuts not occurred, our general fund decrease would be even greater and we would have even less cash on hand," Frank said. The four commissioners each stated that they are on board with Scheper's plans that will be partially unveiled Thursday and then further next Tuesday. 

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"What the mayor is about to release is not just for the five of us to implement," Commissioner Shawn Masters said. "We have to be reaching out to the business community too. This is first time that all five of us up here have agreed with something and we're all on the same page. You see the situation that we're in. We'll be making decisions that won't be popular."

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"It's been a challenging time but one thing I can tell you is that we have worked together well as a team," Scheper said. We are facing the reality of issues head-on and coming up with strategies and plans and actions that will truly change the direction of the City going forward. It's an important time for the future of this city."