By Greg Paeth
NKyTribune Senior Reporter
The Covington City Commission has approved a two percent increase in its tax on insurance premiums in an effort to raise $1 million a year to cover the cost of capital expenditures such as fire trucks, police cars and infrastructure improvements.
Commissioner Steve Frank cast the only vote Thursday against the plan, which was supported by Mayor Sherry Carran and commissioners Chuck Eilerman, Jordan Huizenga and Bill Wells.
Frank said he decided not to vote for the plan because there was no clear, detailed plan about how the money would be spent. The commissioner said he likes to know specifically what he’s buying before he makes a decision to go ahead with an expenditure.
There hasn’t been much debate on raising the tax from 10 percent to 12 percent because the city faced a tight deadline that’s established by the state.
Cities that opt to raise the tax are required to inform the state about the increase at least 100 days before June 30, Frank said. That deadline gives insurance companies enough time to include the new tax rate on bills they mail to policyholders.
The commission approved the increase in a special session because its next regular meeting will be held March 31, which would not meet the 100-day requirement.
The ordinance restricts the use of the money raised through the tax increase for capital expenditures. There was no support for a similar ordinance that did not include that specific restriction.
The legislation includes a “sunset clause” through which the insurance premium tax will revert to 10 percent in six years.
The increase in the tax will go into effect July 1, City Manager Larry Klein said.
In a presentation about the tax, the city staff said the owner of a home valued at $120,000 would see the insurance tax increase from $80 to $95 per year while the auto insurance tax for the owner of two cars would increase $27 from $136 to $163.
For that example, the total increase for both taxes would be $42 per year. A renter would see their auto insurance tax increase from $67 to $81, the city staff said.
Commissioner Wells used the equation championed by former mayor Chuck Scheper a few years back about how “Courage + Vision = Growth.” Wells pointed out that the city, which recently celebrated its 200th birthday, has never had a capital improvement plan.
“Without the courage to have vision, we’re not going to have any growth. I vote yes,” Wells said.
Six people spoke – including a former city commissioner and two unsuccessful candidates for the commission last year — about the tax hike and other issues.
Former Commissioner Michelle Williams, who lost in last November’s election, asked whether the tax is applied to workers’ compensation premiums. Assistant City Solicitor Bryce Rhoades said the tax is not levied on those premiums.
Brandon Mims and Christi Blair, who didn’t get elected in 2014, also raised a number of questions.
The insurance tax increase as well as a recent hike in the trash collection fee that the city charges have stirred some complaints from city residents in the last few weeks.
The annual household waste collection fee recently increased from $122.50 per year to what may prove to be $150 per year. The city sent out bills that cover six months of collection for $75. But Klein said the city doesn’t how much it will charge for the second six months of the year because the fee will be linked, in part, to a new garbage collection contract that will go into effect July 1.
“We sent out the bills for $75 for six months, but we just don’t know what the second six months will be,” Wells said. “It may be more or it may be less. Hopefully it will be less.”
Three companies have submitted bids to the city, which now spends about $2.3 million per year on waste collection.
Klein said the new contract may be discussed at the commission’s March 31 meeting.