Wednesday, October 27, 1999
Study: Payroll tax cut may help Covington
BY CINDY SCHROEDER
The Cincinnati Enquirer
COVINGTON — A reduction in the city's payroll tax — long sought by the business community — would make Covington more competitive with surrounding markets and increase tax revenues, an independent management study has found.
“We would certainly support that,” Beth Sewell, executive director of the Covington Business Council (CBC), said Tuesday. “Through the years, our members have supported the reduction of the payroll tax.”
The finding is among nearly 100 recommendations offered in a 37-page report analyzing city spending patterns.
The yearlong study, chaired by Chuck Scheper, an insurance executive and 22-year Covington resident, is aimed at helping the city deliver services more efficiently, while saving $5 million a year and realizing a one-time savings of $2.5 million.
“This is a long-term blueprint for the city's future,” City Manager Greg Jarvis said.
While the report's recommendations must be tempered with practical and political realities, Mr. Jarvis said, he appreciated the thorough, business-like approach.
“One of the long-term benefits will be the establishment of new relationships within the (Greater Cincinnati) business community,” Mr. Jarvis said.
The report recommends dropping Covington's payroll tax rate from 2.5 percent to 2 percent during the next five years, and increasing the $60,000 cap on taxable wages to an unspecified higher figure.
The reduced tax rate would spur creation of jobs, the report said. That growth, combined with planned projects such as Riverfront West and its 4,000 jobs, and the savings realized from implementing many of the report's recommendations, would increase tax revenues, it said.
“One of the things our mem bers have been telling us for a while is that the payroll tax is excessive, and that lowering it will actually increase revenues,” said Greg Shumate, chairman of the CBC's advocacy committee.
He said he knows of several businesses that have expanded their facilities outside of Covington because of the city's high payroll tax rate.
When combined with Kenton County's payroll tax rate of 0.85 percent on the first $25,000 of income, Covington's rate for low- to middle-wage earners ranks as the highest in Kentucky, along with Newport's, the report said.
Covington's payroll tax rate also is one of the highest in competing markets when compared with Cincinnati's 2.1 percent, 0.7 percent for Indianapolis, 2.2 percent for Louisville, 2 percent for Columbus and 2.25 percent for Dayton, Ohio.
Ms. Sewell said CBC representa tives hope to meet with city officials to discuss how to implement suggestions. Ms. Sewell said she also is intrigued by the recommendation to form a nonprofit, private development corporation to spur commercial redevelopment, “especially if those funds could be funneled back into (Covington's) urban core.”
Covington should consider forming a regional taxing authority to pay for all fire and rescue services, and privatizing ambulance service, and/or enacting a fee increase to better reflect its actual cost, while sharing public safety services with neighboring communities, the report said.
The report also suggests consolidating 911 services with Kenton County and Erlanger.
Within a month, Mr. Scheper, the group president of American Annuity Group Inc., said he plans to convene a six-member committee, including himself, to start implementing the report's recommendations.
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