Article by Sam Wildow, Piqua Daily Call
COVINGTON — During their meeting on Monday, the Covington Council held the first reading of an ordinance that, if approved, would effectively raise the income tax of residents who live in Covington, but work outside of the village.
The council is considering amending the credit given to income tax paid to other municipalities in Ohio to keep up with the cost of maintaining the village.
According to the ordinance, resident taxpayers of the village would receive 0.5 percent credit for income paid to another municipality from the current 1.5 percent, which is a full credit for income taxes paid outside of Covington as the village’s income tax is 1.5 percent. Residents who live in Covington and work in another municipality would have to pay income tax in the municipality where they work and pay an additional 1 percent income tax in Covington.
Covington residents who both live and work in Covington would not be affected.
“We’ve been talking for a couple years about the need to increase revenues,” Village Administrator Mike Busse said. Busse said that the village has “done a pretty good job over time of controlled spending to live within our means,” but they have reached a point where more funding is needed to maintain the village’s roads and infrastructure as well as continue providing residents with the same level of services.
Busse discussed the street levy that residents voted down in May and how funds are needed to maintain Covington’s roads.
“We put the street levy on in hopes of generating funds to pave the streets because we didn’t pave any streets this year. We just don’t have the revenue for it,” Busse said. “In fact, we’re in the same situation for next year. We don’t have the revenue to pave streets for next year, either.”
Busse said that, when the street levy failed, the village discussed whether they should try and put the street levy another ballot, try to increase in the income tax, or this measure of trying to reduce the income tax credit for taxes paid to other municipalities.
Busse said reducing the tax credit that the village offers is something that other municipalities of similar sizes have been considering.
“A lot of other villages are now reducing the credit they give for taxes that are paid to other communities,” Busse said. “A person who lives in Covington and works in another community … they pay their taxes to that community first and we’ve always given 1.5 percent credit, so we gave full credit for these taxes paid in other communities. We — like Pleasant Hill, West Milton, Greenville, Arcanum — have all looked at this and determined that we can’t continue with the funding level that we have and maintain our infrastructure, our streets, police protection, general government functions. Everything has just becoming more and more expensive, and there’s really no way to cut things without cutting services.”
According to data from St. Mary’s Tax Department, the village estimated that by reducing the income tax credit, it would receive approximately $260,000 in additional funds.
If approved, the change would be effective in January 2019 and would not apply to income earned in 2018.
The council is also considering an ordinance that would change how the funds generated by the village income tax is allocated. The funds are currently split with 20 percent to the street fund and 80 percent to general fund, but this ordinance would split the funds with to 25 percent going to the street fund and 75 percent going to the general fund.
Busse noted that the village can transfer funds from the general fund to the street fund as needed, but the village is prohibited from transferring funds from the street fund to the general fund.