Why Fort Thomas will not be Stockton, CA (BANKRUPT)

By G. MICHAEL GRAHAM

Fort Thomas Matters Reporter

Stories about cities going bankrupt have grown more common in the news over the past couple years.

Cities like Stockton, California and Harrisburg, Pennsylvania among other cities have done that. But City Administrative Officer Don Martin said Fort Thomas is not in that boat, nor is he aware of any other cities in Kentucky that are.

Martin said the main reason is Fort Thomas takes a conservative approach toward spending. Also, Martin said Kentucky cities must balance their budgets annually by law, unlike the federal government.

“Like an individual’s personal budget, the best way to avoid bankruptcy is to not spend more than you make,” Martin said. “In other words, make sure that the expenditures remain below revenue. Last year, the city eliminated the Assistant to the City Administrator and Recreation Director positions and shifted those responsibilities to other employees. This was a proactive approach to address expenditures to help ensure the city remains on solid financial ground.”

Martin said the city has three main resources for revenue streams. The property taxes generate about $4,056,000 in revenue with approximately $2,030,000 coming from payroll taxes and about $2,125,000 from insurance license fees. Martin said those three sources make up about 80 percent of the city’s income. Martin said Kentucky limits the abilities for cities to increase income streams. Property tax revenues are limited to four percent annually. Cities are also not allowed to have sales taxes.

Martin sent a chart on the property tax increases. They stood at 36 cents for every $100 on a home value last year. Property taxes went down 2.62 percent in 2010 before increasing by 3.89 percent in 2011 and another 3.75 last year. The chart listed a home worth $200,644.92 would have an annual tax of $670.22 in 2010 and that increased to $696.31 in 2011 and $722.39 last year. That annual mark was the highest in property taxes since 1989 when it would have produced $700.52 on a home of the same value. The lowest the property tax has been per $100 was 29.3 cents in 1994.

“Our department heads all focus on finding savings in their budgets and on alternative sources of funding, such as grants,” Martin said. “Additionally, cities that seem to be struggling the most rely heavily on employee payroll taxes driven by businesses. When the economy sours and jobs are lost, those cities lose a great deal of that revenue. Property taxes provide a very stable revenue source that is not directly tied to those economic downturns.”

Martin also listed a chart that compared Fort Thomas to similar property tax rates in other cities in Northern Kentucky. Fort Thomas ranked 24th lowest out of 36 Northern Kentucky cities. The lowest was Crestview Hills at 15.2 cents per every $100 on a home value and Elsmere was the highest at 54.6 cents.

Martin said the biggest financial challenges cities face is the increasing cost of health insurance and meeting employee retirement system contribution requirements. Martin said cities can’t do much about either.

“The city and its three labor unions agreed to contract changes that provided the city greater flexibility when selecting employee health insurance plans,” Martin said. “Accordingly, annual increases in health insurance costs have been lower than many cities have faced while still providing quality insurance for our employees.”

Martin said Fort Thomas has been able to increase revenues without tax increases two ways. The first is finding ways to attract new businesses like Omega Processing. The main way they do that is keeping lower payroll taxes. The payroll taxes in Fort Thomas stand at 1.25 percent compared to 2.5 percent in neighboring cities like Covington, Newport and Dayton.

The second way is looking for grants to buy equipment like a fire truck. Martin said the city earns more than $100,000 in grants annually.

Martin said one advantage Fort Thomas has is great volunteer support. He said they spend a number of hours helping out the city at special events like the Merchants and Music Festival.

“If the city had to fully fund the Merchants and Music festival, it may not even occur,” Martin said. “For the past several years, the city has received more than $30,000 in donations toward the festival.”