Covington has weathered the economic downturn and could, with continued diligence, survive until the economy bounces back.

That’s what City Manager Derek Matheson told the City Council on Oct. 10 during his 2012 draft budget presentation.

As city staff worked on the budget, Matheson said, a handful of themes became apparent.

“Bold cuts early in the recession have served the city well and allowed us to continue to provide quality services to the community,” Matheson said. “However, growing expenditures are catching up with flat revenues.”

Watching how it spends its money, Matheson said, should help Covington keep deficits down into the next year, but because the city has had to spend more money while experiencing no growth in revenue, things could get tough if the economy does not turn around.

“A double dip recession could necessitate a mid-year adjustment in 2012,” Matheson said. “On a national level, the recovery seems to be stalling after a strong start at the beginning of 2011.”

While job growth and taxable retail sales have provided bright spots in the economic outlook, Covington has also seen increases in the real estate excise tax receipts compared to the previous two years, while sales tax revenues are on target for the third quarter, Matheson said.

The city has continued to use strategies it adopted in 2010 to manage its budget, Matheson noted, including making changes to how money is distributed among funds, foregoing the biennial budget process until the economy stabilizes and modifying the merit award program for city employees by replacing bonuses with additional floating holidays.

Covington officials are reviewing ways they can bring in additional revenue with two specific options on the table.

First is the .5 percent, or about $180,000, available in utility tax authority. Cities have the authority to tax water and sewer districts via interlocal agreement, Matheson said, the two districts which serve Covington residents have not seemed receptive to the idea of using that capacity to bring in additional cash to the city’s coffers.

The second option is for the city, acting as a transportation benefit district, to impose a vehicle license fee of up to $20 per car without a public vote or up to $100, but more than $20 must be put to the voters.

The finance department estimated a $20 vehicle license fee would bring in between $180,000 and $280,000 annually.

“With the economy still struggling, revenues still lagging and expenditures still increasing, the effort to continue to provide a balanced budget becomes more and more difficult,” Matheson said. “Staff continues to do an excellent job of managing expenditures, which provides funds that can be rolled over into the following year. However, staff can only do so much and at some point that margin will not be available and services will begin to erode unless the economy turns around or other resources are found.”

Matheson said the city is going to continue what has worked so far, including pursuing economic development opportunities from the Destination Covington event on Oct. 6, as well as proceed with projects such as Covington Community Park, design of the road project on Jenkins Creek on Kent Kangley Road to 185th Street, as well as pursue grant funding for projects and upgrade technology to make things such as the permitting process more efficient.

“We plan to seize opportunities that make sense,” Matheson said. “We plan to keep our neighborhoods safe, our streets repaired and our grounds maintained. And, we plan to survive this economy. With continued and increased community support, we plan to keep that promise.”