COVINGTON, Ky. – The City of Covington has finally freed itself from the need of a $3.5 million short-term loan, relied on for the last 40 years.

At Tuesday night’s meeting, Covington Mayor and Commissioners voted not to renew the City’s annual short-term loan known as a Tax Anticipation Note (TAN).

Every year since 1976 the City has used the TAN to pay its payroll, employee benefits, and other operating expenses when the city’s cash on hand was insufficient. The TAN was then repaid at the end of the fiscal year once tax revenues had been collected.

But the City became reliant on this temporary cash influx and renewed the TAN each year creating a never-ending borrowing cycle.

Thanks to better cash management and financial planning the city has finally been able to break this cycle.

“We have worked hard so that, instead of relying on the short-term cash influx provided by the TAN, the City has adequate cash on-hand to meet ongoing operational expenditures,” said Director of Finance and Operations Lisa Desmarais. “This means that we no longer have those dips in cash flow that create the need for short-term borrowing.”

Rather than renew the TAN for the next fiscal year, beginning on July 1, 2016, Covington has taken measures to improve cash management practices and enact new policies so that the short-term loan is no longer necessary.

Such measures include the implementation of new financial software in the Finance Department, which allows for more oversight and improved revenue management and collection, and the passing of a fiscal stability ordinance.

Enacted in December 2015, Covington’s fiscal stability ordinance established a formal policy for developing future budgets and for allocating any carryover funds for years when the City has additional revenue. The primary goal was to increase funding for existing financial and legal obligations such as repayment of the City’s TAN.

“Improving our financial policies and practices has been a priority for the City the last several years,” City Manager Larry Klein said. “Eliminating this loan practice is a major step forward on that road and will result in an improved financial outlook for the City. We will continue to ensure that best financial practices are in place so that public funds are managed responsibly.”

With this short-term debt obligation addressed, the City is now focusing on reducing reliance on long-term debt.