Draft budget includes police, fire recruits and a record-high human services fund
The first draft of the Cincinnati budget for the next fiscal year includes funding for more police and fire recruits, a record-high human services fund, and proposes a number of new programs.
Interim City Manager John Curp and Mayor Aftab Pureval released their spending proposal Thursday. Council has until the end of June to amend it and pass a final version, although it could be finalized as soon as June 22.
"In this budget, our city is setting aside $72 million of the $139 million in the second tranche of federal American Rescue Plan Funding," Pureval said. "While the city's revenue projections have dramatically improved from previous forecasts, we will use these reserved ARPA funds to protect our basic services during potential operating budget deficits through 2025."
The budget is balanced, but Curp says that's only because of $18.6 million from ARPA filling a deficit.
"While revenues are improving, they are not outpacing the growth of expenditures," Curp said. "In this budget, we propose to hold back $53 million to cover future deficits for fiscal years '24 and '25."
How to give input
Three public hearings are scheduled over the next few weeks:
Thursday, June 2 from 6-8 p.m.
- Madisonville Recreation Center (5320 Stewart Avenue)
Saturday, June 4 from 11 a.m. to 1 p.m.*
- City Hall, Council Chambers (801 Plum Street) and virtual
* A "meet and greet" with council members is scheduled from 10-11 a.m.
Tuesday, June 14 from 6-8 p.m.
- College Hill Recreation Center (5545 Belmont Avenue)
What's in the budget
A few initiatives announced previously are part of the FY23 budget:
- Alternative Response to Crisis program: a new team to respond to emergency calls related to mental health, designed to avoid police responding to some situations
- A study to complete a Public Safety Facilities Master Plan, which could recommend a reduction in the number of police districts
The police and fire departments, combined, make up about 66% of the General Fund each year.
The proposed FY23 budget includes a 2% increase for CPD and a 7% increase for CFD. Both departments would get two recruit classes: a record 100 recruits for fire, and 88 recruits for police, the most since 1999.
CPD alone makes up about 36% of the General Fund in the budget proposal; it's been as much as 38% in recent years (FY20 and FY21). The police budget has increased 17% since FY2017 (compared to a General Fund increase of 21% during that time).
$2.6 million is set aside for public safety facility improvements, and $3.4 million for a new Fire Training Tower.
Police gun range
Pureval proposes $2 million to support relocating the CPD gun range away from Evendale; residents of bordering Woodlawn and Lincoln Heights have pushed for the gun range's removal for years.
"The cost of moving the facility would be much higher than the $2 million," Pureval said. "But this is the city's down payment and good faith investment to be at the table with the state and with the county, because it's going to take all three of us as funders in order to move it."
Hamilton County has promised $5 million from its federal stimulus to move the gun range. The current plan is to build a new facility to be shared with CPD and the Hamilton County Sheriff's Office.
Human Services Fund
The city's Human Services Fund is administered by the United Way, which uses a competitive application process to issue grants to organizations based on Council-established priorities.
From 2004 to 2017, the city budget for the HSF did not exceed 0.8% of the General Fund. Council approved a plan in 2017 to incrementally increase the percentage for the Human Services Fund until it reached 1.5% in 2023.
The budget draft includes about $8 million for the fund, about 1.7% of the General Fund.
"The 1.5% mark set by Council was meant to be a floor," Pureval said. "I'm very proud of the fact that in my first budget we have exceeded that floor."
The Human Services Fund makes up about half of total leveraged support funding.
Other leveraged support funding
The city budget includes funding for third-party, non-government organizations and programs to "support neighborhood revitalization, economic development, human services and violence prevention."
Total leveraged support for FY23 (including the Human Services Fund) is $17,232,290, about 3.6% of the General Fund.
Revenue from the short-term occupancy tax (like Airbnb and VRBO) goes into the Affordable Housing Trust Fund. The budget draft includes $611,000 from that revenue.
Earlier this year, council approved a new process for what happens to money leftover at the end of each fiscal year. It added the Affordable Housing Trust Fund as one of the "buckets" to get funding from that surplus without a separate council vote.
At the time the new policy was approved, city officials estimated between $1 million and $2.5 million would be directed to the fund each year. Thanks to much higher revenue than initially projected, officials now say the fund will likely get the maximum $5 million this year. The carryover budget is usually approved in September.
Separately, the budget includes:
- $1.2 million for the Strategic Housing Initiatives Program (SHIP) through the Department of Community and Economic Development; the funds are used to support the rehabilitation or new construction of housing units, including permanent supportive housing. (This is an increase compared to $750,000 last year and $389,000 that was originally planned for this year)
- $3 million from ARPA for Bethany House's new shelter project; this is money that was previously allocated from an ARPA subset (HOME Investment Partnerships Program) but later deemed ineligible.
- $2 million from ARPA for Affordable Homeownership and Minority Developer Capacity Building programs with The Port.
- $2 million from ARPA for homeownership support through the American Dream Downpayment Initiative (ADDI) (note: council recently approved $300,000 for this program as well)
Capitalizing on Intel
The budget includes $7 million to prepare sites that could be used for high-tech manufacturing.
It's designed to capitalize on the $20 billion Intel facility that will be built outside Columbus. The massive development would employ 3,000 workers, each averaging $135,000 a year. It would become Ohio's first chip factory.
The $7 million would go to The Port.
"The Port will obtain the sites, get them ready and then work with REDI to market and sell those sites to folks looking to move into our economy," Pureval said.
Deferred maintenance for city facilities
Deferred maintenance for facilities like parks and recreation centers is a longstanding problem. The budget draft includes $3 million each for repairs in:
- Recreation Centers
- Health centers and facilities
- Fleet facilities
"The hole that we're in on deferred maintenance is extraordinary," Pureval said. "What we have tried to do is put a balance towards strategic investments to grow our economy and grow our city, while also having a high priority for capital infrastructure investments."
The FY23 budget for pedestrian safety improvements is $1.85 million, an increase of about $600,000 compared to last year.
Separately, Pureval is proposing $4 million from this year's tranche of the American Rescue Plan to go toward pedestrian safety projects. That money would be spent over the next several years with most of it focused on safety around schools, including speed cushions, bump outs, and raised crosswalks.
(Note: Council recently approved $1 million from ARPA leftover from last year as a one-time investment in pedestrian safety.)
Citizen Complaint Authority
The city's independent police oversight board has a proposed budget of $1,297,140 — a slight increase from last year, and more than double the budget in FY 2017.
The biggest increase was last budget, with an additional $390,000 to hire new investigators, primarily to deal with a huge backlog in cases. At the time, the administration recommended evaluating whether the increase was needed long-term, implying the budget could be reduced in future years. Two then-council members opposed some of the budget increase.
"We're trying to right-size the Citizen Complaint Authority with the number of investigators in order to make sure they're addressing that backlog and have the resources necessary to do the job in front of them," Pureval said. "And we'll continue to analyze that to see if that funding is appropriate."
Experts say Cincinnati needs to immediately increase its annual contribution to the retirement system for city employees. The pension fund is about 70.5% funded, down from 77% in 2015.
The current estimated unfunded liability is about $724 million. Officials say the retirement system can be fully-funded by 2045 if the city immediately increases its yearly contribution.
Last month, the Cincinnati Retirement System Board of Trustees unanimously voted to recommend an increase the Employer Contribution rate from 16.25% of pensionable payroll, to 16.75%.
The current budget draft keeps the contribution rate at 16.25%, but Pureval says a recent change to end-of-year carryover makes up the difference.
"Based on these projections, we are very confident that we will exceed the funding for both the Affordable Housing Trust Fund and the pension at the end of the year with the carryover budget," Pureval said. "I can't be certain but our projections are showing us trending in that direction."
The updated "waterfall" policy allows for up to $2 million per year to go into the pension fund; an increase to 16.75% of pensionable payroll would be about $2.2 million, according to the CRS Board of Trustees.
The Affordable Housing Trust Fund will likely get the full $5 million allowed under the new policy. The projections are based on revenue estimates and could change.
The budget draft includes $17.1 million for street rehabilitation, plus $9.2 million in grant resources.
City officials estimate that will cover 49 lane miles of street rehabilitation and 24 lane miles of preventative maintenance.
The budget also includes $3.8 million for the Western Hills Viaduct replacement project.
Understanding the city budget
Here are some common questions about the budget process to help you understand the discussions.
Where Can I See Budget Information Online?
Documents are published on the city website under the Finance & Budget page: Cincinnati-oh.gov/finance/budget
There are also links to prior years' recommended and approved budgets.
Why Does A New Budget Start In July Instead Of January?
The city budget is based on fiscal year rather than calendar year. Fiscal Year 2023 (often abbreviated as FY23) begins July 1, 2022 and ends on June 30, 2023.
Where Does City Income Come From?
The majority of city revenue comes from income taxes, also called earnings taxes. Usually that makes up as much as 72% of overall revenue; this year (like last year) is unique because of federal stimulus. Here's the breakdown of revenue for FY23:
- Earnings Taxes: 61.2%
- American Rescue Plan Act: 15.3%
- Property Taxes: 5.2%
- State Shared Revenue: 2.6%
- Casino Tax: 1.7%
- Investments: 0.7%
- Parking Meter: 0.3%
- Other Revenues: 13.0% *
* Includes: license and permit fees; admission taxes; short-term rental excise taxes; buildings and inspections fees and permits, etc.
The current city income tax is 1.8% of gross earnings and the revenue is divided into three categories:
- 1.55% for the General Fund
- 0.15% for permanent improvements (capital)
- 0.1% for maintenance of city infrastructure
The most significant change to city revenue in recent years is a reduction in the Local Government Fund (State Shared Revenue). The state imposed cuts to this fund about ten years ago; the amount allocated to Cincinnati in FY22 ($11.7 million) is a 72% reduction compared to 2011 ($40.7 million).
What makes up most of the budget?
82.7% of the general fund goes to personnel and benefits. And, 84.2% of city employees are represented by labor contracts negotiated with a union.
Who Decides How To Spend Taxpayer Money?
The process begins with Interim City Manager John Curp, who worked with his team to prepare the first draft of a budget. That draft is passed along to Mayor Aftab Pureval, who has the option to make any changes before it goes to Council.
This year, Curp and Pureval announced the budget draft together, and Pureval did not make any line item changes.
Council has ultimate authority over the budget and must reach a majority agreement (five of nine council members) to approve the spending plan.
The public input part of the process takes place at City Council. The Budget and Finance Committee typically holds three public hearings after the draft is released; this year, Committee Chair Greg Landsman added a hearing in April for input before the administration's draft. The usual three hearings are scheduled for early June.
How Does A Biennial Budget Work?
The city budget technically covers two years at a time, but Council still votes to approve funds every year.
This year is a "budget update" to account for differences in actual revenue compared to expected revenue. Practically speaking, however, it's an entirely new budget prepared by an entirely new administration.
What's The Difference Between Operating And Capital Budgets?
The operating budget includes the services provided by the city, like police officer patrols, filling potholes, trash collection and operating the water treatment system. It includes wages for city employees and the cost of supplies needed to deliver services. The operating budget includes the General Fund, where City Council has the most flexibility in funding decisions.
General Fund dollars can be used for capital projects, but capital dollars cannot be used for operating.
The capital budget covers purchasing or improving city assets like buildings and vehicles. It includes assets that cost at least $10,000 and last at least five years. The Capital Budget includes some cash and some borrowing.
The overall Capital Budget for FY23 is about $304 million, which includes restricted funds like MSD capital improvements, the convention center and stormwater management.
The city can also take on debt for capital projects, but the amount of debt is limited by the amount of revenue expected from taxes — the city has to bring in enough money to make payments on the debt. If the city wanted to take on more debt for capital projects, Council would have to approve an increase in taxes. Right now, the city issues bonds based on property taxes.
The city can't issue bonds on assets not owned by the city; that also applies to city-owned buildings with long-term leases like Music Hall's 100-year lease. Playhouse in the Park is another example of a city-owned building that can't use bonded capital for improvements because of long-term use agreements.
A portion of income tax revenue is set aside for the Capital Budget: 0.15%, which equals about $9 million each year for FY22 and FY23. This is cash-in-hand the city can use to pay for capital projects, which could include buildings not owned by the city.
Will There Be Budget Cuts This Year?
Thanks to stimulus funds from the American Rescue Plan, no departments have budget cuts.
When last year's biennial budget was passed (for FY 22-23), city officials anticipated a 3.7% reduction across the board for all departments. Actual revenue has come in much higher than last year's projections, meaning those cuts are not necessary.
How Do Officials "Find" Money In The Budget To Add Services?
City officials budget every dollar of expected income; sometimes there's leftover money when the city brings in more than projected, and often mid-year adjustments are needed to transfer money from a department with surplus to a department with a deficit.
When council members add programs or projects to the budget recommended by the city manager, they usually have to choose what to cut. But adjustments to the budget draft over the next few weeks could mean adding council member priorities without taking away from the current budget draft.
City administrators say there's about $1.4 million available for council to allocate from last year's American Rescue Plan stimulus, plus some "wiggle room" in the city's capital budget.
City engagement session: Budget Basics
The City of Cincinnati's Office of Budget & Evaluation and Department of City Planning & Engagement held two Budget Basics Sessions for residents to learn more about City's budget structure, the budget development process, and how to provide feedback during the Fiscal Year (FY) 2023 Budget Update process. Sessions were held virtually on March 10 and March 29, 2022.
You can watch a recording of one of those sessions below: