Cincinnati's 'rainy day fund' meets the recommended amount for the second time ever
Cincinnati City Council voted Wednesday to approve about $15 million of the carryover budget, an annual process dealing with money leftover from the last fiscal year.
The $15 million spending plan will get a final council vote Wednesday. It includes $5 million for the affordable housing fund, and $2 million for the chronically under-funded pension fund. The rest goes into various reserve accounts in case of future emergencies.
"The total combined reserves after the proposed transfer is just over $85 million," Assistant City Manager Billy Weber told council in a committee meeting Monday. "$85 million is a lot of money to have set aside for a rainy day in the event of an emergency for the city."
The $85.5 million equals 17.51% of the previous year's General Fund operating revenue — well above the recommended 16.7%. The city reached that benchmark for the first time last year.
"That is the success of multiple years of putting away money for that," Weber said.
Last year's carryover budget included one-time American Rescue Plan stimulus funds in the revenue calculation; that's why the reserve amount was higher last year, even though the percentage of revenue was lower.
Separately, the city set aside $50 million for reimbursing income tax collected from people who worked remotely outside the city during the pandemic lockdowns.
The total carryover balance is $26.2 million, leaving about $10.9 million for council to use for one-time spending. The City Manager's Office recommends using $7 million for certain deferred maintenance projects and $2 million for community development initiatives in the West End.
Budget and Finance Committee Chair Reggie Harris says there's time to consider how to spend it.
"I would rather take the time to move deliberately with those dollars than just try to rush and get some money out the door to spend it without recognizing that we have a lot of priorities to balance," Harris said.
The total carryover is less than what officials announced last week, by about $11 million. Weber explained Monday an accounting error is responsible for the mistake.
"[An] automated report, when it was customized, essentially did not provide accurate information. And it was relied upon without a manual check this year, due to the newness of that," Weber said. "We are putting policies in place to ensure that this error does not happen again, and errors like it."
The City Manager's Office previously recommended adding more than $18 million to reserve accounts, compared to $7.8 million in the updated recommendations.
The city's bond rating — essentially its credit score — is heavily affected by how much money is set aside for potential emergencies. The 16.7% goal is based on total operating revenue from the previous year.
The first set of recommendations included $85.6 million from American Rescue Plan federal stimulus in fiscal year 2023 revenue. That inclusion increased the amount needed to reach 16.7%.
When the error was discovered, city officials decided to make up the difference by removing the ARPA money from the revenue total, decreasing how much should to be added to reserve accounts.
"We have discussed this with our financial advisors and they feel very comfortable with the fact that we have sufficient reserves," said Finance Director Karen Alder.
City officials will meet with bond agencies next week.