Cincinnatians kicked off city budget engagement season with the first public hearing in Westwood Tuesday night.
It was the first of three public hearings this month, ahead of the release of the first budget draft expected in late May. The next two meetings are:
- Monday, March 11 at 5:30 p.m. at Roll Hill School (2411 Baltimore Ave)
- Wednesday, March 20 at 5:30 p.m. at North Avondale Recreation Center (617 Clinton Springs Ave)
A virtual "Budget Basics" meeting, aimed at helping residents understand how the budget works, was Feb. 26. (You can watch the full video at the end of this article.)
Budget Director Andrew Dudas says the administration has two main goals every year: first, to create a structurally balanced budget, meaning revenue should be equal to or greater than expenditures.
"Since the pandemic, we have not had a structurally balanced budget; however, we have had a balanced budget," Dudas said.
In other words, the city had to use one-time sources (mostly federal stimulus from the American Rescue Plan Act) to fill a deficit. That stimulus money will run out at the end of fiscal year 2025.
"Our other main strategy in terms of the budget is on the revenue side, to expand our tax base with a focus on economic development and neighborhood investment," Dudas said. "Because we rely so heavily on the earnings tax, our ability to recruit and retain jobs within the city is paramount to preserving that General Fund revenue source."
Unique this budget cycle is the portion of money that comes from the sale of the Cincinnati Southern Railway. The city-owned asset has been leased to Norfolk Southern for decades, but Cincinnatians voted in November to approve selling the CSR to Norfolk Southern instead.
The deal is set to close March 15, so the city will only get two-and-a-half months of lease payments for calendar year 2024. Transaction fees (separate from the $1.6 billion sale price) will cover the gap in the capital budget for the rest of fiscal year '24 and for fiscal year '25.
The sale revenue will be invested, with the first returns expected about a year from now. The money can only be spent to maintain or improve existing infrastructure.
City Manager Sheryl Long released a plan last year outlining a plan for spending the additional revenue expected once investment returns start coming back. But, Long says, all of that is subject to City Council approval — and public engagement can influence their decisions.
"There will be an online dashboard that our [Office of Performance and Data Analytics] team and budget teams are developing right now. This will show where the funds are going and anyone can access it at any time," Long said. "Please continue to come and make your voice heard as we develop the budget every year."
City Council will hear from city department heads in late March and early April, and pass a policy motion in mid-April; that's the document the city manager will use to create the first draft of the budget.
Long expected to transmit her draft to Mayor Aftab Pureval by May 23, with a public press conference expected May 24. A public hearing is scheduled for the evening of June 3. City Council must pass a final budget by the end of June.
See the full schedule below (story continues after):
Understanding the city budget
Where can I see budget information online?
Documents are published on the city website under the Finance & Budget page: Cincinnati-oh.gov/finance/budget
Once the city manager and mayor release their budget draft, they will be available on that page (one document for the proposed operating budget and one document for the proposed capital 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 2025 (often abbreviated as FY25) begins July 1, 2024 and ends June 30, 2025.
Where does city income come from?
The majority of revenue comes from income taxes, also called earnings taxes. Usually that makes up as much as 72% of overall revenue. This year is unique because of federal stimulus. Here's the breakdown of revenue for FY24 (the current budget):
- Earnings Taxes: 65.3%
- American Rescue Plan Act: 5.3%
- Property Taxes: 6.9%
- State Shared Revenue: 3%
- Casino Tax: 1.9%
- Investments: 1%
- Parking Meter: 0.3%
- Other Revenues: 16.3%*
* 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 a decade ago; the amount allocated to Cincinnati in FY24 (about $15.7 million) is a 61% reduction compared to 2011 ($40.7 million).
What makes up most of the budget?
Of the General Fund, 80.8% goes to personnel and benefits. And, 83.4% of city employees are represented by labor contracts negotiated with a union.
Who decides how to spend taxpayer money?
The process begins with City Manager Sheryl Long, who worked with her 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.
Council has ultimate authority over the budget and must reach a majority agreement (five of nine council members) to approve the spending plan.
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.
Last year, council approved a budget for fiscal year 2024 and fiscal year 2025. This year, council will vote on a "budget update" to account for differences in actual revenue compared to expected revenue. Practically speaking, however, significant changes are typical in a budget update year.
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 expenses.
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 FY24 is about $310 million, which includes restricted funds like Metropolitan Sewer District 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.
Where can I learn more?
https://www.cincinnati-oh.gov/budget/budget-engagement/
WATCH: Budget Basics
