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The next city budget has no projected deficit, even without federal stimulus

City Hall as seen from Plum St. in Cincinnati, Ohio, Wednesday, May 12, 2021.
Jason Whitman
City Hall as seen from Plum St. in Cincinnati, Ohio, Wednesday, May 12, 2021.

The first draft of the next city of Cincinnati budget includes no budget deficit, even without using federal stimulus funds as the city has done the last few years. City officials say revenue from property and income taxes came in higher than expected.

City Manager Sheryl Long and Mayor Aftab Pureval released their recommended budget May 24. City Council makes all budgeting decisions, and must vote on a final plan by the end of June.

Long warns the city's long-term financial health is still in jeopardy. Projections suggest the city will spend more than it takes in for fiscal years 2026 through 2029, she wrote in her budget proposal.

"We are still facing a situation where expenses are growing at a faster rate than revenues over the next five years," Long said in late May. "We can’t be shy about looking under the hood of city operations to find new sources of revenue, cut expenses, and improve efficiencies at every possible opportunity."

RELATED: Cincinnati's budget is in trouble. A commission recommends income tax increase, trash fee and more

As recently as December, city officials projected a $26.4 million deficit for FY 25. Since then, property tax revenue has come in $9.6 million higher than expected, and income tax revenue is $8.7 million higher; other revenue increases include a combined $14.6 million more than anticipated.

Officials had saved $25.2 million from the American Rescue Plan Act (ARPA) to fill the expected deficit. Now, Long wants to use $17.6 million of that for one-time spending in the capital budget:

  • Economic Development Initiatives: $4.35 million
  • Neighborhood Business District Improvements: $3 million
  • Property Development Improvements: $1 million
  • Green Cincinnati Sustainability Initiatives: $5 million
  • Lifecycle Asset Acquisition and Replacement: $500,000
  • Fleet Replacements: $2 million
  • Home Enhancement Loan Program (HELP): $500,000
  • Lunken Airport Improvements: $1 million
  • 311 Cincy Technology Upgrades: $250,000

Long recommends the remaining $7.6 million go to the General Fund, including to a $4.1 million reserve fund for contingencies during FY 25. Mayor Pureval is recommending one-time spending for $4 million instead, primarily focused on economic development.
Pureval also added funding to several organizations in Leveraged Support, and added a $15,000 merit increase for City Manager Long. See all the mayor's adjustments below (article continues after):

The FY 25 capital budget is more than $621 million, but most of that is in restricted funds like Greater Cincinnati Water Works and the Metropolitan Sewer District of Greater Cincinnati.

The "general capital" budget is about $106 million, plus another roughly $191 million in grants and matching funds.

Officials say the voter-approved sale of the city-owned Cincinnati Southern Railway will go a long way toward solving the city's expensive deferred maintenance problem. The first investment revenue from the $1.6 billion sale won't be available until fiscal year 2026; in the meantime, the city stopped receiving lease payments from Norfolk Southern once the sale closed in mid-March.

RELATED: The $1.6B fund from selling the Cincinnati Southern Railway has grown about $14M in 2 months

The CSR Board of Trustees voted earlier this week to send the city $36 million to fill that gap for the rest of FY 24 (which ends June 30) and for FY 25 (which starts July 1). That $36 million payment comes primarily from transaction fees paid by Norfolk Southern as part of the sale agreement. Like all funds coming from the CSR Board, the city can only spend the money on maintaining or improving existing city-owned infrastructure. That limit is spelled out in state law.

The budget recommendation includes preliminary plans for $29.2 million from the railway money, about $2.8 million more than the city would have gotten from the lease this year. The outline follows a plan released by the City Manager before the election.

A general breakdown of how the city wants to spend money from the CSR Board on capital projects in FY25.
City of Cincinnati
A general breakdown of how the city wants to spend money from the CSR Board on capital projects in FY25.
A general breakdown of how the city wants to spend money from the CSR Board on capital projects in FY25.
City of Cincinnati
A general breakdown of how the city wants to spend money from the CSR Board on capital projects in FY25.

"I believe this budget meets the needs of our City and prepares us for what comes next," Long wrote to the mayor and City Council. "On the one hand, we must invest in growth and sustainability; on the other, we cannot spend so much that we are not living within the resources we have available. The recommendations I make here aim to strike that balance, and I look forward to working with you to deliver a final balanced budget this June."

City Council will hear feedback on the recommended budget during a public hearing on Monday, June 3. Public comment is also available during Budget and Finance Committee meetings on Mondays at 1 p.m. Learn more about the budget recommendation below.

General Fund

The operating budget includes services provided by the city, like police 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.

DepartmentRecommended FY24 Budget
City Manager's Office *$50,099,920
Public Services$16,629,140
Buildings & Inspections$13,854,640
Enterprise Technology Solutions$7,616,370
Community & Economic Development$4,430,670
Human Resources$5,438,490
Transportation & Engineering$3,933,040
City Council$2,396,950
City Planning & Engagement$12,124,770
Economic Inclusion$2,018,790
Citizen Complaint Authority$1,413,140
Office of the Mayor$2,018,790
Clerk of Council$796,350

*The City Manager's Office includes the Emergency Communications Center.

You can learn more about how each department spends its budget on the city's open data portal Cincy Insights:

Public Safety

The police and fire departments, combined, make up about 59% of the General Fund in the proposed FY 25 budget.

The proposed FY 25 budget includes a 0.6% increase for the CPD budget and a 3.2% increase for the CFD budget. Sworn police and fire employees are represented by labor unions and are budgeted for a 2% wage increase during this fiscal year.

CPD alone makes up about 32% of the General Fund in the budget proposal.

The police budget has increased 44% over the last 10 years, and the fire budget has increased 65%, compared to a General Fund increase of 59% during that time.

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.

The budget draft includes about $8.55 million for the fund, about 1.5% of the General Fund.

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.

Council sets the priorities for the fund ahead of time:

  • Between 25% and 33% for an Impact Award — in this case, eviction prevention and housing
  • 20% to youth gun violence prevention and reduction
  • 25% to comprehensive workforce development
  • Between 10% and 18% for supporting, securing and stabilizing housing for high-risk populations
  • 10% for Project LIFT (direct support for emergency anti-poverty programs)
  • 2% for overhead

A volunteer Human Services Advisory Committee (HSAC) votes to recommend which organizations and programs should get funding.

Leveraged Support

The other mechanism for funding outside organizations is leveraged support, included as direct allocations in the budget.

This is the second year organizations have had to formally apply for funding instead of lobbying council members directly. Council established the new process to take some of the politics out of the equation.

It defines "leveraged support" as "(f)inancial support from the City of Cincinnati to an external organization (i) as general operating support to fund their work in the City or (ii) as funding for a specific program aimed at addressing a public need in the city."

Council set seven priorities for the funding; grants were limited to between $50,000 and $500,000, with larger awards considered for "extraordinary circumstances."

The Center for Closing the Health Gap is recommended for the maximum $500,000; the organization consistently received $750,000 for several years. The mayor's budget adjustment includes an additional $250,000.

The city received 168 applications for leveraged support; 31 are recommended for a total $4 million in funding. The full list is available in the recommended budget document (pg. 12 as listed, pg. 53 of the PDF document).

Several outside organizations do not have to apply for funding because they manage city assets or programs. Those include:

  • 3CDC funding for Fountain Square, Washington Park and Ziegler Park
  • Findlay Market operating budget support
  • The Port
  • Women Helping Women Domestic Violence Enhanced Response Team (DVERT)

The recommended budget includes $625,000 for Community Councils, an increase from last year's $425,000.

Pension Fund

Experts say Cincinnati needs to immediately increase its annual contribution to the retirement system for city employees. The pension fund is about 69% funded, down from 77% in 2015.

A federally mandated settlement agreement requires the city to put no less than 16.25% of active salaries into the fund each year.

The FY 24 budget included 17% of active salaries, the first increase to the minimum contribution since 2016.

This budget recommendation increases the contribution again to 17.75% of active salaries.

How to understand the city budget

Where can I see budget information online?

Documents are published on the city website under the Finance & Budget page:

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 FY 25) 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. Here's the breakdown of revenue for FY 25:

  • Earnings Taxes: 63.6%
  • American Rescue Plan Act: 4.4%
  • Property Taxes: 8.5%
  • State Shared Revenue: 2.7%
  • Casino Tax: 1.8%
  • Investments: 2.4%
  • Other Revenues: 16.5%*

* 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 calendar year 2023 (about $16.3 million) is a 60% 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 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 FY 24 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?

Local Government Reporter with a particular focus on Cincinnati; experienced journalist in public radio and television throughout the Midwest. Enthusiastic about: civic engagement, public libraries, and urban planning.