Cincinnati City Council voted 5-4 Wednesday to approve a revised policy for reserve funds and for spending money left over at the end of each fiscal year.
There was about $42 million left over from the fiscal year 2025 budget; much of that goes into various reserve accounts and other pre-defined purposes.
Council also voted 8-1 to officially approve the reserve levels, and to spend about $16.6 million in carryover from fiscal year 2025, recommended by City Manager Sheryl Long. That spending is detailed at the end of this article.
"We did have some points of disagreement," said Council member Jeff Cramerding, chair of the Budget Committee. "Some points that I think that we are all in agreement on ... all of our reserve funds are full and where they should be to help us weather any unforeseen events or economic downturns."
Cramerding also highlighted $5 million added to the Affordable Housing Leverage Fund, and $2 million to the long-troubled pension for retired city workers.
Council will continue discussion over the next few weeks on spending what's left in the carryover process, although the new policy limits how it can be spent.
Changes to 'waterfall' policy
City Council established a policy 10 years ago that automatically puts most excess revenue into a variety of reserve accounts, in a process known as the "waterfall."
The reserve policy is based on the Government Finance Officers Association (GFOA) recommendation that cities reserve a minimum of two months — or 16.7% — of regular general fund operating revenues or expenditures. Cincinnati currently uses operating revenues, and has actually exceeded the recommendation with 17% in reserve.
The changes approved this week include setting 17% as the new "floor" for future carryover budgets.
The changes also include an increase to the amount saved in a general fund contingency account from 2% to 2.3% of the general fund operating revenue.
Lastly, the new policy adds a new "bucket" at the bottom of the waterfall, with up to $500,000 to be allocated for special events support.
After all of that leftover funding is allocated, any additional surplus would be split 50/50:
- 50% to an Infrastructure and capital project reserve
- 50% to a new housing and economic development capital project reserve
The latter would aim to support housing in neighborhoods with less development activity.
Vice Mayor Jan-Michele Lemon Kearney opposed the ordinance because it doesn't offer enough flexibility for Council to decide how to spend leftover money.
"These restrictions prevent us from bringing forth some other needs that our residents have," Kearney said Wednesday.
Disagreement on how the city should calculate savings
Some Council members want to change the way the city calculates how much money to save in reserve funds. These policies are crucial for the city's financial health; city officials expect significant budget deficits over the next few years.
Seth Walsh and Meeka Owens proposed a motion this week that the city stick with the 16.7% target for reserves, and should use operating expenses to calculate that number instead of operating revenue.
Walsh says basing a "rainy day" fund on expenses instead of revenue is common sense.
"Do you build your [personal budget] reserves based on the revenue that you were making every month, or do you build it on the expenditures that you would have in the event that you lost your job or had some unfortunate accident?" Walsh asked fellow Council members in committee Monday.
He says calculating the reserve level based on expenditures would result in a bit more money for City Council to allocate from the current carryover budget.
"But in future years where we are having hard financial situations, expenditures are going to outpace our revenue, and it would be prudent and fiducially responsible for us to be basing on expenditures," Walsh said.
A few other Council members expressed interest in the idea, but the motion ultimately failed on a 6-3 vote. Ryan James joined Walsh and Owens in supporting it.
City Council did vote Wednesday to request a report from city administration with an analysis of the proposal, for consideration for future carryover budgets.
Approved spending
The City Manager recommended about $16.6 million in one-time spending, mostly to account for increases in city worker salaries and benefits due to union negotiations that concluded after the fiscal year 2026 budget was approved:
- $6.7 million for Cincinnati Fire Department retroactive pay (settlement in a grievance lawsuit)
- $2.7 million for AFSCME (American Federation of State, County, and Municipal Employees) retroactive pay, wage adjustment, one-time lump sum payments, increased deferred compensation match, and increased longevity pay
- $750,000 for CODE (Cincinnati Organized and Dedicated Employees) retroactive pay, one-time lump sum payments, and longevity pay
- $5.42 million for public safety measures (City Council already approved this spending; its inclusion here is to replenish the funding)
- $1.1 million for human services funding that must be appropriated to fulfill contractural obligations
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