Cincinnati City Council has authorized administrators to essentially establish up to a $150 million line of credit with a private lender to respond to the COVID-19 crisis if necessary.
The full council approved the emergency health and welfare bonds issuance Friday by a 9-0 vote. The Ohio State Tax Commissioner would also have to approve the plan along with the city's Board of Health and the lender.
The city is discussing the borrowing with at least two financial institutions. The city could have an answer on the funding in one to two weeks.
The money would only be used if needed to provide for basic services such as police, fire, sanitation and sewer. City Council would also have to approve the appropriations to spend the money.
Meanwhile, a similar measure to issue up to $50 million of bonds for the water works was not voted on. That could have come with a 5% water rate hike for consumers. Mayor John Cranley said the water works has at least one year of cash to keep producing water.
"It's been my experience that in general banks don't lend money when you really need it, they only lend it to you when you don't need it," Cranley said. "At this moment, we don't need it. But if there comes a time when we do need it, we will be glad that we secured it today."
For perspective, the city spends about $35 million a month on general fund expenses. So, if city revenues completely dried up, the $150 would only last about four months.
The bonds for up to $150 million would be repaid with money the city receives from leasing the city-owned Cincinnati Southern Railway (CSR) to Norfolk Southern. Those payments amount to about $22 million a year. That money has been used to pay for infrastructure projects in the city.
Assistant City Manager Chris Bigham said pledging CSR payments to cover the borrowing will not impact capital projects already funded. It could affect future projects. But Bigham said the city could look for different sources to repay the money in the future if necessary.
Council Member Greg Landsman says help for the city may come from the state and federal governments.
"Any measure will be less than what we need it to be," Landsman said. "And it won't show up in time. And we're going to want to look to the administration and say, did we do everything we can to put enough money in our bank account to ensure that we can deliver all of these critical services without interruptions?"
New Council Member Jan-Michele Lemon Kearney supported the borrowing and the discussion around it.
"And I think it makes perfect sense that we get the funds now to make sure we are protected and we get them now while we can and while the borrowing is good terms," Kearney said.
Council Member P.G. Sittenfeld was supportive and asked a lot of questions prior to the measure being approved.
"There's no such thing as free money, right?" Sittenfeld said. "They money has to be paid back. Who pays it back? Obviously the taxpayers, and as we said, they do it with some overall rate of interest."
Sittenfeld noted governments are better at spending money than not spending money. He wants to make sure the borrowed money is only used as a last resort to plug holes in the city's general fund budget.
