Is Council 'Raiding' The Transit Fund To Pay For The Streetcar?

Jul 1, 2020

The city of Cincinnati's "Income Tax-Transit Fund" has been the subject of many social media posts since Mayor John Cranley last week vetoed a City Council-approved ordinance to use $1.5 million from that fund to restart streetcar passenger service with no fares.

Council approved the measure by a 7-2 vote, and if the seven votes remain in place, that's more than the six votes needed to override Cranley's veto at the next regularly scheduled City Council meeting on Aug. 5.

There have been multiple Twitter and Facebook posts suggesting City Council is using money from the recently approved countywide transit sales tax increase for the streetcar. Others suggested council is "raiding" city bus money for the streetcar.

Are they? WVXU answers a few key questions:

Is City Council Using Money From The Countywide Sales Tax For The Streetcar? 

No, because that 0.8% sales tax approved by voters this spring is not even being collected yet. That collection starts Oct. 1, and the Southwest Ohio Regional Transit Authority (SORTA) will not receive any of those funds until sometime in January. Those sales tax dollars flow to Hamilton County, which will then send them to SORTA. That agency "divorced" itself from the city's streetcar system on Jan. 1.  The city is now in charge of managing and operating the streetcar.  And unless there's a secret arrangement, there's no agreement for SORTA to share sales tax revenue with the city for streetcar operations.

Is City Council "Raiding" City Bus Money For The Streetcar?

Council did take $1.5 million from the "Income Tax-Transit Fund" for streetcar operations. But a "raid" would suggest that's all of the money in the account. Even taking $1.5 million away, there's still $2.1 million in the account that could be given to SORTA for its budget. Cincinnati City Council had unanimously approved a resolution in 2012 stating "the City of Cincinnati shall not use city transit funds that are intended for use by the Metro bus system to pay for any portion of the Cincinnati streetcar or its operations." Clearly, though, that resolution was approved without the knowledge that the transit income earning tax would be replaced with a countywide sales tax.  The city also uses small amounts from the transit fund to benefit law, parks and transportation and engineering.

Some Background

Since the early 1970s, city residents and people who work in the city have been paying a 0.3% income tax that was used to fund transit in the city. But that tax will be ending on Oct. 2, the day after the new countywide 0.8% sales tax goes into effect to fund transit.

The city is still providing operating money to SORTA for the months of July, August and September.  After that, the transit agency's primary funding source will be the new sales tax.

City Manager Patrick Duhaney's original budget proposal, released June 11, included $13,725,000 for SORTA. But by June 19, that number had increased to $16,570,409, which is what the agency requested. City Council approved the higher amount when it passed the city budget June 24.

What About Layoffs For SORTA?

When he vetoed the streetcar funding, Mayor Cranley suggested taking $1.5 million from the transit fund would result in a budget shortfall for SORTA and could lead to employee layoffs.

Cranley talked about a meeting with SORTA CEO Darryl Haley on June 22. The mayor said he asked Haley if the agency had all the money it needs between now and when the sales tax begins.

"He said 'No, we're going to have a major deficit,' " Cranley said. "He said we only asked for $15 million because we were told that's what was in the account at the time. We need every penny and more. He said we may have to layoff bus drivers. And if CPS doesn't go back to school, or doesn't go back to school full-time, we're going to have even more massive problems."

But Troy Miller, who leads the union representing bus operators, said last week the first time he heard about layoffs was when the mayor mentioned it June 24.

A SORTA representative said in an email to WVXU the agency had requested the remaining balance in the city's transit fund.

"COVID-19 has had a considerable impact on our budget, including a drastic decline in ridership and revenue," said Brandy Jones, vice president of external affairs. "While we are doing all we can to prevent any layoffs, any further reductions to our budget puts us into a deeper financial challenge as we face uncertainty around the continued impact of COVID-19 on our ridership and workforce."

Jones said the delayed primary election and the delay in beginning the collection of the new transit sales tax from July to October will also impact SORTA's budget.

SORTA, though, has sent mixed signals about layoffs.

Last Friday, Jones told Chris Wetterich with the Cincinnati Business Courier that "we (SORTA) do not expect that decision to result in operator layoffs." Wetterich had asked if City Council's decision to use $1.5 million of the transit fund for the streetcar would result in layoffs.

But an hour later, she sent a second email to Wetterich similar to the response given to WVXU on Monday that, "while it wouldn't necessarily result in Metro laying off operators, it does further put us into a deeper financial challenge as we face uncertainty around the continued impact of COVID-19 on our ridership and workforce."

At a meeting in June, a SORTA Board committee was told that COVID-19 from March through May had a $2 million impact on the agency.

SORTA did receive $33 million from the federal CARES Act. But Jones said the agency must "first incur an eligible expense, pay for it out of pocket and then apply for reimbursement against the CARES funds that are available."

The county sales tax was expected to generate $100 million annually for SORTA. But that projection was before the pandemic. 

Still, the agency will now be getting direct funding for its budget. In the past, it was reliant on a contract with the city of Cincinnati for funding, and that created uncertainty for SORTA, since the city could have ended that arrangement at any time with written notice.

With the city's obligation to SORTA ending on Oct. 1, the remaining money in the transit fund could be available for other uses.

Cranley said in an email to council members on June 19 that SORTA believes it's "entitled to the money." He said city officials "don't agree with that."

The mayor had proposed on June 11 during a press conference unveiling the city budget proposal, that the city could use the leftover transit money as a source to repay the emergency loan the city has secured to balance the city budget for the new fiscal year starting July 1. But his latest comments suggest he now believes the remaining transit balance should be used to help SORTA with its budget issues.