City manager: Cincinnati cannot make long-term budget fixes in next 2 years

Options include possible police, fire levies

CINCINNATI - Cincinnati City Council’s finance committee held its sole summer meeting Monday, and members hoped to hear a plan about how to get a structurally balanced budget in the next two years.

But City Manager Milton Dohoney Jr. told the committee that the goal couldn’t be achieved realistically by the deadline without deep cuts to services for residents, if at all.

Instead, Dohoney presented members with a menu of options for how to reach a balanced budget within the next few years.

The goal probably will require a combination of spending cuts and new revenue, he added.

Options included department-specific tax levies for police, fire and parks.

Also, another option included increasing the admissions tax for sporting and entertainment events. The current tax is 3 percent, which generates $3.8 million yearly.

“The simple answer is we can’t submit to you a budget to be structurally balanced by 2016,” Dohoney told council members.

The city of Cincinnati’s Fiscal Year 2016 budget year begins June 1, 2015.

After City Council again relied on one-time sources of money in May to balance this years’ budget, Vice Mayor Roxanne Qualls asked Dohoney to present a plan to stabilize the city’s budget by the August meeting.

At council’s direction, most non-unionized municipal workers haven’t received pay raises in a few years, and some positions have been eliminated.

Dohoney noted, however, that costs for items like healthcare and energy continue to rise well above the inflation rate.

Between 2000-12, healthcare costs increased 247 percent.

During the same period, fuel costs increased 170 percent.

“One thing we can say for certain is the expense side of this government will not stay flat,” Dohoney said. “We’ve tried to operate it that way for several years and it hasn’t worked.”

Qualls, who heads City Council’s finance committee, told Dohoney she understood the difficulty of having a structurally balanced budget within two years.

But Qualls pressed Dohoney to craft a deadline for when one could be reasonably achieved when City Council begins its normal meeting schedule in September.

“The question is, what is the pathway?” Qualls told Dohoney.

“Everyone’s been really clear you can’t just look at revenues or expenses,” the vice mayor added. “At a certain point, you can’t just keep talking about generalities.”

Councilwoman Laure Quinlivan wants Dohoney to prepare a benchmarks chart, showing how Cincinnati compares to similarly sized cities in spending for each department.

“It’s hard for me to decide what we want to cut if we can’t compare ourselves to other cities our size,” Quinlivan said.

City staffers will use data from 11 cities: Dayton; Akron; Toledo; Cleveland; Columbus; Greensboro, N.C.; Pittsburgh; St. Louis, Minneapolis; Raleigh, N.C.; and Louisville.

Cincinnati has had structurally unbalanced budgets since 2001.

The term means city government spent more in expenses than it took in through revenues. Deficits routinely were avoided during those years by relying on using emergency reserves or one-time sources of money to balance the budget.

For example, the 2011 budget used about $27 million from emergency reserves and borrowing from the workers compensation fund to avoid a deficit.

And the city’s budget for 2012 was only balanced by accepting a $14 million payment from Convergys Corp. in return for allowing it to reduce the number of employees it promised to keep at its downtown location.

The 2013 budget also relies on one-time sources of $11.6 million in General Fund carryover money, which accounts for about 28 percent of the total amount.

Part of Cincinnati’s budget problem, Dohoney said, is its dependence on local income tax revenues. The source accounts for 73 percent of the city’s General Fund, which pays for daily operating expenses.

“Our government relies heavily on jobs and economic growth,” Dohoney said. “Any time there is a dip in the economy, the city is immediately in trouble.”

Cincinnati had an $8.2 million carryover this year because of higher than expected tax revenues, he added. But growth alone won’t be enough to solve the fiscal situation.

“Basically, what it is we have now become subject to (economic) swings, like the Great Recession,’ Qualls said.

Personnel costs make up 81 percent of the General Fund.

Between 2000-12, Cost of Living Adjustments totaled 38.3 percent for police, and 23 percent for workers represented by AFSCME.

By comparison, the inflation rate for that period was 30.6 percent.

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