A lawsuit headed for trial in Hamilton County this week could be a budget wrecker for the city of Cincinnati.
The suit seeks a court order requiring immediate repayment of a $4 million internal loan that was used to balance the city’s budget in 2011.
Developer Hyde Park Circle LLC claims the loan violated state law because the money came from tax-increment financing, or TIF districts, in which property-tax proceeds are supposed to be spent in the neighborhoods where they were generated. City officials say payments to the school district are permissible under the 2001 statute that created the city’s TIF districts.
“The goal behind the payments is to reimburse the school district for lost revenue because of the creation of the districts,” said a May 19 court filing in which the city outlines the arguments it plans to make in a four-day trial scheduled to start Tuesday. “The funds were lawfully dispersed.”
The issue came to light this week after interim City Manager Scott Stiles reported in a memo to council that the city now considers its 2011 fund transfer to be an internal loan that is “not required to be repaid.”
Two members of council said during a budget hearing Monday the issue is one of several reasons the city's proposed $358.2 million is not "structurally balanced," as Cincinnati Mayor John Cranley has argued.
"I still have a lot of questions that have not been answered," said Councilmember Yvette Simpson, "I certainly have qualms about calling it structurally balanced. It's really not."
Simpson joined Kevin Flynn and Chris Seelbach in voting against an omnibus budget plan that appears headed for passage by city council Wednesday.
WCPO Insiders can dig deeper into the legal dispute over TIF districts and learn why city officials insist the controversy won't be a budget buster.