Recommended Budget Invests In Growth
Cincinnati’s Recommended Budget Invests in Growth
Measured Spending Cuts & Parking Revenue Part Of The Picture
Today, Cincinnati City Manager Milton Dohoney, Jr. presented his proposed 2013 budget to Mayor Mark Mallory that continues to invest in the growth Cincinnati has been experiencing while using five areas to address the $34 million deficit:
- Cuts and Cost Shifting
- Savings (from departments)
- Embedded Growth
- One-Time Sources
These five areas work together as the recommended approach to continue on a path of growth.
While the City has worked to create more than 5,000 jobs in the past two years, revenue growth is not occurring fast enough to offset state-level policy changes that eliminate revenue coupled with the cost escalators that are driving the expense side, namely fuel, healthcare and pension.
The deficit number was exacerbated by the policy shift at the state level -- the 50% reduction of the Local Government Fund and the elimination of the tangible personal property tax reimbursement and Estate Tax -- eliminating a $22.2 million revenue stream from the City’s budget.
The Manager's Recommended General Fund Operating Budget totals $368,906,520. It is for a one-year period from January 1 - December 31, 2013. However, because the City is transitioning to a new fiscal year, City Council is appropriating a budget for a six-month period. The six-month appropriation totals $177,603,950. There will be a subsequent vote taken prior to June 30 that will appropriate funds consistent with the new fiscal year.
Dohoney's budget stresses that using these five areas is a moderate approach to balancing the budget while allowing the economy to continue its recovery. "Closing the estimated deficit solely with cuts could be done, but would bring a devastating and demoralizing set of circumstances to the City that would interrupt the momentum that many people both inside and outside local government have worked hard to create," said Dohoney.
CUTS & COST SHIFTING
The "cuts" aspect of the Manager’s Proposed Budget totals $11.3 million, which was influenced by the results of the Priority Driven Budget (PDB) process.
The following Priority Driven Budgeting Quartile 4 programs are reduced or eliminated in this budget:
- Media Bridges Support is eliminated ($300,000)
- Downtown and Neighborhood Gateways Program is eliminated ($57,480)
- Juvenile Firesetter Program is eliminated ($84,100)
- Mounted Patrol is eliminated ($188,350)
- Arts Grants is eliminated ($50,000)
- Human Services Funding is reduced ($610,770)
Additional cuts were made to departmental budgets including Police, which reduced the number of Assistant Chiefs from five to three (two currently vacant) and eliminated 12 management positions. Police also are seeking to hire 38 civilians for select positions rather than using uniformed officers, saving costs and allowing for redeployment of those officers.
Other cuts include transferring expenses to other eligible non-General Fund City sources; Reductions to personnel expenditures and positions; Reductions in funding to Outside Entities; Savings in purchasing salt for the winter (last year's supply was not fully used); and leaving some vacant positions open through 2013.
The 2013 Recommended General Fund Budget totals $368.9 million and includes $231.4 million for public safety departments and $113.1 million for non-public safety departments. The public safety departments and non-public safety departments reflect budget decreases of $1.8 million, or 0.8%, and $2.2 million, or 1.9%, respectively.
To balance the 2013 budget exclusively with cuts would require the elimination of 344 positions and would affect employees all over the government including Police and Fire, Emergency Operations, Public Services, Economic Development, as all other departments.
The City expects to realize $5 million from savings to departmental budgets, with $3.9 million coming from Public Safety attrition and turnover. Although the Administration is recommending recruit classes for both Police and Fire, these costs will be covered by a federal SAFER grant for Fire and savings in paying overtime that will cover the Police class.
After months of study at the direction of City Council, the Administration is recommending that the City of Cincinnati moves toward semi-automated solid waste collection. This will reduce worker’s compensation costs (at nearly $1 million a year), further standardize the solid waste function, facilitate cleaner neighborhoods, expand efficiency, and promote higher levels of recycling.
The Administration proposes the following:
- Reverse the decision to co-mingle yard waste with trash.
- Issue standard 95 or 64-gallon carts and restrict set out beyond that limit unless a special bulky item pick-up is scheduled.
- Reduce worker injuries by standardizing garbage collection guidelines.
- Bringing the delivery, maintenance, and storage of the carts in-house.
- Develop a plan to add side-loading vehicles to the Public Services fleet in the future, which would enable one-person operator vehicles.
- Expand marketing efforts to achieve higher recycling rates.
- Save money by reducing routes.
- Franchise commercial waste collection.
This first step uses capital investments to secure the carts and produces operating savings from reduced worker injuries, route reductions and increased recycling diversion. Because it will take time to implement the program, the first year represents a net cost to the operating budget. Savings will occur in later years after the initial investment.
By eliminating City hauling of commercial waste, and providing a franchise to waste disposal companies, the City can ensure high quality service for customers of commercial waste haulers, reduce City operations expended at businesses that can be redeployed, while leveraging revenue for the City.
This budget recommends that commercial waste haulers obtain a franchise and pay a franchise fee to the City for the privilege of doing business in Cincinnati equal to 10% of the company’s gross revenues from commercial waste collection, transportation, and handling in Cincinnati. This is expected to generate over $900,000 in 2013 and $1.9 million annually thereafter.
The City Manager’s budget also recommends that an outside entity manages city-owned parking facilities, including meters, surface lots, and garages, as doing so is not a core city government function. The Administration issued a Request for Proposals (RFP) in October to determine the feasibility of this. This is not a proposed sale of the asset, but rather a 30-year lease, that also provides a revenue stream from the parking function.
Revenue would come to the City in two ways -- an upfront lump sum payment and a negotiated share of the revenue stream over the life of the agreement. The required floor for the RFP respondents is $40 million. Of the three areas of the parking function, meter revenue can be used to address the operating needs of the city.
The Administration is recommending using $21 million from the meter portion of the lump-sum payment to apply toward the 2013 deficit. However, the Administration is not recommending allocating any more of the income at this time since the full total is unknown and must be negotiated. The full agreement will go before City Council in 2013.
Full-time employees of the Parking Division will be placed in a job with the City of Cincinnati, should they not move over to the new parking manager.
The City Manager’s budget recommends eliminating the income-tax reciprocity credit. This would generate $4.8 million of revenue for the General Fund.
The 2013 budget maintains the $5,000 allocation to each neighborhood as well as other “momentum” partners including the Greater Cincinnati Chamber of Commerce, the African American Chamber of Commerce, the Port Authority and the Greater Cincinnati Film Commission.
The Finance Department has forecasted growth in Income Tax for 2013 at 2.8 % over the 2012 revised estimate. This stems in part from the various economic development initiatives that have come to fruition, as well as the successes of our local business community. Embedded growth is expected to account for $4.8 million of new revenue.
The Budget includes the recommendation for the Focus 52 Program that will provide funding for redevelopment projects that will grow the City’s revenue base, create new jobs, and/or increase the population of the City. All 52 neighborhoods will be eligible for the program. Funds will be granted or loaned on a case-by-case negotiated basis (maintaining a 1/3 public/private investment ratio). The sources for the Program will be two parts: The City will pledge $4 million of non-tax revenue over the next twenty years to support this effort to create approximately $54 million dollars of capital capacity for the City to stimulate investment. Further, the federal HUD Section 108 Economic Development Loan Pool also can fund a number of types of economic development projects including industrial expansion, a small business revolving loan fund, construction of a neighborhood shopping center or grocery store, rehab of a commercial building, or even a direct loan to a company.
The Manager’s Proposed Budget contains the use of one-time sources totaling $11.6 million from 2012 General Fund carryover balance. This aspect of balancing the budget only accounts for 28% of the total.
Over the past year the City of Cincinnati, with the assistance of a consultant, implemented a citizen engagement process to ascertain what kind of a community people want. Listening to the public’s comments helped staff to focus on the community attributes that were most important. From this engagement, the citizens told us that they want:
- A City that is Inclusive, Thriving and Livable
- A City that has Well Planned and Developed Infrastructure
- A City that is Safe
- A City that has a Sustainable Built and Natural Environment
- A City that supports Commerce and Jobs
- A City with Leadership and Financial Stewardship
- A City that offers Efficient and Effective Basic Services
All of the analysis conducted allowed the City to more strategically allocate resources, as well as a clearer understanding of the budget decisions as we move forward.
"When we look at what is in front of us, we must balance both sides of the budget. We historically keep focusing on cuts. That only addresses half the picture. This budget doesn’t get us there all the way, but we believe it is a reasonable approach that balances all sides," said Dohoney.
NOTE: Today, the Mayor and Members of City Council are also receiving the Administration's recommendation for the Tentative Tax Budget, which sets the millage rate for the operating property tax. It is the Manager’s recommendation that the estimated operating property tax millage is set at 6.1 mills. This results in property tax revenues increasing $7.5 million, from $23.5 million to an estimated $31 million. When calculated on a $100,000 residential property, the millage rate of 6.1 mills would increase the property tax by $46 when compared to the 2013 millage rate.