Thursday, June 14, 2012

Business Courier, Cranley explain why property tax hike is to pay for Streetcar

For more than four years, Cincinnati Mayor Mark Mallory, City Manager Milton Dohoney, and Council member Roxanne Qualls have insisted that the City's $110 million streetcar project was going to have no general fund implications -- no tax increase, and no layoffs of other City employees.

But now the veil is off, and City voters are being properly informed of the truth of the fiscally disastrous situation that Mayor Mallory has created.

In today's Cincinnati Business Courier, Dan Monk carefully explains, through the complexities of City finances, how and why Cincinnati's proposed 23% property tax hike is really a tax increase caused directly by the City's foolish diversion into the streetcar business. 

And the refreshing honesty comes because former Council member and Finance Committee Chairman John Cranley, has broken ranks with Tim Burke's inner circle ruling the City from the left, and has spoken truth about the mess in which these folks have put us.

Interestingly, the City of Charlotte, NC, yes the folks that just snatched Chiquita Brands International away from us, just rejected a much more modest tax increase.  You can read that here.

So, Mayor Mallory and his merry band of thieves have gotten away with their larceny so far, but it appears that the media and voters on on to them.  The Streetcar is bankrupting Cincinnati, or at least for now forcing an increase in your property taxes.

If you click here, you can e-mail your Council members to tell them how you feel about their choice of spending priorities.


  1. It's preposterous to think a city can build and operate a $110 million toy, the majority of it not coming from outside funds, and think it's not going to affect taxes.

    Especially since they still haven't identified how to pay for much of it. That means it's going to come from their own city coffers. It's money they don't have, which means higher taxes are in the city's future.

  2. June 13, 2012 - Roxanne Qualls

    2013 budget deficit: $34.3 million

    Last week, City Manager Milton Dohoney, Jr. submitted the 2013 Tentative Tax Budget to City Council, which showed the city is facing a $34.3 million budget deficit for next year. The administration also presented the economic forecast for 2013/2014, and the 2013/2014 biennial budget report, based on the economic forecast, that shows projected revenue and expenses, and outlines major budget issues for the city's operating, capital, and consolidated plan budgets. The manager is recommending a property tax increase to help reduce the deficit and preserve city services, and to fund several capital projects.

    A few basics

    The city's operating budget covers the day-to-day delivery of city services, and operating expenditures cover employee salaries and the cost of supplies used to deliver services. Police officer patrols and trash collection are examples of activities funded by the operating budget.

    The capital budget is for the improvement, construction, or purchase of city assets that cost $10,000 or more and last at least five years — fire trucks or buildings, for example. Just as people save and borrow to finance the purchase of a home, the city uses a combination of cash and debt financing to invest in assets like the new Smale Riverfront Park or police and fire stations.

  3. cont.

    Tentative Tax Budget

    State law requires that the city submit a council-approved operating budget to the county auditor by July 20 of each year. The tax budget includes estimated property tax revenue that the county will use to set the property tax millage for 2013.

    The city charter provides for property tax for operating revenue, and also property tax for debt service for permanent improvements (general capital). The general capital rate must be set by council at a level to cover outstanding and planned general capital debt.

    The millage level for operating revenue is capped at 6.1 mills by the city charter. Dohoney is proposing that City Council return the operating millage to 6.1, the rate that had been collected from 1948 until 2000, when council instituted a 'rollback' that adjusted the millage each year to produce $28.9 milllion in revenue. Last year, council voted to keep the millage at the 2011 level of 4.6 mills, resulting in a loss of $5 million in estimated revenue. Since the rollback was instituted in 2000, the city has foregone $88 million in operating revenue.

    In a recent Enquirer op-ed, Dohoney notes that the city has "cut more than 1,000 workers in the same time frame, combined services and reduced expenses in cost centers like energy, fuel and health care," and that employees’ salaries have been held flat or cut over the past several years.

    Citing steadily declining general capital budget resources that are "woefully inadequate" to meet the city's infrastructure needs, Dohoney is also asking council to raise the debt service millage to 6.25; of that amount, 6.1 mills is the level required to cover outstanding debt and planned general capital debt for 2013, and the additional .15 mills would cover $27.9 million in one-time capital expenditures (see below).

    The increase in operating millage would cost taxpayers $46 more per year for every $100,000 in property value, and the increase in debt service millage would add another $10. The additional revenue would reduce the projected 2013 deficit by $7.8 million to a level of $26.5 million.

    The administration has contrasted the extra $56 per year with the estimated $133 in annual savings for residents and small businesses that the city has negotiated for the electricity buying group authorized by voters last fall, with additional savings expected when rates are negotiated for natural gas.

    City Council must pass a Tentative Tax Budget resolution and submit it to the county auditor's office by July 15. Since council will recess in July, it must pass a resolution no later than its June 27 meeting. The County Budget Commission sets the millage for 2013 by October and City Council accepts it through a resolution.

  4. Budget forecast and deficit drivers

    The city's budget deficits are expected to continue through 2016, with projected annual expenditure growth (2.8 percent) outpacing revenue growth (2.4 percent), leaving the budget structurally unbalanced and threatening the city's bond rating as a result. Cuts by the state to the local government fund and estate tax account for $20 milllion of the $34.3 million budget deficit. Casino revenue projections have been revised downward ($20 to $14 million annually) because of money lost to the new 'racinos' approved by Governor Kasich.

    Ever-escalating health care costs are one of the most volatile cost drivers, and are projected to rise 10 percent next year and about 18 percent over the next three years. The city's contribution to the retirement system has also been increased to 20 percent.

    Priority-based budget

    Even if council approves Dohoney's request to raise the property tax, the size of the deficit will force further cuts in services. For the first time, the city is using an innovative tool called priority-driven budgeting. Priority-driven budgeting offers a common-sense, strategic alternative to conventional budgeting. It creates a fundamental change in the way resources are allocated by using a collaborative, evidence-based approach to measure services against community priorities.

    Working with the Center for Priority Based Budgeting, citizens have identified seven strategic priorities for the city. The new approach will allow council to look at the 400+ functions that have been identified, and score them in the context of the priorities identified by citizens. Council will be able to see which programs are not consistent with priorities, and identify functions that could be performed by other entities. It will allow council to be as strategic as possible with scarce funds — to use a scalpel instead of a hatchet.

  5. Budget myths and facts

    Myth: The city manager has proposed raising the income tax.

    Fact: The administration has not requested an increase in the city income tax, which would also require voter approval.The budget development report does note that an 0.1 percent increase in the income tax would raise $15.7 million for the general fund. The report also notes other potential sources of revenue (admissions tax, solid waste fee) that council could consider.

    Myth: The budget deficit is caused by 'pet projects' like the streetcar and the atrium.

    Fact: The capital funds that have been committed to the streetcar and atrium cannot be used for operating services like trash pickup, police and fire, or health clinics.

    In fact, the path toward structurally imbalanced budgets was set in 2000 with the property tax rollback, reducing revenues by $88 million; and in 2002 and 2006 when council voted to increase the police sworn complement by a collective increase of 135 officers.The cumulative impact from 2001-2011 of those two decisions on the general fund was $143.4 million.

    Myth: City Council is underfunding the pension system to balance the budget.

    Fact: After passing groundbreaking reforms to the pension system last year, council approved increasing its annual contribution to 20 percent to help stabilize the system and has approved a four-year step-up increases in the employer contribution that will raise the contribution to 24% in 2015. To eliminate the unfunded liability that mushroomed after losses in the 2008 economic crash would require an employer contribution of 46 percent, which would mean an additional $19.7 million impact on the general fund, and a $53.4 million impact on the All Funds Budget. The step-up approach will protect taxpayers as well as water and sewer ratepayers while setting the system on the path to stability.

  6. COAST thinks Anonymous doth protest too much. The City budget is an absolute shambles precisely because of the prevarications coming from City Hall, not because of COAST and other Council critics (who have no role in City budgeting).

    Democrat John Cranley, Democrat Chris Smitherman, and others are speaking the truth about the poorly-chosen democrat priorities. The property tax hike is to fund the Streetcar, plain and simple.

    The liberals have no one to blame but themselves for bankrupting the City and driving away hard-working, tax-paying citizens.


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