City Manager Milton Dohoney Jr. and other city administration officials say the city will have to carry out Plan B, which would lay off 344 city employees, including 189 cops and 80 firefighters. But council members Chris Seelbach, P.G. Sittenfeld, Charlie Winburn and Chris Smitherman claim there are other ways — casino revenue and cuts elsewhere — to balance the budget.
The meeting got testy after a few council members called the city administration “disingenuous” for framing Plan B and the parking plan as the only two budget options, prompting Mayor Mark Mallory to slam council members for attempting to pin the city’s budget woes on the city administration.
“I don’t think anyone in the administration wants to see their colleagues laid off,” Mallory said. “The administration makes a recommendation to this mayor and to this council. The final decision makers are the elected leaders.”
He added, “What’s disingenuous is to create a crisis and then criticize the administration for its response to the crisis when those responsible for dealing with the crisis are the elected leaders. It would be like an arsonist setting a building on fire and then complaining about how long it took the fire department to get there and what equipment they used to put out the fire.”
Lea Eriksen, the city’s budget director, said the ideas she heard at the special session today would not be enough to close the budget gap.
Throughout the discussion, the city administration repeatedly dismissed ideas presented by council members as not enough to overcome the city’s $35 million deficit and avoid layoffs. By the city administration’s admission, even Plan B would only close about $26 million of the projected deficit.
How that budget gap is closed may come with additional expenses. Eriksen said the budget gap may reach $45 million if the city carries out Plan B because the city would also be forced to pay for accrued leave and unemployment insurance.
Still, Assistant City Manager David Holmes admitted the city could balance the deficit without Plan B or the parking plan, but the numbers must “add up” and would require direction from City Council.
When the discussion came to casino revenues, Holmes said the city administration feels “uncomfortable” projecting casino revenue because the state’s projections have trended downward in the past few years. In 2009, the state government estimated Ohio’s casinos would take in $1.9 billion a year, but that projection was changed to $957.7 million a year in February.
Eriksen said the city estimates between $9 million and $11 million in casino funds will be available to the city. She said even if Cincinnati’s Horseshoe Casino hits its $100 million goal, the city will not be able to get the $21 million previously touted by Horseshoe Casino General Manager Kevin Kline because the money is pooled with money from other casinos around the state, which has fallen far below projections, before it’s distributed to cities and counties.
When asked about shifting parking meter revenue to the general fund to help balance the budget, Eriksen said doing so would ultimately be a “wash” because of expenses currently attached to parking meter revenue.
Seelbach suggested making more cuts through the
priority-driven budgeting process. Eriksen explained Plan B does cut
programs that were poorly ranked by the process — the mounted patrol
unit, arts funding and recreation centers were a few examples she cited. But
only relying on programs ranked poorly by the priority-driven budgeting process would “decimate” departments and
programs that the city deems essential, she said.
In the original 2013 budget proposal put forward by the city manager, mounted patrol was cut, but Seelbach lobbied for the program’s restoration.
Multiple council members brought up traveling and training costs as potential areas to cut, but Eriksen said the city administration had not considered further cuts in those areas because the leftover expenses are currently used to get certifications that city employees “need to do their jobs.”
Councilman Charlie Winburn, the lone Republican on City Council, asked the city administration if they tried to balance the budget without layoffs. Eriksen replied, “Yeah, that was called the parking plan.” She added without the parking plan, it would be “mathematically impossible” to balance the budget without layoffs.
When Winburn suggested city employees should take salary cuts, Eriksen said such cuts would require extensive negotiations with unions because about 90 percent of the city’s employees are unionized.
In November, Winburn was one of the prominent supporters of giving the city manager a raise and bonus.
Vice Mayor Roxanne Qualls, a Democrat running for mayor, said she would be open to using any revenues possible for reducing the budget gap, but she said City Council must acknowledge the harsh budget realities facing the city — further re-emphasizing points she made in a blog post Sunday.
John Cranley, another Democrat running for mayor, has said in the past that the threat of layoffs is “the boy crying wolf.” Cranley released his own budget plan on March 28 that he says would avoid layoffs and balance the budget without the parking plan, but some critics say the budget’s revenue estimates are unrealistic.
Eriksen said Cincinnati has run structurally imbalanced budgets since 2001, but city officials say deficits have been made much worse by state cuts in local government funding carried out by Gov. John Kasich and the Republican legislature since 2010 (“Enemy of the State,” issue of March 20).
City Council approved the parking plan in a 5-4 vote on March 6 that would lease the city’s parking assets to the Port Authority to raise funds that would help balance the deficit for the next two fiscal years and pay for new development projects, including the construction of a downtown grocery store (“Parking Stimulus,” issue of Feb. 27).
Opponents of the parking plan, who say they fear it will lead to rate hikes, filed their petitions for a referendum effort today. It is so far unclear whether they have the 8,522 verified signatures required to put the issue on the November ballot.
City Council’s Budget and Finance Committee moved forward with two controversial measures in two 5-4 votes today that will allow the city to rehire retirees while still paying their pensions and create an executive project director position for the streetcar project.
One of the measures repeals the city’s ban on “double dipping,” which means rehired retirees will be able to simultaneously cash in a salary and pension payments. The measures will allow the city to hire John Deatrick, the current project manager for The Banks, to head the streetcar project. The city could not previously hire Deatrick because he formally retired from the city and is currently receiving pension payments.
The city says Deatrick has the experience and expertise necessary to help bring the streetcar project’s costs in line, but critics say the city should not be hiring someone for the streetcar project when the city is considering laying off 344 employees, including 189 cops and 80 firefighters, to balance the budget.
Deatrick says the layoffs are unfortunate, but he
emphasizes that they are occurring through the general fund. If he was
hired, Deatrick’s salary would be paid through the capital budget, a
completely separate fund that the city uses for major development
projects. Because of legal and traditional constraints, capital budget funds generally can’t be used to balance the general fund.
“The capital budget generates projects that bring money into the general fund,” Deatrick says.
Deatrick’s point is similar to an argument often touted by City Manager Milton Dohoney Jr., who says the city needs to economically grow out of structural budget deficits. Dohoney and other city officials say the true cause of Cincinnati’s structural budget imbalance has been the city’s dwindling population in the past decade, and bringing people back to Cincinnati through economic development projects, including the streetcar, is a better approach than austerity that would cause more layoffs and economic pain.
Others, particularly Democratic mayoral candidate John Cranley, aren’t convinced. In a press statement that used vocabulary that often comes from streetcar opponent COAST (Coalition Opposed to Additional Spending and Taxes), Cranley said, “Since day one the streetcar has been a poorly conceived, poorly managed boondoggle that is now costing the city even more money. The fact that this being done while police officers and firefighters are facing layoffs is a slap in the face of those who risk so much to make sure that our city is safe.”
But the city says Deatrick’s involvement could help bring
the streetcar project’s costs down, and Deatrick seems to agree.
“That’s been my whole ‘shtick,’ ” Deatrick says, before citing numerous aspects of the streetcar project he would be interested in looking at to bring costs in line.
Opponents have pointed to the streetcar’s multiple problems, including unexpected costs and delays, as proof the project has been doomed from the start. But Deatrick says it’s normal for big projects to deal with hurdles, and he cautions he would expect to deal with more rising problems if he takes the job.
“Any time you try to build something — even out in the middle of a corn field — you’re going to have unexpected, unanticipated issues,” he says. “These things happen, and that’s what project management is all about.”
Deatrick says he has long supported the streetcar, and he plans to expand the project up to the University of Cincinnati and the rest of the uptown area if he’s put in charge.
While Deatrick has discussed heading the streetcar project with city officials, no formal offers have been made yet. Still, City Council members and Dohoney repeatedly named Deatrick as a potential candidate in the special session of City Council today.
Some council members said they were concerned the double-dipping measure will be used for more similar hires in the future, which could raise hiring costs as the city pays for multiple employees’ salaries and pensions at the same time.
Democratic council members Roxanne Qualls, Laure
Quinlivan, Yvette Simpson, Cecil Thomas and Wendell Young supported the
measures. Democrats Chris Seelbach and P.G. Sittenfeld, Republican
Charlie Winburn and Independent Chris Smitherman voted in opposition.
Deatrick’s resume shows experience going back decades. Since June 2008, Deatrick has headed The Banks project, which recently won the American Planning Association’s 2013 National Planning Excellence Award for Implementation (“Bank On It,” issue of Jan. 16).
Before that, he worked as deputy director and chief engineer at the District of Columbia Department of Transportation from May 2002 to August 2007, where he says he helped manage parts of the D.C. streetcar, among other projects.
Prior to his work at D.C., Deatrick started his career as an urban development
technician at Cincinnati’s Department of Transportation and Engineering on September 1973. He helped with many projects around the city before eventually rising to the director position in
November 1999, where he remained until May 2002.
The streetcar is one of the few issues dividing Democratic mayoral candidates Cranley and Qualls, making the 2013 mayoral race another important election for the future of the project (“Back on the Ballot,” issue of Jan. 23).
The Ohio Senate's budget plan for fiscal years 2014 and 2015 would restore about $717 million in education funding, but the gains wouldn't be enough to outweigh $1.8 billion in education cuts from the 2012-2013 budget, which was approved by the Republican-controlled Ohio legislature and signed into law by Gov. John Kasich in 2011.
The bill would also favor the state's property-wealthiest districts, which can already raise more money for local schools by leveraging their massive local property values.
About 85 percent of the wealthiest school districts will get funding increases, while 40 percent of the poorest rural districts receive no increases, according to Stephen Dyer, a former Democratic state representative and an education policy fellow at Innovation Ohio.
Dyer put the regressive breakdown in chart form in a blog post:
The chart shows the bottom one-third of school districts only get about 15 percent of the increases, while the top one-third are getting a vast majority of the increases.
Still, Dyer points out that the budget is increasing funding for urban, high-poverty areas, while rural areas are generally getting the smallest increases.
The budget would also include $250 million in one-time money for the Straight A Fund, which is supposed to entice innovation at schools around the state. When the program was first proposed in Kasich's budget plan, the Kasich administration asked for $300 million.
Even with the Straight A Fund, the funding increases wouldn't be enough to overcome $1.8 billion in cuts in the last biennium budget, which is a previous estimate from progressive think tanks Policy Matters Ohio and Innovation Ohio that includes tax reimbursements for tangible personal property and public utility property, federal stimulus funds and state aid to schools.
Many school districts have coped with the cuts through local tax levies, which Innovation Ohio previously compared to a $1.1 billion tax increase across the state.
In 2012, Cincinnati Public Schools was one of the many school districts to successfully pass a levy after dealing with years of cuts from multiple levels of government ("Battered But Not Broken," issue of Oct. 3).
The changes proposed by the Ohio legislature are the latest in a chain of attempts to reform the state's school funding formula, which has a history of legal and political problems.
Between 1997 and 2002, the Ohio Supreme Court issued four decisions that found the state's school funding formula unconstitutional because it relied too much on property taxes and failed to provide "a thorough and efficient system of common schools."
But 16 years later, critics argue the system still relies too much on property taxes. According to them, the reliance on property taxes drives inequality because property-wealthy areas can more easily leverage their high property values to fund good schools, while property-poor areas are generally left behind.
Kasich attempted to address the issues with his own rework of the education funding formula, but the rework was dismissed by the Ohio House and Senate — a victory for critics who deemed Kasich's plan regressive ("Smoke and Mirrors," issue of Feb. 20).
The Ohio legislature and Kasich must approve a budget plan by June 30.
Speaking at a press conference today, city officials did not mask their contempt for the ruling that put the parking plan on hold earlier in the day, saying it will force the city to make cuts and layoffs to balance the 2014 budget and potentially eliminate the passage of expedited legislation.
The press conference was in response to a ruling from Hamilton County Judge Robert Winkler, which opened the parking plan to referendum and ordered a permanent injunction on the plan pending any referendum effort. City Solicitor John Curp said the city is appealing the ruling.
Mayor Mark Mallory and City Manager Milton Dohoney Jr.
explained the city will now have to close a $25.8 million shortfall in
the budget for fiscal year 2014, which begins July 1.
Dohoney said he has already ordered city departments to begin
preparations for Plan B, which will lay off 344 employees, including 80
firefighter and 189 police positions, to balance projected deficits.
“Part of the irony is we're swearing in a recruit class tomorrow,” he said, then shook his head. “Too bad.”
In addition to meeting the July 1 budget deadline, the city has to expedite some layoff notices to meet union contracts, which typically require a notice 30 days in advance.
Curp said the ruling also poses significant legal challenges that will hinder the city’s ability to expedite legislation with emergency clauses. Emergency clauses are often used by City Council to remove a 30-day waiting period on passed laws, and the city argues they also remove the ability to referendum.
The layoffs could be retroactively pulled back if the city wins in appeals courts or if the referendum effort fails to gather enough petitions.
“Don't sign the petition,” Mallory said. “If you sign a petition, you're laying off a cop or firefighter.”
Dohoney said the delays make the city look sluggish — an image that he says the city has been trying to overcome. “One of the criticisms I’ve gotten is that this city takes too long to get deals done,” he said. “This complicates that.”
City Council approved the parking plan to lease the city’s parking assets to the Port of Greater Cincinnati Development Authority to help balance the budget for the next two fiscal years and fund development projects around the city, including a downtown grocery store (“Parking Stimulus,” issue of Feb. 27).
Opponents of the plan argued that there were alternatives that did not involve laying off cops or firefighters. Councilman Chris Seelbach proposed Plan S, which would redirect $7.5 million in casino revenue to help balance the deficit, cut $5 million based on the results of the city's priority-driven budgeting process and put two charter amendments on the ballot that, if approved, would include up to a $10-per-month trash fee and increase the city's admissions tax by 2 percent.
At the press conference, Mallory called the alternatives “unworkable.” He said Plan S in particular does not work because it relies on a ballot initiative that would have to be voted on in November. “We don’t have until November,” he said.
Opponents say they’re concerned the parking plan will cede too much control over the city’s parking meters, which they say will lead to a spike in parking rates.
The city says rate increases are initially capped at 3 percent or inflation — whichever is higher — but the rates can change with a unanimous vote from a special committee, approval from the city manager and a final nod from the Port Authority. The special committee would be made up of four people appointed by the Port Authority and one appointed by the city manager.
In the legal proceedings, the two sides are arguing whether emergency clauses eliminate the ability to hold a referendum on legislation. Opponents of the parking plan, headed by the Coalition Opposed to Additional Spending and Taxes (COAST), say the city charter is ambiguous with its definition of emergency clauses, and legal precedent demands courts side with voters’ right to referendum when there’s ambiguity.
Supporters of the parking plan cite state law, which says emergency legislation is not subject to referendum. Terry Nestor, who represented the city in the court hearings, said legal precedent requires the city to defer to state law as long as state law is not contradicted in the city charter.
Winkler sided with opponents of the parking plan in his decision. He wrote in his ruling, “If the people of Cincinnati had intended to exempt emergency legislation from their referendum powers, they could have done so when adopting Article II, Section 3 of the City Charter.”
Mallory says the city is not disputing voters’ right to referendum in a general sense; instead, he says the city needs to expedite the budget process to balance the budget before fiscal year 2014.
City officials say the parking plan is necessary largely because of Gov. John Kasich’s local government funding cuts, which Dohoney previously said cost Cincinnati $22.2 million in annual revenues (“Enemy of the State,” issue of March 20). Opponents argue Cincinnati had structurally imbalanced budgets years before Kasich took office, but the city says Kasich’s policies have made the situation much worse.
The tea party-backed amendment that would semi-privatize Cincinnati’s ailing pension system gathered enough signatures earn a place on the November ballot.
Of 14,215 signatures scrutinized so far, 8,653 were valid, according to Sally Krisel, deputy director of the Hamilton County Board of Elections. That clears the requirement of 7,443 signatures, but the numbers will grow as the board continues counting petitions.
The success follows a well-funded effort from Cincinnati for Pension Reform, which paid California-based Arno Petition Consultants nearly $70,000 to collect enough signatures, according to petition documents obtained through the city.
The amendment would privatize pension plans so city employees hired after January 2014 contribute to and manage their own retirement accounts — a shift from the current set-up in which the city pools pension funds and manages the investments through an independent board.
But unlike private-sector employees, city workers might not qualify for Social Security benefits, which means they would lack the safety net and benefits that shield them from bad investments.
Alternatively, the city could be required to pay into Social Security. An Aug. 5 report from the city administration claims that would make the tea party-backed system more expensive than the current pension system, which would defeat the reform’s main intention.
Supporters of the tea party amendment say it’s necessary because Cincinnati is dragging its feet in addressing an $862 million pension liability, which earned the city a downgraded bond rating from Moody’s in a July 15 report. Although the city passed reforms in 2011 addressing future pension costs, the unfunded liability actually grew by $134 million between 2012 and 2013.
The Cincinnati Retirement System board is working on changes that would address the unfunded liability, but so far no agreement has been reached as board members argue over whether taxpayers or retirees should be hit hardest by more cost-cutting measures.
City officials acknowledge the issues with the current pension system, but they claim the tea party-backed amendment would exacerbate cost problems and reduce payments to future city retirees.
“Under the guise of ‘reform,’ a well-financed out-of-state group is pushing an amendment that spells economic disaster for the future city retirees and the city’s budget,” Vice Mayor Roxanne Qualls said in a statement. “Current and future retirees need an income they can live on. This amendment is a budget-buster for retirees and the city.”
City Council condemned the amendment in a resolution unanimously passed on Aug. 7.
CityBeat’s Aug. 14 news story will give an in-depth look at the amendment and the campaign behind it.
This story was updated at 5:07 p.m. with the most up-to-date numbers.
In a ruling today, Hamilton County Judge Robert Winkler said the city will have to allow for a referendum on the parking plan and imposed a permanent injunction pending the outcome of a referendum.
The ruling means the city may be unable to rely on the parking plan to balance fiscal year 2014’s budget, and the city may be forced to find cuts elsewhere by July 1, when the new budget will kick in.
The ruling may be appealed, but City Solicitor John Curp says he is not aware of any filing yet. He says Mayor Mark Mallory and the city administration plan to hold a press conference later this afternoon to discuss the ruling in further detail.
For opponents of the parking plan, the ruling comes as a big victory that will allow them to put the parking plan on the ballot if they gather enough eligible petition signatures by April 5.
For the city, the ruling potentially leaves a $25.8 million hole in the 2014 budget.
When the restraining order was extended for two weeks on March 20, city spokesperson Meg Olberding told CityBeat the delays were causing the city to approach a “pressure point”: “We respect the court's right to do that (the extension), and know that every day that we cannot make the parking deal happen is a day that we are closer to having to lay people off.”In the past, City Manager Milton Dohoney Jr. said the plan will force the city to lay off 344 employees, including 80 firefighter and 189 police positions.
But opponents argue there are ways to solve the budget without laying people off. As an alternative to the parking plan, Councilman Chris Seelbach proposed Plan S, which would redirect $7.5 million in casino revenue to help balance the deficit, cut $5 million based on the results of the city's priority-driven budgeting process and put two charter amendments on the ballot that, if approved, would include up to a $10-per-month trash fee and increase the city's admissions tax by 2 percent.
City Council approved the parking plan on March 6 to lease the city’s parking assets to the Port of Greater Cincinnati Development Authority to help balance the budget for the next two fiscal years and fund more than $100 million in development projects, including the creation of a downtown grocery store and more than 300 luxury apartments ("Parking Stimulus," issue of Feb. 27).
Opponents of the parking plan say they’re concerned the city will cede too much control over its parking assets and cause parking rates to skyrocket. The city says rate increases are initially capped at 3 percent or inflation — whichever is higher.
But the rates can change with a unanimous vote from a special committee, approval from the city manager and a final nod from the Port Authority. The special committee would comprise of four people appointed by the Port Authority and one appointed by the city manager.
The ruling comes after the city and opponents of the parking plan met in court on March 15 to discuss whether the plan is subject to referendum.
Curt Hartmann, an attorney who represents the Coalition Opposed to Additional Spending and Taxes (COAST) and opponents of the parking plan, said the city charter is vague on its definition of emergency clauses, and legal precedent supports siding with voters’ right to referendum when there is ambiguity.
The city cited state law to argue emergency clauses, which remove a 30-day waiting period on legislation, eliminate the possibility of referendum. Terry Nestor, who represented the city, said legal precedent requires the city to defer to state law as long as state law is not contradicted in the city charter.
With his decision, Winkler sided with opponents of the parking plan. He wrote in the ruling, “If the people of Cincinnati had intended to exempt emergency legislation from their referendum powers, they could have done so when adopting Article II, Section 3 of the City Charter.”
It might cost Cincinnati more to issue debt following a credit rating downgrade by Moody’s. In a report released on July 15, the credit ratings agency downgraded the city’s general bonds from Aa1 to Aa2 and revised the bonds’ outlook to “negative.”
“The negative outlook reflects the expectation that the city will continue to face challenges in attaining structurally balanced operations, stemming from its unfunded pension liabilities and reliance on a number of one-time budgetary solutions in recent years,” the report reads.
In a memo to the mayor and City Council, City Manager Milton Dohoney put the blame on Moody’s methodological changes that now account for state pension funds that Cincinnati has no direct control over. Specifically, Moody’s now looks at the state-managed Ohio Public Employees Retirement System (OPERS) and Ohio Police and Fire Retirement System (OP&F) when scoring Cincinnati, instead of just the Cincinnati Retirement System (CRS), which the city directly operates.
“It is important to note the Ohio Revised Code provides the percentage each employer pays into OPERS and OP&F as its contribution. The City has paid 100 (percent) of this contribution each year as required. The City has no ability to impact the unfunded liability of OPERS or OP&F,” Dohoney wrote in the memo.
Still, some of the blame lies on the city’s pension fund, which is lacking a long-term strategy for sustainability, according to Moody’s.
The CRS board is currently looking at scenarios to address the city’s long-term liabilities. Its next meeting is on Aug. 1, and it could produce changes that would be presented to City Council, according to the city manager’s memo.
The report also takes issue with the city’s repeated use of one-time sources to fix budget gaps. Since 2001, the city’s annual operating budgets have used one-time sources instead of achieving structural balance with long-term cuts and sources of revenue.
Critics argue the one-time sources only delay fiscal woes instead of permanently fixing the budget shortfalls. Supporters claim the one-time methods allow the city to balance its budget without taking austere measures that would lead to city layoffs and hurt growth while the economy is in recovery.
The report from Moody’s does give Cincinnati some good credit, citing a “pressured but still satisfactory financial position,” the recent stabilization of earnings taxes, financial flexibility provided by an available but untapped levy authority, the city’s economically diverse population and an above-average debt position.
Bonds are typically issued when the city needs a temporary infusion of funds for capital projects, such as the Cincinnati streetcar.
Updated with more context.
A new poll from the Health Foundation of Greater Cincinnati found a clear majority of Ohioans supports the Medicaid expansion.
The poll asked a random sample of 866 Ohioans, "Generally speaking, do you favor or oppose expanding Medicaid to provide health insurance to more low-income uninsured adults?" About 63 percent of respondents said they favor an expansion, with a margin of error of 3.3 percent.
The poll found a partisan divide on the issue: About 82 percent of Democrats support the expansion, while 55 percent of Republicans oppose it.
The question was part of the Ohio Health Issues Poll conducted between May 19 and June 2. The University of Cincinnati's Institute for Policy Research has conducted the poll for the Health Foundation each year since 2005.
"The Health Foundation supports the expansion of Medicaid in Ohio because we believe that it will have a positive impact on the health of uninsured Ohioans who will be newly covered by Medicaid," said Health Foundation CEO Jim Schwab in a statement. "We also believe that expansion of Medicaid will have a positive impact on Ohio’s economy. This positive impact was validated in an economic impact study that the Foundation helped underwrite earlier this year. The OHIP findings show that the majority of Ohioans also support the expansion."
Under the Affordable Care Act ("Obamacare"), states are asked to expand their Medicaid programs to 138 percent of the federal poverty level, or an annual income of about $15,856 for a single-person household and $32,499 for a family of four.
For the first three years, the federal government would pay for the entire expansion. Following that, the federal government would phase down its support for the expansion to 90 percent of the costs, where it would indefinitely remain.
Earlier this year, the Health Policy Institute of Ohio released an analysis that found the Medicaid expansion would insure nearly half a million Ohioans and save the state about $1.8 billion in the next decade.
Although Gov. John Kasich supports the expansion, his Republican colleagues, who control the Ohio House and Senate, have so far passed on the expansion in budget plans and legislation.
In an April interview with CityBeat, Michael Dittoe, spokesperson for Ohio House Republicans, said the proposed federal commitment to the Medicaid expansion is unprecedented, which, according to Dittoe, makes Republican legislators skeptical that the federal government can live up to such obligations in the long term.
Bipartisan legislation introduced this week in the Ohio House and Senate would reform the Medicaid program — supposedly in a way that lowers costs without cutting services. But the legislation wouldn't take up the Medicaid expansion.
Convening in packed City Council chambers today, Cincinnati officials discussed the costs and benefits of the streetcar project in light of a $17.4 million budget gap revealed by the city administration on April 16. City Manager Milton Dohoney Jr. said the project could and should be saved, but a minority of public speakers and some City Council members did not seem convinced.
To balance the budget
gap, Dohoney said the city would have to pull funds
from multiple sources. He said he will offer specifics in writing
tomorrow, which invoked verbal disappointment from officials who were expecting details at the meeting.
“I'm disappointed in this presentation,” said Councilman Chris Smitherman. “We're here today to hear how we're going to pay for it.”
The meeting, which was
called by Democratic Vice Mayor Roxanne Qualls shortly
after the budget shortfall was announced, covered a presentation from Dohoney, comments from public speakers and City Council
questions to Dohoney. Despite expectations prior to the meeting, no specifics were given for closing the budget gap even after extensive questioning.
Dohoney did reveal the price tag for halting the streetcar project: $72 million. According to Dohoney, the project has already cost the city $19.7 million, and the city would have to spend another $14.2 million in close-out costs. Another $38.1 million in federal grants would have to be returned to the federal government.
Dohoney added that terminating the project would also reduce faith in Cincinnati’s competitiveness and ability to take on big development projects.
The budget gap was originally $22.7 million, but the city administration identified $5.3 million in potential cuts. Dohoney said further cuts would “alter the scope” of the project and push it into a “danger zone.”
The budget gap is a result of construction bids coming in $26 million to $43 million over budget. The lowest bid from Messer Construction, which came in $26 million over budget, has already expired, but Dohoney said the company is still willing to work on the streetcar project.
The city could rework the request for proposal for construction bids, but Dohoney said city officials and third-party experts agreed it’s unlikely that would effectively lower costs.
Throughout the meeting, streetcar opponents argued that the cost of the project is too high and the budget shortfall is proof the program is unsustainable.
Most of Dohoney’s presentation focused on the streetcar’s purpose. He said the streetcar would help drive
economic and population growth, which would then bring in more tax revenue to
help balance the city’s operating budget. That would represent a turnaround for Cincinnati, which has been steadily losing population since the 1950s during a period that has
coincided with disinvestment, urban flight and the dissolution of
the city’s old streetcar system.
Throughout his presentation, Dohoney cited multiple examples and studies that found streetcars can help grow local economies. He said the city has not pursued the streetcar because “it’s a cool thing to do,” but because it follows the expert advice given to city officials about what’s necessary to compete with other cities.
Dohoney’s argument was previously supported by HDR, which the city hired to do an economic impact study in 2007. HDR found major benefits to connecting Over-the-Rhine and the Central Business District, including travel cost savings, increased mobility for low-income individuals and economic development that would spur rising property values. The HDR study was entirely supported and echoed by a follow-up assessment from the University of Cincinnati.
Some critics have argued that the study is outdated because it was conducted before Over-the-Rhine’s recent revitalization, but Dohoney said there are still several hundred vacant buildings in the area, particularly north of Liberty Street.
The project has faced continued opposition from Democratic mayoral candidate John Cranley, Republicans and the conservative Coalition Opposed to Additional Spending and Taxes (COAST). They say the project is too expensive and they’re skeptical of the economic growth being promised by city officials.
Opponents of the
streetcar have so far put the project on the ballot twice, but Cincinnati voters rejected the referendum efforts. Still, the streetcar may be on the ballot
again this year through the 2013 mayoral race between Democrats Cranley and Qualls (“Back
on the Ballot,”
issue of Jan. 23). Cranley opposes the streetcar, while Qualls supports it.
The streetcar project was originally supposed to receive $52 million in federal funds through the state government, but Republican Gov. John Kasich pulled the funds after he unseated Democratic Gov. Ted Strickland.
Beyond the financial cost, Dohoney pointed out Kasich’s decision raised concerns about the project’s feasibility among previous supporters, leading to more hurdles and delays. He said Duke Energy in particular began stalling efforts to move utility lines to accommodate for streetcar tracks because the company grew weary of the project’s prospects.
Duke’s reluctance led to a conflict with the city over who has to pay to move utility lines — a conflict Duke and the city agreed to resolve in court. While the court battles play out, the city set aside $15 million from the Blue Ash Airport deal to move utility lines, but city officials say they will get that money back if the courts side with the city.
The city originally expected $31 million in private funding for the streetcar project, but those expectations were dampened as a result of the Great Recession, which forced local companies to scale back private donations.
John Deatrick, the current project manager for The Banks, previously told CityBeat that it’s normal for large projects to deal with multiple hurdles. Deatrick, who the city wants to hire to manage the streetcar project, said, “Any time you try to build something — even out in the middle of a corn field — you’re going to have unexpected, unanticipated issues. ... These things happen, and that’s what project management is all about.”
Dohoney said the current phase of the streetcar project is only a starter line between Over-the-Rhine and Cincinnati’s business district, but city officials are already planning for a second line that would run up to the University of Cincinnati and hospitals in uptown. If Dohoney’s vision for the project were completed, streetcars would run on multiple lines all around the city, ranging from the Cincinnati Zoo to The Banks.
The streetcar budget debate comes amid another debate regarding a $35 million deficit in the city’s operating budget. Some streetcar opponents have tried to link the two issues, but the streetcar is funded through the capital budget, which cannot be used to balance the operating budget because of legal and traditional constraints.
Gov. John Kasich touted a rosy, progressive vision when announcing his education reform plan Jan. 31, but reality does not match the governor’s optimism. It’s true Kasich’s proposed 2014-2015 budget
will not reduce school funding, but under the Kasich administration,
local schools will still have a net loss in state funds.
The governor’s office released tentative budget numbers yesterday that show the Kasich plan will give Cincinnati Public Schools (CPS) $8.8 million more funding for the 2014 fiscal year. But that’s not enough to make up for the $39 million CPS will lose in the same fiscal year due to Kasich’s first budget, which was passed passed in 2011. Even with the new education plan, the net loss in the 2014 fiscal year is $30.2 million.
The problem is Kasich’s first budget had massive cuts for schools. The elimination of the tangible personal
property reimbursements (TPP) hit CPS particularly hard, as CityBeat previously covered (“Battered But Not Broken,”
issue of Oct. 3). In the Cut Hurts Ohio website, Innovation Ohio and Policy Matters Ohio estimated Kasich’s budget cuts resulted in $1.8 billion less funding for
education statewide. In Hamilton County, the cuts led to
$117 million less funding.
Kasich’s massive cuts didn’t even lead to lower taxes for many Ohioans. A report from Innovation Ohio found school districts and voters made up for the big education cuts with $487 million in new school levies. In 2012, Cincinnati voters approved a $51.5 million levy for CPS. The school levies are a direct increase on local income and property taxes, but they’re measures Ohioans clearly felt they had to take in the face of big state budget cuts.
For more analysis of Kasich’s budget, check out CityBeat’s other coverage: