Values and Priorities-the Budget Discussions Begin

The City Manager has asked City Council to approve the layoffs of 44 police officers and a departmental reorganization to cut another $5.1 million from this year’s budget. I’ve scheduled four public hearings this month in our neighborhoods so that residents can tell council what their priorities are as we grapple with the City Manager's proposed mid-year correction and as we anticipate a projected $33 million deficit for 2012.

City Manager Milton Dohoney, Jr. presented his mid-year budget adjustment plan to cut $5.1 million through police layoffs and departmental reorganization to council’s Budget and Finance Committee on August 1. Council will meet in a special session on August 30 to vote on the recommendations. Dohoney's plan would:

• Eliminate 50 full-time positions. Forty-four police officers would be laid off; if the city does not secure a federal grant, another 50 officers could be laid off next year.·
• Disband the Office of Environmental Quality, moving the department director to Public Services;· Move the Department of Community Development to the Department of Planning and Buildings;
• Eliminate the White Goods Collection program for the rest of this year.

Without new sources of revenue, it will be impossible for council to balance the budget without cutting priority services that are needed to keep our neighborhoods safe, clean and healthy for every Cincinnati family. Council needs to hear from residents who value and use the city’s health clinics, school nurse program, pools, and other threatened services. While we may have a very lean budget in 2012, it should not be mean and it should, at a minimum, guarantee all our neighborhoods receive services that combat blight.

It is important that everyone understand the budget basics. The 2011 General Fund (GF) Budget is $355 million. 69% of the GF budget goes to Fire and Police. 84% of the GF budget is for personnel. 90% of all personnel is unionized.

From 2000 through 2011 the combined Fire and Police GF budgets increased by 35.6%. During this same period, non-safety department GF budgets decreased by 28.6%.

Staffing in Police and Fire during this period remained stable, while staffing in non-Public Safety departments fell by 44% in the General Fund.

Deep cuts in non-safety departments and slight increases in revenues helped offset the General Fund budget increases for Police and Fire.

But, the rapid rise in employee health care cost- a 203.2% increase, and the 55.6% in pension contributed to the rise of chronic deficits in spite of constant cutting of non-safety General Fund departments and programs.

This year actions by the state have compounded the City's deficit problem. The state cut the Local Government Fund revenues to the City by $4.4 million in 2011 and by $9.2 million in 2012. The legislature also eliminated the Estate Tax resulting in a $13 million revenue loss beginning in 2013.

So even if we manage to balance our budget through continuing to cut, the State's actions put us further in the proverbial budget hole.

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Streetcar vs Eastern Corridor? Not really...

What follows is the explanation for why the city does not support the Tiger 2 application of the Hamilton County Transportation Improvement District for the Eastern Corridor.

The City’s position on the Hamilton County Transportation Improvement District’s (TID) unilateral Oasis Line application to the federal TIGER II program was expressed by Councilman Berding at the TID meeting on Monday, July 26. While the City of Cincinnati remains a committed and engaged partner in the Eastern Corridor project, the City does not support the TIGER II application at this time due to a variety of factors. These include the following:

1. The proposed project competes with the City’s clearly articulated priority, the Cincinnati Streetcar Project. Although Commissioner Portune has stated otherwise, any additional projects are competition for the limited grant resources of the program. ($600 Million is available nationwide, approximately $200 million of which is dedicated to administration, planning and rural projects.)

2. The proposed project is linked with a TID-proposed 3C Inter City Rail station in Fairfax, which is contrary to the City’s stated preference for a statin location ultimately at Union Terminal, and in the near term, in Bond Hill. City Council has clearly stated this in earlier Resolutions.

3. The project application commits the partners to a local match. While the city understands the Ohio Department of Transportation indicates a match source doesn’t have to be identified now, a match will have to identified if the application is successful, and allocating resources, now or in the near future, to this match is not a priority for the City.

4. The project application is premature. The design effort for the Oasis Line commuter rail is currently underway, as evidenced by HDR’s presentation at the Hamilton County TID meeting. TIGER II requires additional environmental work and an intensive Benefit Cost Analysis (BCA) for the grant application (this work is not currently in HDR’s contract). There is grant construction obligation date of 2012 (the project must be bid and awarded), and, in all likelihood, right-of-way must be acquired according to federal process for the project. The Oasis project has not advanced sufficiently to meet these metrics. An application for construction will not be competitive and only serves to “muddy the water” as to our priorities.

The Eastern Corridor is a significant project for the City, Hamilton County and the region; however, the city has clearly and routinely articulated its transportation priorities. As we all know, resources for governments remain scarce and we all must prioritize our political and financial resources. As such, advancement of the Oasis Line beyond the current scope of work is not a priority for the City.

?Habla usted espanol? Parlez vous francais?

Yesterday there was quite a dust up regarding a motion I put forward to have multi-lingual signs on Fountain Square and around downtown, and to have emergency signage in English and Spanish. Apparently, there are people who feel very strongly that if one is in the US one should speak English.

Well, we have many visitors in Cincinnati who are from out-of-country, and are here on business or for vacation. I believe we need to put out the "Welcome to Cincinnati" sign and make our guests feel welcome and impress them with Cincinnati hospitality. This is increasingly important as more and more of our companies conduct their business around the globe. It also is important because we want to compete for international conventions and events. In fact, Cincinnati will host two major conventions in the next two years that will bring thousands of visitors to Cincinnati-many of whom may not speak English.

In 2011, the League of United Latin American Citizens (LULAC) will bring its convention to Cincinnati. 15,000 people will attend. It is one of the largest conventions Cincinnati will ever have hosted. It is likely that some of the attendees or their friends or family members with them will not speak English

In 2012, the city will host the World Choir Games. 20,000 competitors from 90 countries will participate. The eyes of the world will be on us, and we need to show that we welcome international attention and are capable of making participants and their friends and families welcome.

Hopefully, these two major events are just the beginning.

As for emergency signage, it would make us all safer if signage for things such a "sheltering in place", "watch for emergency vehicles", even "do not enter" were either in international symbols or in English and Spanish.

People Say the Darndest Things

Thursday evening (October 22) the NAACP held its Candidates' Forum. Prior to the candidates speaking the FOP and CODE Presidents spoke. The FOP represents police officers and CODE represents middle managers in the city. Among the many things they said, each talked about how the accountant hired by the two unions to challenge the City Manager's deficit projections had found all sorts of money and that the projected $51.5 million deficit for 2010 could be closed with the monies identified by their accountant. I assume they will continue to say this as council proceeds to close the deficit before the end of the year.

So, I thought you might like to read what the city's Budget Director had to say in response to the CODE/FOP accountant's assertions. Also, remember that the court totally dismissed the two unions efforts to obtain a restraining order against the city based on their assertions about "found" money and their allegations that the City Manager was not being accurate in his assertion that we had a deficit.

The following is a response from Lea Erikson, the city's Budget Director, on October 23, 2009 to an inquiry from my office.

Here is my preliminary analysis on the accountant’s affidavits:

Burke & Schindler used flawed logic when developing a projection for items for which annualized appeared to be less than the 2009 budget amount.

1. The City’s expenditures generally do not get expended throughout the year in a straight-line fashion (i.e. you can’t say that expenditures should be 50% of budget 50% of the way through the year). There are many reasons for this including:
1. Many municipal operations have seasonal peaks and valleys with their expenses such as winter operations which is heavy early and late in the year or Aquatics which is heavy in the summer only.
2. Personnel expenses are incurred 26 times through bi-weekly payroll, not 1/12^th each month.
3. Personnel expenses are not level from start to finish since there are contractual pay raises such as Fire’s 3% COLA which started in June and AFSCME’s 3% COLA which started in August.
4. Contracts with outside entities are entered into throughout the year and so there is no way to generalize those expense.
5. Supplies and other purchases do not happen in a straight-line fashion throughout the year.
6. Other expenses may not occur until later in the year.
2. Since the City’s expenditures do not get expended throughout the year in a straight-line fashion, the Burke & Schindler’s annualization technique was flawed.
3. Since Burke & Schindler only compiled results of items which appeared to be under expending, they completely ignored items that may appear to be overspending. When using their same methodology of annualization with ALL line-items in the budget, the result shown that the City is projected to overspend its departmental General Fund Budget by $10,223,000. Obviously, since the methodology is flawed, the Office of Budget & Evaluation is not concerned that we are on track to overspend our budget by that amount. A proper budget monitoring activity looks at spending on all line-items and makes professional assumptions based on knowledge of operations when projecting spending for the remainder of the year.
4. In the case of the statement: “total projected unspent amount within the Police Department is at least $1,000,000”, when you use actual Police Department budget report totals (versus only a few line-items) and use the same logic and the same annualization, the department now has a deficit of $4,866,695 rather than savings of a $1,000,000.
5. While there is a budgeted amount with every line-item, departments have the ability to expense items less than or greater than the individual line-item budget. City Council approves the budget at the Agency level (not the program level) and at the higher level expense categories of Personnel, Other Expenses, Properties and Debt Service. City Council does not appropriate to the line-item detail. Therefore, in order to be flexible to meet departmental needs, departments can over spend on certain line-items as long as they under spend on other items to remain in balance within the appropriated budget amount. When there is a case where there is projected overspending in total within an Agency, since accounts must be balanced, the Administration with the approval of City Council adjusts the agency budgets in the Final Adjustment Ordinance that is presented in November of each year.
6. In the case of the identified $998,000 in items with no expenditures to date, the same caveats above apply. Really a comparison could be made to the number of line-items and amounts that have already overspent their entire annual budget as of August 20, 2009. There are 1,310 expense line-items within departments that show a collective overspending of $32,586,890 as of August 20, 2009. Since there are other items which are under spent by this amount and more, this is not an issue of great concern to the Office of Budget & Evaluation.

Municipal budgeting and fund accounting are not simple and straightforward, and therefore, true projections of over or under spending require detailed analysis that looks at budgets within the context of departmental operations and financial procedures.

As to the numbers in the memorandum, the City also does not receive revenues in a straight line manner, so if you look at page 3 of the Net Revenue detail report attached to the memorandum, the better comparison is the current year to date ($208,915,846.23) versus the prior year to date ($218,915,846.23) which shows to date, we brought in $10,790,376.50 less revenue than last year at this time. When you factor in the fact that we were counting on growth in revenue this year compared to last year, it shows how Finance can say that we are $14.1 million behind forecast year to date in the July monthly finance report (available on council on-line). Based on Finance’s professional assumptions about how this carries out the rest of the year, that explains the projected $28 million revenue deficit by the end of the year.

In their memorandum, the unappropriated surplus calculation of $12,656,282.07 is not an actual YTD amount since two of the components that go into that calculation are projected expenditures and projected revenues. In this case, those amounts assume that we spend every penny appropriated in the budget in the General Fund and that we receive every penny “forecasted” in the general fund. Since the forecast has not been officially reduced to reflect the projected $28 million deficit, the $12.6 million is not true money. You can see the calculation of the $12.6 million and see what the revenue would have to be received to truly get $12.6 million by the end of the year. For comparison I showed what we projected in the original budget (see the General Fund appropriation ordinance last page) and the May Finance Report (available on council on-line). The reason for the big increase between May and June is that we cut the projected operating expenditure line by the June mid year General fund budget reduction approved by Council (revised plan A). When Finance officially lowers the revenue estimate through the amended certificate of resources the unappropriated surplus will be a negative number (discussed on page 2 of the July monthly report).

In their memorandum, the reference to page 172 of the Net Revenue Detail report of $885,960,242.33 this year compared to $844,171,567.95 last year is completely erroneous. They cited the TOTAL revenue amount which is really the total of all 172 pages of net revenue detail (keep in mind that the General Fund only represents the first three pages) and called it revenue from “investments”, when in fact it is the total revenue collected from all sources including General Fund, Enterprise funds, other funds, capital funds, grant funds, etc. My only guess why they thought it was revenue from investments was that the first revenue item listed on that page was titled Rents and Investments (notice the fund number is 980 which is our capital fund.)

This is just my preliminary analysis and this doesn’t represent the Administration’s official opinion on this. Since this is a court case, we have to be careful how information is presented, but I just felt that I had to give you comments per your request.

Thanks,

Lea Eriksen
Budget Director
City Manager's Office, Office of Budget & Evaluation
Suite 142, City Hall
801 Plum Street
Cincinnati, Ohio 45202
P 513-352-1578
F 513-564-1717
E lea.eriksen@cincinnati-oh.gov
www.cincinnati-oh.gov

Saving Energy-Saving Tax Dollars

Read the report from the Office of Environmental Quality on the energy saving measures beings installed in 39 city buildings. These are the measures referred to by a local restaurateur as, "$5 million for City Hall windows." Just goes to show that what is good for the environment can also be good for the wallet.

The Rest of the Story-What some people conveniently forget to say.

This past Sunday, a number of items appeared in the Cincinnati Enquirer that warrant a response because of the misleading nature of the statements. It is unfortunate that the techniques, values, and ethics of national attack politics have now arrived in Cincinnati.

One of the items was an ad that attacked Council members Harris, Thomas, Cole, Crowley, and me on a variety of subjects. A well-known restaurateur sponsored and signed the ad. It is unfortunate that neither he nor his staff took the time to check their facts.

The recession has severely impacted the City of Cincinnati. The Mayor and Council closed a $28 million General Fund deficit this year and will have to close a $40 million General Fund deficit for 2010. It is important to note that the deficit is in the General Fund because the cause is reduced income tax and other revenues into the General Fund. Simply saying City Council approved this or that expenditure, even if true, may not be relevant because the source of funding could be the Capital Budget or Enterprise Funds or state or federal grants.

As for the issues used to attack Council members Harris, Thomas, Cole, Crowley and myself in the ad, I will take each one and provide... "The rest of the story..."

1. "...decided it was more important to spend $5 million to replace windows at City Hall, than to keep the people safe..." Enquirer ad, 9-27-09 p C5
Response: The city executed Energy Services Performance contracts with Ameresco and Honeywell on June 29, 2009. The contracts allow for the installation of nearly $5.6 million worth of energy efficiency upgrades to City Hall, the Convention Center, Centennial 2, various police and fire stations, and other buildings maintained by City Facility Management. A total of 40 buildings are affected. These lighting, heating and air conditioning, building automation, and building envelope upgrades will reduce the City's energy use by 3,290,539 kWh, generate 45, 817 kWh of renewable energy, and reduce greenhouse gas emissions by 3,413 metric tons each year. The majority of the work will be self-funded with guaranteed energy savings (a minimum of $450,000 annually) and energy rebates...$351,675 of Energy Efficiency Conservation Block Grant funds (aka stimulus funds) will be used for gap financing to make the first-round projects work. $239,380.77 is from the General Fund, but is not from tax receipts. It is money repaid to the city by Duke Energy for overcharging the city. FYI Memo from the City Manager to Mayor and Members of Council 6-30-09.

2. "...Over-the Rhine was the most violent neighborhood..." Enquirer ad, 9-27-09 p C5
Response: Violent crime in Over-the-Rhine for Jan-May 2009 was 36% lower than the same period in 2005. The study that resulted in O-T-R being called the most violent neighborhood in the US used data that was outdated and did not use as its basis the entire 110 square blocks of Over-the-Rhine. It only used a ten block area in the northwest sector of Over-the-Rhine and in the West End. The study's methodology is highly questionable and intellectually suspect. Repeating its flawed conclusions does a tremendous disservice to the residents and businesses there and to the organizations and individuals who have invested over $84 million in the community. Visit UrbanCincy.com

3. "...to lay off 138 police officers unless every officer accepted a pay cut." Enquirer ad, 9-27-09 p C5
Response: One element needed to close the $28 million deficit in the city's 2009 General Fund was city employees agreeing to take cost savings days. When originally proposed by the City Manager, every employee paid out of the General Fund would take 6 cost savings days. The unions had to agree to this for those employees in the city's bargaining units. The City Manager and Chief Streicher were instructed to make sure that any police cost savings days would not impact street strength. In a memo dated, August 5, 2009 they specifically stated the layoffs would not impact street strength. Ultimately, the 138 police officers were not laid off because the union agreed to accept a salary reduction of $1,151.69 per officer, which averages out to approximately 4.6 cost savings days per officer. FYI Memo from the City Manager to the Mayor and Members of Council, 8-5-09

3. "...these same council members voted against taking pay cuts themselves." Enquirer ad, 9-27-09 p C5
Response: Cincinnati City Council members have not increased their salaries since 2006 even though by law, the members are entitled to the increase. Due to inflation over this same period of time, council salaries have remained static, but the purchasing power has declined. In 2006 council did not take a 3% increase. In 2007 council did not take a 3% increase. In 2008 council did not take a 7.7% increase. And, in 2009 council did not take a 7.7% increase. As for council members taking cost savings days, individual members of council are writing checks to the city for the equivalent of between five and six cost savings days.

"So instead of providing funding for public safety, he (sic Thomas) and his colleagues chose to:
4. ... hire a tree trimmer..." Enquirer ad, 9-27-09 p C5

Response This position is for a Tree Maintenance Worker paid a salary of $37,026. The Park Department needed this position to insure the safety of residents and employees. The responsibilities include pruning and removing hazardous trees along park roadways, around picnic areas, and playsets. The person will use an aerial lift truck or rope and saddle. It is paid out of the General Fund. Source: Report from the City Manager to Mayor and Members of Council, "Second Quarter 2009 General Fund Hire Authorizations," 9-2-09

5. ...and a climate control coordinator..." Enquirer ad, 9-27-09 p C5

Response: All general fund funding for the Climate Protection Coordinator was eliminated as part of the mid-year budget correction. The position is now part-time and is funded entirely through an Energy Efficiency Conservation Block grant (aka stimulus dollars) from the federal government.

6....and to spend $3 million on recycling containers..." Enquirer ad, 9-27-09 p C5
Response: Council has not voted to spend $3 million on recycling containers. In May 2008, council asked the administration to review the recycling program and recommend how we could increase the rate of recycling, share to a greater extent in any revenue from sale of recyclables, and increase the amount of money the city saved by avoiding landfill tipping fees. The original motion was extensive, and also directed that workers received a living wage for sorting recyclables.

The Office of Environmental Quality worked diligently and developed a plan that achieved the objectives of council.It would increase the amount recycled by 300% and create 20 new jobs at sorting facilities and 36 new jobs at recycling manufacturing facilities. It also would decrease greenhouse gas emissions.

The city currently spends $2.3 million for its recycling program.

So...where did the $3 million figure come from?

Well, to improve participation rates the administration recommended a program that includes a Recycle Bank and the use of 64 gallon wheeled carts. The program also moved the city into the modern age of RFID's (Radio frequency identification devices, known to most people as barcodes) to allow for tracking of participants so they could receive rewards for recycling.

The cost of purchasing and providing 64 gallon wheeled carts to all households in four family or smaller units and all single family homes is $3.5 million. The administration proposed to finance the purchase with a lease that covered the cost of the $3.5 million and would have required annual payments of approximately $462,000 a year (Option1). The savings projections previously referenced include the cost of the lease. Source: Report from the City Manager to the Mayor and Members of Council, "Recycling Program Enhancements/Cost Savings," 8-3-2009

7. ...and $1.5 million on sidewalks..." Enquirer ad, 9-27-09 p C5

Response: This reference is a true mystery. I can only assume the sponsor of the ad was referencing an ordinance to pay for sidewalk repairs. The amount was under $700,000. The amount is recouped through sidewalk assessments to property owners whose property abuts the sidewalk.

It is unfortunate when a respected member of the community is mislead into making public statements that are factually untrue. It is understandable, however, because public finance and the city's budget are complicated -more complicated than the books of most restaurants. In the future, one can only hope that he will take a little more time to do his due diligence.

Deficits, Lay offs and Recessions

Beginning in June of this year, the global economic crisis hit home in
the City of Cincinnati. The Administration informed City Council that
due to lower than expected tax revenue, we were faced with a 2009
deficit of $20 million. Recognizing the devastating effect such a
deficit could have on the citizens of Cincinnati, Councilmembers Cole,
Qualls, Thomas, Harris, and Vice-Mayor Crowley, presented a plan that
made substantive cuts while protecting critical City services. Had we
not passed this plan, 902 City Employees would have received layoff
notices, including 302 police officers and 230 firefighters.

It is important to note that no one wanted to layoff any City
employee, especially in the area of Public Safety. But it is also
important to note that since 2000, Cincinnati Police and Fire staff
levels have risen approximately 6%, while General Fund staffing levels
for all other departments have been cut by 29.9%. Over the same time
period, public safety department budgets rose 37.1% (33.8% for Police
and 43.3% for Fire), while non-safety General Fund department budgets
fell 10% overall. Public Services fell 18.9%; Economic Development
-25.1%; Finance -29.9%; and Community Development -6.7%.

On July 17, when faced with a deficit that grew to $28 million, the
City Manager announced layoffs would be necessary in 2009. He did,
however, emphasize that layoffs could be avoided this year if the
unions agreed to cost-savings days and to forgo cost of living
increases for 2009 that were awarded by an arbitrator. To close the
gap, General Fund departments made reductions in their budgets ranging
from 2.7% to 11.2%, with eleven departments –taking cuts of 5% or
more.

Mayor Mallory, supported by Councilmembers Cole, Crowley, Harris,
Thomas, and Qualls undertook negotiations with the city’s labor unions
and the Administration to find substantive cuts and reasonable
concessions from the unions.

These negotiations were successful and were reflected in the plan passed by a majority of City Council on September 4.

While we are all grateful for solving this recent crisis, we know that next year will be worse. Cincinnati does not exist in a bubble. This is a global recession, not a local one. Other cities are facing very similar budget problems.

• Philadelphia - Laid off 3,000 workers, reducing garbage collection
to once every other week.
• Atlanta - Four rounds of layoffs, increase in property taxes, and
mandatory furloughs for all city workers (including police, fire, and
others).
• Miami - Deep pay cuts (ranging from 6% to 15%) and pension benefit
reductions or the elimination of 191 sworn police officers, 305
general union employees, 5 firefighters, and 110 nonunion workers.

The plan that the council majority passed on September 4th is responsible, possible, and
reflective of the times. We did not demand layoffs and we did not make
the quality of life unbearable for our citizens. We asked the unions to meet us halfway. And we are glad the CODE and the FOP agreed. It is unfortunate that AFSCME did not do so.