CINCINNATI — Noting a long-term commitment to money-saving innovations and a dire need to find additional revenue sources, the city of Cincinnati unveiled its proposed budget for fiscal years 2024 and 2025 on Friday.

It totals nearly $1.59 billion. The operating budget — which includes staff, day-to-day operations and supporting a variety of neighborhood efforts — is the bulk of the budget at $1.28 billion. The capital budget, which deals with city buildings and its fleet of vehicles, comes in at $302.9 million.

The 700-page document calls for investments in police and fire recruit classes, the expansion of a pilot program to send non-police officers to non-emergency calls and invests nearly $8 million in human services funding, exceeding the 1.5% of the overall budget required by the city’s charter.

Mayor Aftab Pureval plans to submit an ordinance to use $10 million in one-time sources to support several community organizations and pilot programs. That includes using $375,000 to create college funds for preschool-aged children in Cincinnati.

“We are proud to present a community-informed budget that helps drive Cincinnati toward a bright future,” Pureval said on Friday.

But Pureval and City Manager Sheryl Long spent nearly an hour on Friday outlining the financial challenges facing the city this year, next year and for the foreseeable future if they can’t find new ways to generate more revenue.

“This budget is a reflection of the challenges and priorities of residents throughout our city,” the mayor added.

As required by state law, the city balanced its budget, meaning it’s not spending more than it’s bringing in. But because of the financial realities facing Cincinnati and other cities across the nation, the budget is not structurally balanced because it relies on one-time financial sources to cover deficits.

The city’s operating expenses continue to far outpace revenue growth primarily because of increases in personnel costs, according to city officials. Operating expenses have grown 6.9% since last year, but revenues are projected to only increase by 5.1% for the next fiscal year.

One of the biggest challenges caused by the pandemic is its impact on the city’s income tax revenue. Permanent work-from-home, remote work and hybrid work arrangements have led to a considerable amount of people who live outside city limits no longer commuting into the city for work.

Earnings tax revenues account for 65.3% of the city’s budget. Since December 2022, the city’s projected income tax revenue for fiscal year 2024 decreased by about $7.5 million.

“The pandemic has fundamentally altered the way people work,” Long wrote in her budget message.

The city has relied heavily on roughly $280 million in pandemic-related American Rescue Plan Act funding to cover projected budget holes the past few years. For Fiscal Year 2023, for example, the city inserted $85.6 million in its budget. Those funds are running out this year, Pureval said.

This year, the city is using $28.2 million in federal funding and will only have $25.2 million left for next year. Even after those ARPA funds next year, the city will still face a $10 million deficit, according to a city spokesperson. To balance the deficit, the city preliminarily plans a 1.8% across-the-board budget reduction for all city departments.

The city will reassess that reduction plan as part of the next budget process, the spokesperson added.

The central challenge now and moving forward is to deliver consistent service despite fewer resources. To do that, the city came up with five strategic areas that align with a shared vision between the mayor and the city council.

The five strategic areas are:

• Public safety and health
• Growing economic opportunity
• Thriving neighborhoods
• Fiscal sustainability
• Excellent and equitable service delivery

Long described the approach as “to break things apart to build them back up, with a goal of service delivery that is both more efficient and more cost effective.”

The budget looked for budget-neutral and no-cost changes to make operations more efficient, she said.

In terms of public safety, the city also wants to expand the Alternative Response to Crisis (ARC) program, which provides non-police responses to mental health emergencies. 

The city also wants to invest $1.5 million in the Affordable Housing Trust Fund and create several new housing initiatives, such as supporting low-income homeowners with home repairs and working with problem landlords to protect tenants from dilapidated housing conditions.

There’s $750,000 earmarked for pedestrian safety, a top priority by the mayor and City Council during the past two years.

The budget proposal features some good news for city employees as well. It doesn’t recommend any layoffs, furloughs or cut any currently unfilled positions. There’s also a recommended 0.75 percentage-point increase in employer pension contribution. It’s the first increase since Jan. 1, 2016.

As part of this budget process, the city overhauled its process for supplying funding to organizations that benefit the community. Now, groups must undergo an application process to justify getting the money. They’ll also have to report results to continue receiving those funds in the future, the city said.

Long’s team selected 27 of 92 applications to receive a combined $3.9 million.

The three biggest recipients are the Center for Closing the Health Gap ($650,000), African American Chamber of Commerce ($350,000) and Shelterhouse ($325,000), which provides temporary housing and services to those experiencing homelessness.

The city also provides about $8 million for its Human Services Fund, which gets administered by the United Way of Greater Cincinnati.

“We need to continue to deliver services that sustain, improve, and grow the city of Cincinnati,” Long said. “I believe this budget will help us achieve our strategic objectives and prepare for future operating deficits, but without thoughtlessly slashing or increasing long-term operating expenses.”

The mayor’s $10 budget ordinance includes $2 million to address deferred capital maintenance at city facilities. It also gives $400,000 to improve Cincinnati’s bike network and promises $250,000 toward the construction of a new skatepark and skating facility.

Pureval also plans to use a combined $2.125 million for three “financial freedom” pilots to address things like medical debt and income inequality. The child savings account program would give $50 to kids enrolled in Cincinnati’s Preschool Promise, the mayor said on Friday.

Funding from those projects would come from $6 million in tax credits from the Cincinnati Southern Railway Board and $5 million in re-appropriated Fiscal Year 2023 funds.

Cincinnati’s mayor described this budget as “innovative” but stressed a need to find new revenues. One of the biggest opportunities is the potential sale of the Cincinnati Southern Railway, Pureval said. He noted that the $1.6 billion payday for the city would go a long way toward helping to address the $400 million in deferred maintenance faces in the next five years.

The city-appointed CSR Board approved has already approved the sale, but the deal will now go before Cincinnati voters for a final decision. The board plans to address when to place the initiative on the ballot at its next meeting.

There’ve been no discussions about raising the local earnings tax, Pureval said, but “everything is on the table.”

One way the city hopes to achieve those goals is through what it labeled the “Futures Commission.” Leaders from Procter & Gamble, Kroger, the Cincinnati USA Regional Chamber and other local businesses will craft revenue suggestions for the city, Pureval said.

“Unless we can diversify our revenue, we’re going to run out of money,” he added.

The budget deliberation process — which includes council discussion and community engagement sessions — begins next week. The city held three public hearings on the topic earlier this year.

Council must vote to approve the budget by the end of June. Cincinnati’s fiscal year starts on July 1.