Tuesday, June 8, 2004

Deficit will grow, city told

Red ink flow, cost-cutting options laid out for council Finance Committee

By Kevin Aldridge
The Cincinnati Enquirer

Cincinnati City Council could face some tough cost-cutting decisions - including layoffs, freezing wages and service reductions - in light of a projected $10.5 million operating budget deficit next year.

City administrators painted a grim financial picture Monday for council's Finance Committee that included a projected accumulated general fund deficit of $71 million by the end of 2008.

William Moller, city finance director, said revenues are projected to grow at an average of 2.9 percent between 2005 and 2008, while expenditures will grow at a rate of 3.2 percent. That "structural imbalance" will increase the shortfall over the next several years, he said.

"It's going to be a challenge to balance the budget and maintain the current levels of service that we have," Moller said. "We probably are looking at some level of service reduction."

Council must adopt a policy budget by June 30.

The city will bring in an estimated $323 million in revenue next year and spend about $340 million from the general fund.

The general fund is the primary operating budget fund and is used to deliver basic municipal services such as police and fire protection, park maintenance, street repair, trash collection and operation of recreation centers. The city has three budgets: the operating budget, the capital budget and the consolidated plan budget, which total about $1 billion for 2004.

A freeze on state funds given to cities and a decrease in estate tax revenues, which together account for about 15 percent of the general fund, are part of the problem. Property taxes, which make up 9 percent of the general fund, are expected to stay flat.

Income tax revenue, which makes up about 63 percent of the fund, is projected to grow at an average 4.2 percent annually. Other revenue streams - licenses, permits, fines, interest income, program fees and charges for services - are estimated to increase 4.5 percent next year and then remain flat in 2006.

Moller said labor contracts, health care and energy costs are key contributors to the expenditure increases.

He said the city has cut $13.5 million in recent years by eliminating vacant positions and shifting money among funds. At one point, the city used money from its parking meter fund to cover general fund costs, Moller said.

"We're about at the end of the management magic as far as balancing the budget," Moller said.

Mayor Charlie Luken said the forecast is not cause for panic, noting that city revenues sometimes end up being better than predicted.

"We have shown deficits in the past and have been able to deal with them," Luken said. "Sometimes we worked through them better than we anticipated."

Luken said the city might have to consider freezing or limiting wage increases. He also did not rule out layoffs in non-safety-related areas.

Councilman David Crowley suggested that council reconsider the city's property tax rollback in favor of an increase.

Council voted in October to roll back property taxes for homeowners. The rollback saved an owner of a $100,000 home about $7 a year.

Councilman David Pepper said operating the city more efficiently, not raising taxes, is the answer.

E-mail kaldridge@enquirer.com

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