City Manager: Increase Property Taxes To Close Deficit & Pay For Projects

Dec 21, 2017

Cincinnati City Manager Harry Black is recommending city council increase both the general fund and debt service property tax rates in the next fiscal year.

The information is in a "tentative tax budget" the city must submit to the Hamilton County Auditor's office no later than January 20.  The auditor's office reviews the information and then uses it to set millage rates so the amount of property tax revenue requested by the city can be collected from property owners.

Increasing the operating tax millage to 6.1 mills would mean a $17 annual property tax increase per $100,000 of residential property value.

Hiking the debt service millage from 6.5 mills to 7.5 mills would mean a $31 annual property tax increase per $100,000 of residential property value.

City council's budget and finance committee will hold a public hearing January 8 at 1 p.m. to consider the tentative tax budget.

Since 2001, city council has always voted to lower the property tax rate to keep the amount of revenue collected steady at around $29 million for the general fund.  Supporters say this policy prevents property owners from paying higher taxes as property values increase.  Opponents say the policy has cost the city millions of dollars of needed revenue.

For the general fund, the city manager is projecting a deficit of $21.3 to $23.4 million depending on what action the council takes.

Black is presenting two versions for consideration:

  • Version 1 – Incorporates the proposed operating millage at 6.1 mills (maximum amount allowed in the City Charter) and the debt service millage at 7.5 mills. This version reduces the FY2019 projected operating deficit by $2.1 million to $21.3 million based on the additional proposed millage. The 1.0 mill increase in the debt service mills will be utilized to fund the Western Hills Viaduct, upgrades to restrooms at various fire stations and a new regional fire training facility.
  • Version 2 – Incorporates the proposed operating millage based on fixing the operating property tax revenue at $28.988 million consistent with the current city council policy of rolling back the millage rate to generate a consistent revenue amount. The debt service millage is included at 7.5 mills. This version will result in a FY2019 projected operating deficit of $23.4 million, an increase of $2.1 million as compared to Version 1. The 1.0 mill increase in the debt service mills will be utilized to fund the Western Hills Viaduct, upgrades to restrooms at various fire stations and a new regional fire training facility.

City council voted Wednesday to provide $33 million for the Western Hills Viaduct replacement project, matching a similar amount pledged by Hamilton County.  

Officials are hoping to use those local dollars to leverage grants fund from the state of Ohio and the federal government for the project.

Council also voted Wednesday to provide $17 million to the fire department to build a new training facility and add women's restrooms and locker rooms to city fire stations that currently do not have them.

The mayor and some council members had suggested this $50 million in capital debt, or borrowing, could be funded by restructuring current debt and not increasing the debt service property tax millage to pay for it.  But the administration's proposals include a one mill increase for the borrowing.

Black again stated in a memo that growth in expenditures has outpaced revenue growth resulting in the deficit.

"Without raising revenues, the reduction to close the deficit equates to a 5 percent across the board reduction for all department," Black wrote. "When exempting public safety departments from the reduction, the deficit is a 15 percent across the board reduction for all other departments."

City administrators are working on solutions to close the deficit, and will present city council with a structurally balanced budget for the fiscal year which start on July 1, 2018.

"It has become increasingly difficult to balance the budget given the annual reductions in expenditures by non-public safety departments without reducing service levels and layoffs."

The new city council, with six incumbents and three new members, will be making the decision on the city's property tax rates.

It may be difficult asking the group to increase tax rates as one of its first decisions of the new council term.

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