CINCINNATI – In just four days, the federal government is expected to begin distributing money from the American rescue plan to cities and counties, and Cincinnati is expected to receive approximately $ 300 million over a two-year period.
The city started providing some of the funding this week, but more money is being used on the budget deficit than originally expected.
So far, the city has provided around $ 134 million. Most of this is intended to fill budget gaps as remote working is likely to have an impact on city taxes. This also means that less is used as a stimulus fund for local organizations
Steve Goodin, a member of Cincinnati City Council, has been cautious about spending the roughly $ 300 million the city will receive as part of the US rescue plan.
“Not everyone will return to the office after COVID,” he said. “We won’t be able to tax them over time. It’s going to be a very slow bleeding.”
Income tax finances the city’s budget and can only be levied on people who work within the city limits. During the pandemic, Governor Mike DeWine issued an emergency decree that allowed cities to collect taxes from people who work for city businesses outside of city limits.
That order will eventually be lifted, and Goodin said if people don’t return to work downtown, tax revenue will be lost
“We know that 71% of our revenue as a city comes from income tax, and we know that more than half of those workers do not live in the city,” he said.
Because of this, the University of Cincinnati Business Center predicts the city will lose about $ 34 million in income tax in 2022. That brings the city’s budget deficit to an estimated $ 67 million for the next year.
Because of this, Mayor John Cranley said the city is allocating more money from the American rescue plan to the general fund budget.
“We don’t yet know exactly what will help lower our income tax, but we know it will be significant. That is why it is so important to put most of that money into reserves and savings,” said Cranley.
Democratic Senator Sherrod Brown, who visited Cincinnati Friday to discuss vaccination progress and the US bailout plan, said the new bill would give the local government more time to spend the funds.
“We’ve done three things: more of this goes directly to cities and counties; number two, they’d have the time to pass it with no deadline that would cause them to do things they didn’t want to do … and.” three they had flexibility, “said Brown.
Of the $ 134 million made available to the city on Wednesday, around $ 107 million will be used to fill budget gaps or invest in budget reserves. This leaves less than $ 30 million for stimulus programs for local organizations.
“We were quick to provide help to social service organizations, arts organizations, restaurants and small businesses – and we are going to do more of it,” said Cranley.
Goodin said he believed that was the right thing to do.
“I’ve said this from the start, this is not a transformative amount of money, it is a restorative amount of money,” he said.
The city council’s budget and finance committee will hold a special meeting on Tuesday to further discuss these funds. On the same day, cities and federal states are expected to receive their first cash payment from the federal government.