Cleveland Heights — not just nuclear-free, but financially solvent, at least for this year. Tom Jewell/Special to cleveland.com
CLEVELAND HEIGHTS, Ohio — The city is “not out of the woods yet” financially, but it has reached a clearing at least, with a $3.8 million budget carryover from 2016.
This does not include the first budgeted balance surplus of another $1 million for 2017 that outgoing City Finance Director Tom Raguz has seen since he started in Cleveland Heights five years ago.
The cool million derives from projected revenues exceeding expenditures for this year’s $43.9 million General Fund budget, explained Raguz, who takes over in the Greater Cleveland RTA’s Office of Management and Budget next week (Feb. 6).
Raguz pointed out on Jan. 30 that he’s still forecasting a preliminary budget deficit in 2018, although he once against commended the city’s department managers for living well within their means last year.
Back during the 2017 budget hearings held in November, Raguz was projecting a budget carryover of at least $3 million, based largely on collections from the city’s quarter-percent local income tax coming in not necessarily higher, but sooner than expected.
Those additional city income taxes hit $2.1 million last year, but the full impact of $2.9 million is not expected to be reached until 2018, with $2.2 million budgeted this year.
City voters approved the local income tax increase in November 2015, taking it from 2 percent to 2.25 percent.
A small portion of last year’s income tax collections were also listed as “non-recurring revenues” that totaled just over $1.2 million in 2016, including:
— $450,000 in additional delinquencies obtained through the Regional Income Tax Agency’s “subpoena” program — over and above the $350,000 that was budget for 2016;
— $315,000 in a “reconciliation” with RITA after it reached the percentage amount agreed to in its contract with the city;
— $257,000 in building permits for the Cleveland Heights High School overhaul, expected to wrap up in time to reopen for the 2017-2018 school year;
— $185,000 in additional local income taxes collected from contractors on the $100 million high school project.
Raguz noted that the city has also “pre-funded” $1 million in health insurance that is budgeted at $5.8 million citywide. Another $4.1 million is earmarked from the General Fund.
At Monday’s (Jan. 30) discussion of the 2016 year-end budget totals, some council members decried the 16 percent increase in health insurance.
But City Manager Tanisha Briley pointed out that they were looking earlier at a possible 24 percent hike, with some other cities facing as much as a 50 percent increase.
Raguz and Briley have also plugged in another $790,000 toward Workers’ Compensation, and there’s still $2.1 million in the Budget Stabilization Account that City Council established last year.
About $1 million from the Budget Stabilization fund will be needed to cover the 27th pay period that crops up this year, part of a 12-year cycle, Raguz noted earlier.
While it is sometimes referred to in general terms as a “rainy day fund,” the Budget Stabilization Account can only be used for certain expenses, including the extra payroll or “substantial losses to the city’s tax base,” Briley noted.
Raguz estimated that the unencumbered balance carryover adds up to about 9 percent of the city’s General Fund.
The carryover has been as low as 3 percent in the past, and “Best Practices” policies for municipal finances recommend a reserve that’s at least 16 percent of the General Fund.
And city officials have been told that it takes as much as a 30 percent to 40 percent reserve to earn an “AAA” bond rating.
Back in 2015, the city’s bond rating dropped two grades to “A1,” which is the fifth-highest ranking, an “upper-medium” grade.
Raguz and Briley said the city will have to continue to work toward that goal incrementally.
“The reserve is there as our safety net,” Mayor Cheryl Stephens said.
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