Documenting Cleveland’s Budget: What you need to know
Cleveland is required by law each year to pass a balanced budget, meaning the city can’t spend more money than it has coming in.
Here’s how the process works:
- The Mayor sends City Council a document that summarizes the administration’s budget recommendations. It has detailed information for each city department and city fund and includes estimates on how much money the city expects to collect through taxes and fees. This happens by Feb. 1 each year (yes, even during a pandemic!)
- City Council holds budget hearings in February. Council committee members discuss, debate and ask questions about spending priorities.
- Council members can agree to amend–change–portions of the budget recommended by the Mayor.
- Council publicly shares its version of the budget, which is written into an ordinance or law that Council votes on after hearings are completed. This is sometimes called the “2nd reading” of the budget.
- Council must wait at least 15 days after sharing the amended budget to do a “3rd reading” and vote to approve or not approve the budget.
- The City must approve a budget by April 1 of each year. After the budget is approved, it is posted online.
- At the end of the year, council reconciles the budget and decides whether to redistribute or save any money that was not spent.
What’s different this year?
Normally, the city would hold its budget hearings and deliberations in the council chambers at City Hall. This year they will be held on Zoom and livestreamed on Council’s YouTube channel.
Mayor Frank Jackon explained his budget priorities for 2021 in this Facebook Live video.
What is the purpose of the budget?
The budget tells residents what money the city is collecting and how it is being spent. The budget also makes it clear what the priorities of city leaders are. The Budget Book breaks the spending and priorities down by department (the highest level of organization) and by division (different sections of the departments.) City departments have directors and divisions have commissioners.
In the Budget Book, you can see priorities laid out for each department.
Find the current Mayor’s Estimate for the budget here.
Find the Community Development Block Grant Fund budget here. (More on CDBG money, how it can be spent and what it is used for below.)
Find past Budget Books here:
How would you spend the money in Cleveland’s General Fund?
Refund Cleveland created this tool, which allows you to see how the city allocates more than $600 million in the General Fund and then to set your own budget priorities.
The tool doesn’t include the Capital Budget, which pays for infrastructure and long term investment, the school district budget or for the city-owned utilities, which are supposed to be sustained with their own fees and charges. It does allow you to adjust the parts of the budget City Council reviews and votes on following budget hearings.
How is the budget organized?
- Two main parts are the Operating Budget and the Capital Budget. The Operating Budget is the money spent on things such as employees and supplies. The Capital Budget includes larger investments in buildings or street lights. The Capital budget gets discussed more in depth later in the year.
- The money that is spent comes from a number of buckets. The major funds include: General Fund, Special Revenue Funds, Enterprise Funds and the Agency Fund. See definitions below!
- Money that the city receives from most federal and state grants is not included in the city budget funds because those grants are managed following different rules and often on a different schedule, called a fiscal year.
Where does the money come from?
Cleveland collects money in the form of taxes: income taxes from paychecks of people who work and/or live in the city, and taxes and fees from businesses such as “bed” taxes from hotel rooms.
What is City Council’s role?
The legislative body reviews, amends (changes) and approves the final city budget.
Community Development Block Grant funds
The federal program provides annual grants to states, cities and counties based on a formula to help “develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income persons,” according to the U.S. Department of Housing and Urban Development often referred to as HUD.
Places like Cleveland that receive the grants have latitude to decide how to distribute the money, though it has to be used for the purposes the federal government has outlined and the city and the agencies it works with have to report back to HUD in detail about how the money is spent. It also is aimed to benefit low-to-moderate income communities and individuals.
Here’s the income guidelines for the area that includes Cleveland for 2020.
CDBG grants were first handed out in 1975 with additional grants added in 1993 for housing needs. Cleveland received a high total of $40 million in CDBG money in 2002 but that amount has steadily dropped to an estimated total of $24 million in 2021.
Cleveland uses a portion of the money to support activities through its Community Development Corporations or CDCs. That is different from how other cities use the money. It also pays for city resources and contractors who carry out programs.
Here are some more specifics from HUD about how those targeted grants can be used. The grants are based on a federal formula.
CDBG – 28 activities can be funded with this set of grants including:
- Acquisition of real property
- Relocation and demolition
- Rehabilitation of residential and non-residential structures
- Construction of public facilities and improvements, such as water and sewer facilities, streets, neighborhood centers, and the conversion of school buildings for eligible purposes
- Public services, within certain limits
- Activities relating to energy conservation and renewable energy resources
- Provision of assistance to profit-motivated businesses to carry out economic development and job creation/retention activities
HOME grants can be used to increase home ownership and affordable housing
ESG or Emergency Solutions Grants can be used to assist the homeless populations
HOPWA or Housing Opportunities for People With AIDS are used for direct services and support for housing individuals with HIV or AIDS.
Here’s a Twitter thread about Community Development Block Grants from Jessica Trivisonno, Economic Development Director for Detroit-Shoreway and Cudell Inc. Community Development Corps.
Appropriation: Money authorized by formal action, such as a city council ordinance, for a specific purpose.
Bed Tax: Money a hotel must pay the city for each room rented.
Bond: An IOU or promise to repay borrowed money by a specific date. Bond proceeds are primarily used to finance capital projects.
CCA or Central Collection Agency: Entity that collects taxes.
Capital Budget: Money for internal or long-term investments in infrastructure.
Capital Projects: The construction, rehabilitation or acquisition of fixed assets (buildings, bridges) or permanent improvements.
CDBG or Community Development Block Grants: Money provided by the U.S. Department of Housing and Urban Development (HUD) intended to help cities provide safe and decent housing and support economic opportunity for low-wealth residents. Money has specific rules as to how it can be spent. In Cleveland, each ward gets a portion of this grant money to spend on projects or activities.
Debt Service: What it costs the city to borrow money for projects or services.
Enterprise Funds: These are funds that hold money collected from bills or fees that are used to finance or support a public service. In Cleveland, this includes the Cleveland Division of Water and Cleveland Public Power. This money is kept separate from other general funds collected.
General Fund: Most city services are supported from this fund including police, fire and EMS, the city’s recreation centers and garbage pick up.
Fee: A charge to a person or business who is using or benefiting from a city service. For example, when a person applies for a building permit, that fee pays for an inspector to make sure the construction work is done properly.
Fiscal year: A twelve-month period when a budget begins and ends. Cleveland’s fiscal year is Jan. 1 through Dec. 31. The federal government’s fiscal year is Oct. 1 through Sept. 30.
Fund: Used to account for money. Must be balanced for money coming in and going out.
Grant: Money from the state or federal government or a nonprofit organization that pays for a specific purpose or program.
Property tax: Money that property owners pay based on the value of the property they own. Used to levy taxes for purposes such as funding libraries and schools.
Operating Budget: Plan for how to spend public money.
Unencumbered Funds: Money that isn’t appropriated or designated for a specific purpose.
Below are some examples of city funds and where the money comes from:
Do you have comments or questions about our Cleveland Budget Primer?
Are we missing something? Have an idea how we can make it better? Tell us here: https://forms.gle/Q6orrzXW7GQzbDWj9