City budget proposal eyes tax rate increase
Published on -7/2/2014, 11:39 AM
By Ken Stephens
The Hutchinson News
City Manager John Deardoff on Tuesday presented a staff-developed 2015 budget proposal that calls for an increase in the tax rate of 2.565 mills, largely to cover more street maintenance, a merit raise for eligible city employees, higher pension and medical insurance costs, capital improvements and equipment purchases.
If adopted, it would be the first significant increase in the tax rate since 2008, when the mill levy went up 2 mills to 42.867. The following year the levy dropped back down to 41.383 and it has remained within about one-tenth of a mill of that level since then.
The proposed increase in the tax rate -- from the current 41.485 to 44.050 mills -- would mean that the owner of a $100,000 home would pay an additional $29.50 in property taxes in December.
Deardoff emphasized that the budget at this point is only a proposal. "There will plenty of opportunity for your input and public input," Deardoff told the council, which will discuss the budget in detail for the first time at a study session starting next Tuesday.
General fund spending, which is supported by property taxes, sales taxes, franchise fees and other revenue, would grow from an estimated $29.4 million this year to just over $31 million next year.
Despite an increase in the mill levy, which will generate $745,000, and an additional $300,000 in property tax revenue resulting solely from a 3.35 percent increase in assessed valuation, the proposed budget would require that the city spend about $785,000 out of its end-of-year general fund cash balance.
Several years ago, the City Council established a goal of building a general fund reserve equal to two months of operating expenses. Today, that would be about $6.5 million.
Since 2009, when the reserve was only $3.6 million, the city has been able to grow the reserve by carefully watching spending and taking advantage of some unexpected increases in revenues.
Last year, for instance, a major hailstorm in July led to increased revenues from building permits for new roofs and sales tax revenue for roofing materials. The damage from the storm was so widespread that roofers are still working on the backlog of jobs and permit and sales tax revenues remain elevated, and by the end of 2014 the general fund cash balance is expected to be just over $6 million.
Spending down some of the cash balance to cover the 2015 budget would reduce the reserve to about $5.3 million at the end of 2015.
However, Deardoff said he doesn't expect the cash reserve to go that low because "at the end of the year there are a lot of savings. We never spend 100 percent of our budget."
Here are some of the highlights of the budget proposal:
--Routine street maintenance, such as slurry seals, milling and new asphalt overlays on residential and some arterial streets, will increase by $400,000 -- from $200,000 to $600,000 in general fund spending.
In recent years, the city has resurfaced fewer miles of city streets because the cost of maintenance has increased 80 percent, from $15 to $26 a square yard. Deardoff said the city's Engineering Department estimated that the city needed to spend $400,000 a year to get the street maintenance plan back on track.
That doesn't include larger arterial reconstruction projects, which will be financed with bonds repaid over a number of years.
One such project is the planned resurfacing of Main Street between Seventh and 30th avenues over the next three years. The Capital Improvement budget proposed bonding $1.8 million for Main Street in 2015. Including those projects, total street maintenance spending will grow from $2.07 million in 2014 to $2.92 million in 2015.
--A merit step increase in pay for eligible city employees would cost about $130,000, plus benefits. City employees received no wage increase in 2012, a 2 percent cost-of-living increase in 2013 and a merit step for eligible employees in 2014.
--Health insurance for city employees will cost about 5 percent more, or $126,000.
--Payments into retirement plans for city employees will grow by about $233,000.
--About $663,000 is provided by the next phase in the development of Rivers Banks Orchard Park, which includes completion of the loop road and trails. That expense will be bonded and paid out over a number of years and won't show up as an expense in the budget until 2016.
--The Capital Improvement budget also includes $170,000 for replacing the roof at Fire Station No. 5, $400,000 for new bleachers at Fun Valley and $265,000 for locker rooms and a storage shed at Hobart Detter Field.
--$75,000, about 25 percent less than this year, for demolition of dilapidated or unsafe houses and other structures.
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