Budget includes pay increase for city workers

April 18--Most city of Owensboro employees will receive a 1.5 percent annual pay increase under the proposed 2016-17 city budget unveiled last week, with most of the increase -- 1.25 percent -- attributable to the city's step increase system that awards pay increases based on years of service.

The across-the-board cost of living increase in the budget is 0.5 percent, City Manager Bill Parrish said.

The step increases and the 0.5 percent increase together will cost the city an additional $190,000 a year. But increased health insurance costs the city must bear will rise by $340,000 a year, which is a 10 percent increase, Parrish said. And of that health insurance increase, $294,402 will be caused by the federal Affordable Care Act, which carries an array of mandatory services that weren't previously required, on top of an annual "reinsurance fee" charge required by the law. In Owensboro's case, the reinsurance fee is $65,000 a year, Angela Hamric, finance director, said.

City employees will see their portion of health insurance costs go up by 5 percent, Parrish said.

When he introduced the budget to the City Commission on April 12, Parrish said it "translates your governing strategy into dollars and cents. More or less, there are no new major expenditures."

Of course, the big news out of the proposed 2016-17 budget is a projected general fund deficit of nearly $1.6 million in the 2016-17 fiscal year that begins in July. Parrish told the commission that the general fund revenue is expected to be just more than $46 million. But expenses, even after cuts in many categories, will come in at $47.6 million, resulting in the deficit.

If the deficit occurs as projected, the city's general fund reserve will fall to about $6.5 million by the end of June of next year, which is almost $2 million less than recommended for the city by the Government Finance Officers Association and would be less than half of the size of the reserve fund four years ago.

The budget includes 4 percent more property tax revenue, with 75 percent of it coming from the natural rise in property values. A small increase in the property tax rate may be necessary to generate the entire $349,000 in additional property tax revenue that is allowed, which Mayor Ron Payne said the commission might be willing to approve.

The complete budget document will not be made available to the public until a May 3 public hearing at City Hall. But Parrish's 64-slide presentation revealed several other items of interest, including:

--The city's total budget appropriations for the year -- including the general fund and all other spending categories and loan payments -- will be $108.8 million, which is down by $2.7 million.

--"Spiking" penalties imposed by the state retirement system will cost the city $66,000. Spiking is when a employee who has retired received more than a 10 percent increase in pay for any year in the last five years of employment. Some cities have done that intentionally to benefit retirement payments for employees, Parrish said, but Owensboro does not. But the 10 percent threshold for increased pay can still occur when an employee such as a police officer or firefighter nearing retirement worked a lot of overtime.

"Anything over 10 percent triggers spiking, even if it's justifiable," Parrish said. "... I applaud the state for cracking down on abuse, but we haven't abused it. We have legitimate overtime expenses."

The city could possibly avoid spiking penalties, but it would mean hiring additional employees that would actually cost the city more in personnel and equipment costs, Parrish said.

--According to the slide presentation, the city is saving almost $2.3 million a year because the number of full-time employees has been reduced by 28 since 2008.

--With a budget of $11.4 million, the city's police department is the largest department by expenditure. The fire department is No. 2 at $9.6 million in spending.

--The city intends to spend an additional $340,000 next year on street work, with $223,000 coming from the "Your Community Vision" fund. "We need more done," Parrish said. "There are tighter standards for ADA (Americans with Disabilities Act) ramps, and we have to do those anytime we do a street project. And, we added Second and Fourth streets. They used to be state streets."

--The city intends to save $230,000 in part by doing more drain cleaning with city employees instead of using outside plumbing contractors during off-hours.

--The top general fund revenue source for the city will be, as always, the occupational (payroll) tax. It will produce $12.25 million. Property taxes are expected to produce just more than $9 million. The No. 3 source of revenue is the Owensboro Municipal Utilities cash dividend of $6.79 million, followed by insurance premium tax revenue of $4.27 million. Almost $3 million will come from net profit taxes on businesses.

Steve Vied, 270-691-7297, [email protected]

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