After a lighthearted hour in which the Common Council had some laughs while cutting a few thousand dollars from the proposed 2005 city budget, City Clerk and Budget Director Richard P. Mullaney spoiled the fun.
Asked what impact the changes had made on the 9.6 percent property tax increase in the original budget submission, Mullaney stunned the aldermen by announcing that the tax hike is now 14.6 percent.
Mullaney said he had informed the aldermen last week that about $500,000 less in reserve funds would be available to spend next year than had been thought when the budget was calculated earlier this month.
However, none of the aldermen seemed to have made the connection that less nontax revenue means that more tax revenue is needed to support the same amount of spending.
"I don't think we realized the funds weren't back in there," said Alderman Joseph C. Kibler, R-at Large.
Before the Mullaney bombshell, the aldermen had shown little stomach for cuts. They spent their fifth budget work session nibbling as little as $100 from various public works items.
They appeared ready to restore $30,000 worth of pothole-filling material they had deleted in a session Tuesday; they took care to keep a truck driver's job in the budget after a prolonged discussion about which heading it should go under; and they decided not to reduce the budgets for garbage collection or road salt.
"I guess we have to sharpen our knives," said Alderman David E. Blackley, D-1st Ward.
"We might even have layoffs. It might come to that," said Kibler, chairman of the Finance Committee.
The tax increase in the budget Mayor Michael W. Tucker proposed Oct. 12 was driven by four new union contracts, all of which included two years of retroactive pay increases in addition to pay hikes for 2005. All the unions had been working under contracts that expired at the end of 2002.
In effect, because of the retroactive pay, the city has to pay three years of wage increases in one year. That far outweighed savings from a new single-carrier health insurance plan that the unions accepted in a trade-off for the raises.
But Mullaney said that after the budget was submitted, the city received a bill from the state public employee pension fund, due in December, that totaled $1.8 million.
Of that, $1.4 million is in the general fund, which is the portion of the budget primarily financed by property taxes. Last year's general fund pension tab was $672,000.
Mullaney said the city is planning to pay $230,000 of the bill, the part for police and firefighters hired since 1984, by issuing bonds. For the rest, he said, the city will use most of its remaining reserves.
Mullaney said the city thus will have about $388,000 in reserves available to apply to the 2005 budget, not the $880,000 he had anticipated.
Kibler said the city had been counting on a clause in the new contract with the Hickory Club Police Benevolent Association. Police officers were to turn back to the city hundreds of thousands of dollars they had been saving for post-retirement health coverage. A fund for that purpose was set up in the former union contract.
"That's still going to happen, but probably not until next year," Kibler said. He asserted that the Council had still not seen the texts of the new union contracts, though it has already ratified three of them.