A larger-than-expected health insurance premium and a settlement that cuts the assessed valuation of the former Delphi plant have created unanticipated budget woes for the city, Mayor Michael W. Tucker said Tuesday.
Taking audience questions after his State of the City address at a Rotary Club meeting in the Lockport Town and Country Club, Tucker revealed that the health insurance amount in the 2011 budget turned out to be nowhere near enough.
Counting all budgetary funds, the city expected to spend $4.5 million on employee health coverage this year. But the January bill sets a pace that could produce a tab of slightly over $5 million by year's end, City Clerk and Budget Director Richard P. Mullaney said.
Mullaney said the city spent about $4 million on health premiums in 2010; the 2010 budget had projected a $4.65 million cost.
The Common Council, looking to reduce taxes, trimmed the amount in the 2011 budget for health insurance by $150,000.
That wouldn't have been a problem if the city's expectations had been accurate. Mullaney said he had expected a 12 percent rise in costs, but now it looks like the 2011 tab will be about 25 percent higher than the amount spent in 2010.
"It's one of those things where we were guessing and we guessed wrong. We weren't getting anything from the insurance broker about what the rates were going to be," Mullaney said.
He said the city's unappropriated fund balance, or surplus, is expected to be about $1 million as of the end of 2010, although final figures aren't in yet. The surplus fell by about half in 2010 because the Council spent $1.1 million of it to balance last year's budget.
Tucker told the Rotarians, "2012 is going to be a disaster."
To try to improve the situation, he said he will approach the city's five unions in the next two weeks to look for health insurance concessions. "I'm going to ask them for some help," he said. But there is no requirement for the unions to play ball; all have contracts that are good through the end of 2012.
Meanwhile, the city and the Town of Lockport have cut a deal with General Motors over GM Components' lawsuits seeking reductions in the assessment on the former Delphi auto parts plant. The city portion of the property was assessed at a shade more than $23 million before the suits were filed in 2009 and 2010.
Tucker told his audience that the new assessment in the city will be $19 million. The Buffalo News learned that the actual figure is slightly less than $19.7 million.
The Town of Lockport also faced lawsuits from GM. The city-town border runs right through GM's office building.
Town Attorney Daniel E. Seaman said GM will be paid refunds on the current year's taxes by the city, town, Niagara County and the Lockport School District.
For the 2010-11 tax roll, GM's assessment in the city will be set at $22.63 million, with the $19.7 million figure taking effect for 2011-12, Seaman said.
GM sought a city assessment reduction to $16.5 million.
The total assessment on three of the four parcels GM owns in the town will fall from $2.78 million before the lawsuit to $2.72 million for the current year. Seaman said the 2011-12 figure will be $2.13 million.
In the city, GM was expected to pay a tax bill this year of $351,890, The News calculated, using the current city tax rate of $15.24 per assessed thousand. The settlement results in a tax bill of $345,085, so the city will refund less than $7,000.
But next year, assuming the same city tax rate, the GM plant will owe $300,358, a further loss of $45,000 in tax revenue for the city.
The GM plant will continue to account for about 3 percent of the city's total taxable value.
In his prepared speech, Tucker urged residents to bear with the city as it restructures departments to try to save money and plans to start privatized garbage and recycling collection this summer.
"We did not make these decisions lightly. We studied and weighed them carefully," Tucker said. "There are 24 less people working for the City of Lockport than we had in September [because of a state retirement incentive]. I replaced one of those people. I'm not going to replace anymore."