Friday, April 23, 2010
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City trims expenses, looks to employees to resolve final $83,000 deficit

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[April 23, 2010]  Last Saturday the full council for the city of Lincoln met in chambers to attempt to pound out a budget for the coming fiscal year.

At the beginning of the 8 a.m. meeting, Alderwoman Melody Anderson, who chairs the finance committee for the city, and Les Plotner, city treasurer, dropped the bomb on the council.

They were projecting that they were approximately $635,000 short of being able to balance the budget for the coming year.

The group spent about five hours Saturday and another 90 minutes Thursday night cutting, moving and rearranging city expenditures, and when they were finished it came down to a net shortfall of approximately $83,000.

It was a small chunk of change compared with where they began last week, and they do have a solution, if city employees and the unions they belong to will make just a few concessions.

On Saturday the group had come to realize that the health insurance program offered to city employees is what Alderwoman Marty Neitzel referred to as a "Cadillac" plan.

In the plan, the employee pays no portion of the premium; the city bears all that cost. In addition, the insurance policy comes with a minimal deductible and very little out-of-pocket expense for the employee.

Anderson said Thursday night that if the policies could be amended to include a $500 deductible and a 20 percent co-pay, the annual savings to the city would wipe out the deficit.

Anderson and Mayor Keith Snyder have met with the police union and said that while the union didn't comment on any of the suggestions they had for saving the city money, they also didn't seem to be openly opposed.

There has also been a meeting with the streets and alleys department, and those employees voiced a willingness to do what it takes to help out.

During discussions with some of the employees, it came out that many of them have not added their families to their policies because that is too expensive.

Anderson said that if this could end up being the solution for the city, it could also end up being of benefit to the employees, as they have to pay the family portion themselves, and changing the policy might make it more affordable for them.

Raising the deductible on the health plans is the city's first choice of actions to resolve their deficit.

However, they have also talked about other options. It was discussed whether or not the employees might be willing to pay a portion of the monthly premiums. If yes, then the policies wouldn't have to be changed.

The group figured that if the employees paid $85 a month, the city could save approximately $95,000 on health insurance.

Another option discussed, which is among the least desirable, is to mandate unpaid furlough days. Snyder said that eight furlough days per employee per year would also solve the deficit.

However, in some cases a furlough day could make things worse. For example, the fire department is currently logging an enormous number of overtime hours. Chief Kent Hulett cut deep into his overtime budget this year, and he said that furloughs could have an effect on that overtime.

Another idea to save money was to ask the employees to forgo their raises this year. Anderson said that those she heard from on the topic were willing to consider it, but they wanted their raises back in a coming year. In other words, no raise in 2010-11 could equate to a double raise in 2011-12. Anderson said there was no way the city could promise that, because there is no way of knowing how long it will take for the city to recover from the money crunch they are experiencing now.

In the end the council agreed that altering the health plan was the best option. Between now and Tuesday night, all four unions that represent city workers will be contacted and proposals will be made.

Alderman Jeff Hoinacki said that all the options the city has discussed need to be shared with the unions so they can decide which is best for their employees. He said this didn't have to be a unified decision; one group may go with one option and another go a different route altogether.

How the deficit went from $635,000 to only $83,000

The $83,000 was the tail end of the big problem. At the Saturday meeting and again on Thursday night, there was a lot of cutting of expenses and moving of money involved to knock the deficit down to that amount.

On Saturday the council spent hours going through each department budget and trimming fat out of expenses. They started with looking at miscellaneous expenditures such as supplies, dues and subscriptions, trainings and such, then moved on to some bigger ticket items like reducing funding for sidewalk repairs and streetlights.

They also talked about eliminating some part-time clerical staff and doing away with funding to Main Street Lincoln and regional planning.

Money for derelict structure demolition went to the wayside as did funding for a citywide cleanup project.

In the end the part-time clerical position in City Hall was saved, and Main Street was awarded a reduced amount, as was regional planning.

Main Street had requested $15,000, plus $2,500 for the Christmas parade. Thursday night it was decided that the city would make a one-time contribution of $12,500 to the organization. Snyder commented that if they wanted to set the $2,500 aside for the parade, they could, but if they needed it for daily running of the office, that would be at their discretion.

The city's contribution to regional planning was raised last year from $15,000 to $17,500. For the 2010-11 year the city will cut that amount back to the original $15,000 figure.

By the end of the Saturday meeting, the council had knocked the net deficit down to the $400,000 range.

Renewal of the general obligation bond knocks off another $193,000

Since the Saturday meeting, Plotner has talked with Kevin Heid of First MidState about the city's general obligation bond. MidState is the underwriter of the bond, and Heid has offered some help on what the money can be used for.

The bond itself is best compared to a revolving loan on a four-year cycle. This fall the bond will be paid off, and it can once again be renewed in December. The bond will add approximately $615,000 to the city coffers. However, that money, like most of the funds that come into the city, can only be used for certain purposes.

Plotner said that he and Heid had talked about what can be taken out of the city's general funds and applied to the new bond. Included in the list of allowable expenditures is anything pertaining to infrastructure and road repair, and capital expenses.

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Plotner said that he had gone through every page of the budget and tagged the capital expenses. He had come up with a total of $193,000 that could be paid with the general obligation funds.

He added that he was going to talk to Heid again about the annual loan payments for the city's latest fire truck as well as the annual payment on the City Hall roof project.

The rub on using the general obligation bond is that the money will not be available to the city until probably January. If the city has to make certain payments before then, it may cause a bit of a squeeze on their cash flow.

Motor fuel tax absorbs $107,000 of the deficit

Jackson and city engineer Mark Mathon had also spent time since Saturday talking to the state of Illinois regarding the motor fuel tax revenues the city receives.

Again, there are restrictions on how that money can be spent, but they wanted to try to get some of the street and alley expenditures tagged as motor fuel tax expenditures.

As the council began to gather for the 5 p.m. meeting Thursday, Mathon still had no answer. But then at 5 on the dot his cell phone rang and the answer was, "Yes, you can move some of those expenses."

With that permission, Mathon and Jackson explained that in the general operating expenses for lighting and the street and alley department, there is $107,000 that can be moved out of the general operating budget and into the motor fuel tax expenditures.

This brought the city down to the $83,000 difference that they will turn to the city employees and their unions to help them resolve.

Possibilities of new money:

--Hotel-motel tax

In addition to all the cuts and moving of money, the city also discussed and decided to pursue a hotel-motel tax levy.

Snyder had introduced the idea on Saturday, saying that the tax charged currently at local motels and hotels was less than what is charged in nearby cities. He said that a 1 percent levy or even a 2 percent would put Lincoln in line with surrounding areas, and it could bring in more than $20,000 a year to city coffers.

Again, this revenue is restricted on how it can be used. It must go to support tourism.

In the general expenditures, expenses that could be tagged as tourism would include the financial support to Main Street Lincoln, the city's contribution to the Lincoln Art & Balloon Festival, and also the support given to the annual Railsplitter Festival.

--Fee increases in zoning and building

Another new stream of money may come from the city's zoning and safety office. John Lebegue, the city's new zoning officer, said that he has done a cursory exam of the fees the city is currently charging in that office and believes some changes should be made to the fee structure. He estimated that modest changes to those fees could bring in an additional $20,000 per year. He also reminded the city that the recent changes made to the enterprise zone agreements will add money to the city coffers as new zoning projects are introduced this year.

Good news comes to the council

Early on in the Thursday night meeting, Alderwoman Joni Tibbs said that the fire department at least had received a little good news. She asked Hulett to explain what she was talking about.

Hulett had applied for a grant in the amount of roughly $40,000 to add a new exhaust system to the existing firehouse. This was needed because firing up the diesel engines in the trucks while they were inside the building was posing a health hazard to the firefighters.

Hulett said he had received word that the grant was a done deal. The city will definitely get that money this coming year.

Attached to that grant, the city will have to pay 5 percent of the expense, but because it is considered an improvement to the fire station, it can be labeled as a capital expense and taken out of the general obligation bond.

With a sigh of relief

At the end of the Thursday night meeting there was a definite collective sigh of relief. The time invested in this year's budget by the council in general and Anderson, Plotner and the city clerk staff in particular has been huge, but in the end the job seems to be done for another year.

At the end of the meeting, Anderson expressed her sincere appreciation to the department heads who had been more than willing to bite the bullet and cut their budgets to the bare bones for this year.

Earlier in the meeting she had also commented on city employees in general, saying that she had felt very good about the meetings she'd attended with the employees and their unions. She commented that she had left the meetings thinking, "This is the way things should be," as she felt everyone was willing to do their part to help the city through a really rough year.

The council will meet on Tuesday at 5:45 p.m. to hear whether or not the unions have agreed to any of the suggestions for saving money.

Hopefully all will go well, but if not, Busby said that they would just have to go through the budget and cut again, and whatever they cut, they'd all just have to live with it.


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