Soldotna City Manager Larry Semmens released his proposed operating budget for fiscal year 2012, which predicts a 9.5 percent, or more than $1 million, increase in spending from last year.
Semmens went through the budget with city council members over the course of two work sessions to explain the reasons for the increased expenditures. The rising rates of health insurance and the Public Employees Retirement System (PERS) are two big factors, as well as increased costs for wages and fuel.
The city must also pay $107,000 for the library bonds, which were approved by the voters of Soldotna in December of last year.
Despite the increase, property taxes are expected to decrease from 1.65 to 1.15 mills for Soldotna residents in 2012.
"The controllable costs have gone up a very small amount," Mayor Peter Micciche said. "We're also seeing increased revenues. And when you put that whole equation together, we still believe that we should return a minimum of half a mill to the property tax payers of Soldotna."
Semmens said this is uncommon, as when municipalities take on debt -- like with the library bonds -- property taxes usually increase.
But while property taxes should not increase, utility rates are expected to go up by an average of 2.5 percent for water and 6.5 for sewer, although individual users will be impacted differently. Sales tax revenue -- from retailers such as Sportsman's Warehouse -- is also expected to increase substantially, which will help pay for the $1 million hike in spending.
The increase from roughly $11.3 million to $12.4 million in spending can largely be broken down into controllable and uncontrollable costs. Health insurance and PERS rates, for example, are virtually unavoidable.
"There are some expenses that you could say are controllable," Semmens explained. "For example, we wouldn't have to make the capital expenditures," which total about $56,000 in the budget.
"You don't have to make those," he continued, "but if you do, it's going to save you maintenance dollars in the future."
Health insurance rates are expected to increase 56 percent in FY2012, and the PERS contribution rate is up three percent, from about 28 percent to 31 percent.
"Of controllable costs, we really have only about a three percent increase," Mayor Peter Micciche said. "The uncontrollable costs are painful, and everyone's experiencing them. The health care issues and the PERS issues ..."
Micciche said he is extremely happy with the budget put forth by Semmens and Finance Director Melanie Lewis, even though it suggests spending more money.
"In the past I've been one of the biggest advocates of taking the administration's budget and wanting to cut more out," Micciche said, "And frankly, I'm appreciative of how responsible they are this year. They've got a budget that reflects what it costs to run the city responsibly; there's no fluff, there's no reason to cut something out of it."
Semmens said residents cannot expect to see the quality of delivered services remain high without spending a little bit of money, and that what a budget really comes down to is allocating money properly so that services don't suffer.
"A budget document is a lot of numbers," he said, "but really what it's about is providing the resources to provide the services to the community."
The budget ordinance is scheduled for public hearing on June 8, and an ordinance regarding the increased water and sewer rates is on the agenda for May 11. A similar ordinance will need to be introduced for the decreased mill rate.
Karen Garcia can be reached at firstname.lastname@example.org.
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