Palmer city budget tightening

PALMER -- Palmer city manager Tom Healy and the city council have been considering the city's 2003 budget in open work sessions over the last few weeks. Healy and city staff have prepared a budget that is similar to recent years. It hasn't been introduced to the council yet, but will likely call for about $5.7 million in general fund spending.

The 2002 budget -- which closes out after Dec. 31 -- looks to finish with a surplus of about $3 million, according to Healy.

The city has an informal goal of maintaining a surplus of at least one-third the total annual operating budget, or about $1.6 million in the case of next year's budget. Healy said that's a "rule of thumb figure" meant to keep cash on hand in case of an emergency.

"It's not a rule or a code, it's just a rule of thumb," Healy said.

Palmer hasn't always been so well off. In the mid-1990s, Palmer was running budget surpluses of less than $100,000. The city council had been ratcheting up property taxes in order to keep existing services running but not generating an emergency surplus. A hike in the sales tax was proposed by the council, and the voters approved it. In 1996 the city sales tax increased from 2 percent to 3 percent in combination with a lower property tax rate.

In recent years the city has been using some of its budget surplus for street improvements, water line replacements and other infrastructure such as the remodeling of the historic railroad depot that serves as a community center and the electric outlets that power tiny white lights on trees downtown. That sort of spending continues into 2003.

"As has been the case for the past couple of years this budget calls for spending some of the surplus operating funds for street improvements and other infrastructure improvements," Healy said.

In a recent budget work session, city council member Tony Pippel raised concerns about that figure, pointing out that if revenues don't increase, the spending can't be sustained more than about three years.

"We've only got a little bit of money and we're trying to go at it 19 different ways," Pippel said.

Pippel also warned that insurance costs and city contributions to employee retirement were likely to go up, as well as city wages. Healy wants to hire a consultant next year to find out if city wages are competitive with similar jobs. Healy is asking the council to approve $35,000 for the consultant.

Healy said Wednesday that his budget keeps $2.3 million in reserves -- "and that's well above the $1.6 million that we want to keep on hand as an emergency reserve," Healy said.

Healy plans to bring the budget resolution to the council for their approval next week at the council's Tuesday night meeting.