Health care costs cause Sidney to trim budget

Sidney was forced to make some tough decisions regarding the 2014-2015 proposed budget once staff learned of major increases in health care costs for the coming year.

“We did have some unexpected challenges with health insurance costs,” said City Manager Gary Person at Tuesday’s city council meeting.

Person attributed cost increases to the Affordable Care Act as well as some of the claim history the city experienced over the past year. The city was not prepared for such major increases.

“As a result, we had to go back to the drawing board,” Person said.

The city cut around $500,000 from its initial plans for next year’s proposed budget to accommodate the rise in health care costs. The general fund budget for the 2014-2015 fiscal year, which runs from Oct. 1 to Sept. 30, is about $16.1 million.

“We had three different departments that were hoping to add a full-time employee; none of that will occur this year,” Person said.

The city also delayed buying two vehicles during the next year.

At the city council’s direction, Sidney staff worked to make sure Sidney’s general budget stays at around 34 percent below the state-mandated property tax lid, which Person called an admirable goal. Staff strived to trim the budget and eliminate all unnecessary costs to make it work.

The city will continue to monitor new developments related to the ACA and look into other insurance options.

“I can tell you, every small employer in America is going through some additional challenges right now as well,” Person said.

In the 2013-2014 fiscal year, the police department’s total projected cost for hospital and life insurance was $210,500. The proposed budget for that insurance in the coming year is $336,700.

Additional health insurance costs will be passed on to city employees in the form of higher premiums. The city planned to meet with employees today to explain the changes before making any public announcements. Residents will likely be paying more for some utilities in the coming year as well.

The new budget proposes rate increases for the electric department and sanitary sewer department.

“A lot of that’s being driven by environmental challenges,” Person said.

Federal government policies also contribute to these rate increase, he said.

The city was recently informed by its electrical wholesale provider that the organization is experiencing funding shortfalls. These costs will be passed to the city.

“It’s been a tough situation figuring all that out too and our rate adjustments are going to have to reflect that because those are costs that are just passed on to us,” Person said.

Although the city had to make quite a few cuts, officials still feel good about the coming year.

“We feel the budget still accomplishes a lot for the future and gets a lot of good things done,” Person said.

The only project cut from next year’s budget was a plan to upgrade the city’s water system.

“We have the ability to do it all, if we wanted to,” Person said. “But it’s been the commitment of the city that there needs to be some property tax relief and that’s still being accomplished in the general fund.”

Many governments budget by planning to collect the highest amount of property taxes allowed by the state, while Sidney attempts to keep its collections well below that lid.

Since the city adopted its first one-cent sales tax, it has promised the community property tax relief.

“We’ve done our best,” Person said. “As a growing community we’ve had additional sources of revenue come in so that’s the way that we’ve tried to balance.”

The city has used sales tax mandates to fund growth and to complete more projects without raising property taxes.

Councilman Joe Arterburn questioned if all city departments were truly working to be as frugal as possible. He also wanted assurance that the city wasn’t simply pushing off necessary hires and purchases.

“I’m a firm believer that we can run leaner than we do and I’ve been working on that this year,” said Sidney’s Chief of Police BJ Wilkinson.

He challenges his command staff to better manage budgets and holds them accountable for the money they spend, Wilkinson said. He pays close attention to overtime hours, fuel budgets and vehicle maintenance.

“We were faced with some problems that we weren’t expecting at all,” Wilkinson said. “The significant increase in health care costs and how that rippled through the entire city’s budget, I took some personal ownership of that.”

The police department gave up a few things on its wish list and hopes that next year will be better, he said.

Mayor Wendall Gaston expressed concern over delaying the purchase of vehicles and equipment until next year.

Health care costs could double again in the future, he said. However, if costs don’t increase again, the city can catch up on things next year.

“We’re going to have to figure out a way next year to try and work on this issue, hopefully things get better,” said councilman Mark Nienhueser.

The city voted to file the proposed budget on Tuesday. It will hold a public budget hearing on Sept. 9, which will feature a detailed break-down of the coming year’s proposed budget.