Celina city leaders concerned by rising insurance expenses

CELINA - City officials are alarmed with escalating insurance costs for the city's 98 employees, which this year alone are expected to increase 15 percent to $1.5 million.

City council members on Monday night approved second reading of the 2015 budget that would set aside $43.538 million for all accounts, but not before discussing rising insurance costs. Those costs are paid through the general fund, the financial source of the city's day-to-day operations, including fire and police services.

"I'm just concerned how the general fund can remain solvent long-term and how this would be sustainable, especially three years down the road if the city income tax goes back down to 1 percent," councilman Fred LeJeune said in the opening salvo of the health care cost discussion.

City voters on Election Day defeated a ballot issue that would have repealed a 0.5-percent income tax for police and fire expenses and replaced it with a seven-year tax at the same rate for police, fire and street expenses.

The city will continue to collect the 0.5-percent income tax, which generates about $1.6 million annually, for another three years but can use the funds only for police and fire expenses, not streets.

"Obviously if we go down to 1 percent, it's not sustainable," city safety service director Tom Hitchcock said.

Councilman Jeff Larmore said he can remember not too long ago when health insurance costs were $800,000 a year.

"It's going to be an issue, I think, and maybe what we ought to do is project out, do a forecast," he said.

The city may not be able to do much to control costs, but officials need to be ready for the future, he added.

"Much of the insurance right now is controlled by the employees of the unions as far as the insurance plans so that is part of the union agreements and contracts," mayor Jeff Hazel said. "Until we would have the Affordable Care Act or some federal mandate that would order a change, we are, I guess, in a position where we have to continue to negotiate with the unions to do the thing that's the best for the city and ultimately the taxpayers."

Officials still need to use historical data to develop a long-term forecast, Larmore argued.

"Because we can say who controls the insurance, but there's not going to be money there to pay for it - it really doesn't make any difference who controls what, in my opinion," Larmore said. "If the cash is not there to pay it, you've got yourself an issue."

Councilman Eric Clausen agreed with Larmore's idea of creating a long-term forecast for health care costs. Councilman Bill Sell, too, said he was alarmed at the rising costs.

However, the city must be careful in comparing health care costs by comparing "apples to apples," councilman June Scott said.

"You can't compare it to the private sector and the public sector, they're two different animals there," he said.

Larmore replied that the city would use its own historical data, not private sector data, to formulate a forecast.

City auditor Betty Strawn pointed out that the city's health insurance costs are ultimately determined by its claims. Future health care costs are unpredictable.

Higher electrical costs and employee expenses are also part of a $5 million increase in the city's proposed 2015 budget. The final reading is scheduled for 7 p.m. Dec. 8.

If approved, $43.538 million would be set aside for all funds compared with $38.56 million appropriated in 2014. The general fund would be set at $7.25 million, about $200,000 more than was appropriated this year.

The city is poised to begin next year with a general-fund carryover of $2.06 million if finances continue at their current rate, according to auditor Betty Strawn, who on Monday night presented a general fund summary for the end of October.

The carryover is down from the $2.8 million last year. The estimated carryover has decreased significantly in recent months since the city advanced $1.285 million to cover the cost of developing three softball fields at Westview Park and completing the West Bank walkway. The city will be reimbursed for those costs through state capital budget grants, which is reflected in the proposed 2015 budget.