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MEMORANDUM <br />To: Mayor McMillan and Orono City Council <br />From: Ron Olson, Finance Director <br />Subject: 2017 Budget <br />Date: June 27, 2016 <br />Attachments: <br />A) 2017 Year -to -Date Reports (Unadjusted) <br />B) Health Insurance Cost Comparison <br />C) May Work Session Information <br />Issues for discussion: <br />Tax Levy <br />Staff is requesting guidance on the amount that the Council is comfortable with for a tax levy. <br />At the April 25th work session, there was an indication that the council may be comfortable with <br />an increase in taxes as long as the rate did not increase. Since 2011 the only General Fund levy <br />has only increased by 2.1% ($84,240). Inflation has increased by 6.0% over the same time <br />period. <br />In the 2016 budget the council did include an additional levy increase of 3.8% ($183,000) <br />specifically for road funding. A fully funded road program will require an additional $867,000 <br />in annual funding. Taxes for all purposes (roads or General Fund) can be increased by $399,000 <br />without increasing the tax rate. <br />Wages <br />As discussed at the May work session, the current police labor contracts will end on 12/31/2016. <br />The draft budget will include an amount in the contingency line item to cover estimated costs <br />associated with a new labor agreement. <br />The council will need to make a decision on a cost of living increase for non-union employees. <br />From April 2015 to April 2016 the CPI has increased 1.1%. For 2016, inflation is projected to <br />increase 1.5%. Each 1% non -wage increase results in a $15,750 increase in the General Fund. <br />A number of employees are due to receive step/longevity increases in 2017. These increases <br />total $60,000. $40,500 of this increase is in the police department. Wages and benefits account <br />for 64% of the budget. As a result, any meaningful budget preparation requires estimates for <br />wages. <br />2017 Budget — Page 1 <br />