Rising health insurance costs and a need to replace firetrucks nearing "antique status" will cause North Little Rock to dip into its reserve fund once again to balance next year's general fund budget, according to an initial proposal to the City Council.
The city's projection is for a $61.5 million budget, a 2.31 percent increase from this year, or $1.4 million more. The city's general fund covers operations, public safety, salaries and most city services.
Mayor Joe Smith has said he expects to hold the first budget workshop with the North Little Rock City Council in the first week of November.
The draft budget includes counting on about $1.41 million in Carry Forward Revenue, another term for carryover or unrestricted reserve. Those are funds in excess revenue over expenses each year held in reserve.
City officials said during budget talks last year that they wanted to refrain from using reserves in the future, but the amount proposed for the 2015 budget is higher than what was used in each of the past two years. The 2014 budget included $1.15 million in reserve funds. In 2013, the amount carried forward was $738,000.
Most of that is needed to cover an appropriation of $1.25 million for new fire vehicles, Finance Director Karen Scott wrote in a budget summary given to city aldermen. The remainder, Scott said in an interview, is needed to pay for a 13 percent increase in employees' health insurance coverage, of which the city pays 100 percent of the premiums for employees and 75 percent for employees' family members. The city's cost to provide that health insurance will be $6.87 million, $770,730 more than this year, she said.
City revenue is forecast to be "slightly higher next year," Scott said, which will help cover the city's additional expenditures, but the rest of the difference will be covered from reserves, if approved. The City Council can recommended further cuts or new revenue sources.
"The budget is based on the proposals we are considering," Scott said.
The $1.25 million for new fire engines is only the beginning, according to a recent Fire Department vehicle summary that Smith distributed to council members. The summary includes a five-year plan to replace 12 firefighting vehicles that will cost a projected $8.95 million. One fire engine has been out of service nine times in the previous two months, and aerial trucks have no operational backup for fire calls, Smith said.
The average city pumper truck is 13 years old, with the oldest being 19 years old with 120,000 miles on it, Smith's memo said, adding that "All of our backup vehicles have reached, or are approaching, actual antique status."
"The five-year plan for our Fire Department starts today," Smith said in a recent interview. "We need reliable and dependable engines. A firetruck ages four times faster than a normal vehicle.
"It's unacceptable that I've got several firetrucks on the front line that won't start when the bell goes off," said Smith, who took office in 2013. "We're going to do something about it. If we'd had a five-year plan five years ago, we would not be in this position."
A capital improvement budget for firefighting vehicles will need to "go from zero to whatever" to update the fleet, Scott said.
"There hadn't been a lot of money budgeted for capital equipment for the Fire Department," Scott said. "At least in the last few years."
Another added expense in 2015 will be new accounting software costing $548,000, Scott said, that will be used by the city's finance, commerce, human resources, planning and city clerk offices.
Through recent tight budget years, Scott said, the city has done well to stay on budget.
"I think the department heads did a really good job in preparing their budgets," Scott said. "I think they do a fantastic job of managing the budget they get."
Smith said he's employed more of a business management style that has reduced expenses while revenue has held steady or even increased slightly in some cases.
"I'm hoping that in the next year to 18 months, we get even more caught up [in the reserve fund]," Smith said. "I think we've cut all that we can. I don't know a whole lot more I can save the city through just good management."
One area previously targeted for decreases pretty much remains intact in the proposed budget. Smith warned in a June letter to 16 nonprofit groups that their annual city subsidies probably would be reduced or even eliminated as part of "budget tightening" for 2015. Next year's projection is for $620,000 spread among those 16 groups, a net decrease of $25,000 from this year's $645,000 amount.
Only four of the 16 are affected by decreases: Arkansas Inland Maritime Museum's $175,000 reduced by $25,000; Thea Foundation, $35,000, decreased by $13,000; the Arkansas Symphony's $5,000 eliminated; and $2,000 provided late in the year to the Argenta Community Theater isn't included for 2015. All other nonprofit requests stay the same, except that the Arkansas Regional Innovation Hub and Art Connection made a combined request of $150,000. That's $20,000 more than the two were budgeted for this year.
Metro on 10/26/2014