By MIKE ANTHONY

Executive Editor

A fiscal 2012 budget that includes a 1.5-percent pay increase for city employees was approved last week by the Sunset Hills Board of Aldermen.

Aldermen voted 7-0 to approve the 2012 budget that projects general-fund revenues of $6,932,966 with anticipated expenditures of $6,930,234 — a surplus of $2,732. Ward 1 Alderman Frank Hardy was absent from the Dec. 13 meeting.

A majority of aldermen last month voiced their support for a freeze on employees’ salaries to balance the then-proposed 2012 general-fund budget. That budget had projected revenues of $6,932,966 with anticipated expenditures of $7,045,584 — a deficit of $112,618.

Ward 2 Alderman Tom Hrastich, who serves as chairman of the city’s Finance Committee, last week presented two proposed budgets to aldermen.

The first budget included no pay hike for employees and projected general-fund revenues of $6,932,966 with estimated expenditures of $6,915,800 — a surplus of $17,166.

The second budget included the 1.5-percent salary increase for employees and was adopted by the board.

“… The alternate budget that I was asked to do would provide a 1.5-percent pay increase as opposed to the normal 3-percent increase that’s stated in the personnel policy …,” Hrastich said.

To keep the alternate budget in the black, a total of $10,000 was cut from the Parks and Recreation Department budget that had been earmarked for trails and $20,000 was removed from the Public Safety budget that had been designated for computers, he said.

Department heads reduced their proposed budgets by a total of $492,600, Hrastich said last month, noting the Public Works Department slashed $383,000, the Parks and Recreation Department cut $76,800 and Public Safety trimmed $32,800.

Hrastich’s motion to adopt the budget with the 1.5-percent salary increase was seconded by Ward 3 Alderman Jan Hoffmann and approved with a 7-0 vote.

For 2012, city officials are anticipating a reduction in total general-fund revenues and expenditures compared to 2011 projections.

Total general-fund revenues are projected to decrease by $405,143 compared to 2011. Excluding federal grants, revenue is projected to increase by $210,876 compared to the current year.

Total general-fund expenditures are expected to drop by $761,227 compared to 2011. However, excluding federal grants, expenditures are projected to decrease by $145,208.

Besides the general fund, the city’s capital-improvement fund balance is estimated to improve to $797,357 in 2012 from $694,292 in 2011, and Sunset Hills’ storm-water/local parks fund balance is projected to decrease to $1,364,883 in 2012 from $1,437,917 in 2011.

City officials expect the county road fund balance to drop to $133,027 from $163,027.

In a separate matter last week, the Board of Aldermen heard a report from former Ward 1 Alderman Mike Sawicki, chairman of the city’s Revenue Review Committee.

Mayor Bill Nolan appointed the 11-member Revenue Review Committee in October to study the city’s revenue stream, including reviewing a number of commercial fees and taxes that have remained unchanged since 1994.

Sawicki said the committee is recommending the Board of Aldermen place a measure on the April 3 ballot that would ask voters to approve a permanent extension of the city’s existing half-cent, capital-improvement sales tax. Sawicki presented a proposed ordinance for the board to consider next month to place the issue on the April ballot.

The capital-improvement sales tax was approved by voters in 1994 to fund a more than $5.7 million bond issue for City Hall repairs, a new police station, a new public works building and street repairs, among other items.

“… We’ve looked at a lot of things and will continue to do that, but I think the major source that’s maybe the easiest to tackle right now is the half-cent capital-improvements tax,” Sawicki said. “Back in the early ’90s, this tax was passed. It was tied to bond issues to build the police, public works, City Hall improvements and roads … Those bonds are scheduled to be paid off at the end of 2016 …

“Because of good planning and good fortune, the city has been able to fund additionally out of that half-cent sales tax not only the debt service on the bonds, but has been able to fund operations in these improvements … Basically I think what the Revenue Study Committee would like to recommend to the city is that we extend the half-cent sales tax …”

The bonds issued in 1994 are scheduled to be retired at the end of 2016. However, if the bonds are retired, the tax would end without a voter-approved extension.

Sawicki said his committee views the extension of the sales tax as a “win-win” and urged the Board of Aldermen to give “serious consideration” to placing the measure on the April ballot.

Nolan said he supported placing the extension on the April ballot. Because the sales tax was tied to a bond issue when it was approved in 1994, restrictions exist on how revenue from the half-cent, capital-improvement sales tax can be used.

“… The principal feature that I think is so desirable for the benefit of the city is that we have the money on hand to retire the bonds and retiring the bonds would save us nominally $50,000 to $60,000 in interest we’re going to pay over the next four years,” Nolan said.” We’re paying 4.5-percent interest on money that we have sitting in the capital-improvement account earning a half a percent. It just doesn’t make any sense not to pay them off.

“But if we pay them off, the tax goes away unless the citizens agree to extend the tax …”

City Attorney Robert E. Jones interjected, “Without a bond issue.”

Nolan continued, “Without a bond issue, it’d just be normal capital-improvement income used for capital-improvement expenses in the future. We have a hitch in the present bonds in that every time we want to spend a dollar from the capital-improvement account to repair roads — and this is the big issue involved here — we have to appropriate 57 cents out of every dollar that we spend from general revenue.

“And general revenue is the basic funding source for city. So we have actually built a surplus in capital improvements because we couldn’t match the money from general revenue to get the work done.

“If it were a clean capital-improvement tax with no bond involved, we could use — I know it sounds bizarre — we could use 100 percent of it for streets, which is the principal expense in our infrastructure. So it would clean things up considerably. Obviously, I’m a proponent,” the mayor said.

If voters were to approve the extension of the half-cent sales tax and the existing bonds were retired, the tax would generate about $850,000 annually for the city.