BY COUNCILOR STEWART:
The city of Duluth does ordain:
Section 1. That Ordinance 9761 passed and approved December 19, 2005, is hereby amended by appropriating an additional $600,000 from the general fund’s excess revenues in investment earnings in the amount of $600,000 as follows:
Department 100 - fire ....................... $200,000
Department 200 - police ..................... $275,000
Department 300 - library .................... $ 20,000
Department 400 - parks and recreation ....... $ 40,000
Department 500 - public works ............... $ 65,000
Section 2. That this ordinance shall take effect immediately upon its passage.
STATEMENT OF PURPOSE: This ordinance would increase the city’s 2006 general fund appropriation authority by $600,000. This technical amendment would be paid for out of current year excess revenues, not from the undesignated, unreserved fund balance of the general fund. The city is anticipating revenue in excess of budget in the area of earnings on investments in the amount of $600,000. The impact on fund balance of the proposed amendment is neutral in that the city is using excess unbudgeted revenues to fund the appropriation. At this time, we are anticipating fund balance to remain flat or increase slightly over 2005's ending balance of $3.338 million which is approximately 4.5% of the general fund operating budget.
The city has faced budget challenges again this year. Areas of pressure in operating expenses included a $103,000 increase in motor fuel expenses over last year; $242,000 in utility expense increases; and an additional $100,000 in blacktop expenses. Offsetting these expenses were savings accrued due to the mild winter of approximately $200,000 in fleet repair, overtime and salt and sand expenses; as well as other areas of savings in departmental operating expenses. However, the largest pressures on the city’s budget for 2006 were created by the unprecedented number of employees retiring in 2006. Citywide 75 employees retired totaling 8.5 percent of the workforce. In order to accomplish the work, department overtime and temporary lines were over expended by $1.2 million. The additional expense in retiree insurance premiums in the amount of $160,000 over 2005 was in part due to the increase in the number of retirees. And finally, the vacation payoffs associated with retirees exceeded $600,000 for the general fund. The savings in salaries and benefits totaled $1.25 million offsetting the increase in overtime and temporaries. The insurance shortfall was covered with other decreases in operating expenses.
The amount the city could not cover with savings and efficiencies is the cost of vacation payoffs to retiring employees. This budget amendment if passed will cover the associated additional expense in salaries and benefits.