GLADSTONE - The Gladstone City Commission and city staff met Wednesday to discuss changes to its proposed budget for the coming fiscal year.
"I feel that our budget this year is going to be a function of what's on the horizon, and if we've got to be saving our nickels and dimes for next year or two, three years down the pike, maybe we should," said Commissioner David Olson.
While revenue in the city has been relatively stable, a 15.66 percent increase in the Municipal Employees' Retirement System Defined Benefits pensions - pensions for Teamsters, police, fire, and supervising personnel - increased the city's expenditures by nearly $85,000 for the 2013-14 fiscal year.
To better absorb the costs, the city suggested switching to an annual payment plan which will start off with lower payments. Switching to the new payment plan will reduce the annual expense for the fiscal year by $34,656.
Because MERS re-evaluates costs annually, future payments made by the city are projections that could change significantly.
"Every calendar year they do an actuarial for us, which tell us what our future ... starting April 1, payment is going to be. That's the only payment that they guaranteed us," said Falcon.
Working with the projections provided, the city is proposing changing its payment plan to reduce the size of payments in the short term. The payment in 2013 would be $552,888 under the new plan, as opposed to $633,360 under the current plan.
"In the long run if we went with (the new plan), yes we would be paying more because we would peak out at $898,000 in 2021, but my solution to that is at any time we can send in lump sum payments to offset those future costs," said City Manager Darla Falcon.
Since 2007, the city has been collecting interest on money held in the electric fund. Without using the electric fund principal, the city has access to more than $195,500 of collected interest to offset later MERS costs.
The city is also preparing to pay off a $250,000 loan which was used to close the public safety group, composed of union public safety officers, from recieveing defined benefits. All newly-hired public safety employees are on defined contribution plans. For the past five years, the city has been paying $47,000 on the loan annually.
"That loan was expressly for the purposes of closing off public safety to any further defined benefit," said Commissioner Joe Maki.
Falcon believes that the $47,000 could be used to pay MERS. "Once that bank loan is paid off in November 2013, if we continue to budget that, that would be another lump sum payment," she said.
The plan also allows the city to hire a full-time assistant director for the Parks and Recreation Department and to budget $15,000 for a code enforcement position.
The commission and city staff also discussed a new level for what is considered an acceptable minimum fund balance. Currently, the city maintains a minimum balance of $250,000 in the general fund.
"We set the goal several years ago that we wanted $250,000 in there, and I think we can all agree that $250,000 four years ago or five years ago is not $250,000 today," said Mayor Darin Hunter.
City staff and the commission discussed tying the minimum fund balance to inflation, but opted to adjust the minimum by a percentage of the prior year's expenditures.
"What if inflation, what if heavy inflation hits next year? That's useless. Holding, typing it to your expenditures is the best way to go," said Commissioner Matt Gay.
A public hearing on the budget will be held during the regular commission meeting at 7 p.m.