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After winning office with pledges of fiscal restraint, Omaha Mayor Jean Stothert is proposing a city budget that doesn't touch property tax rates — but deals with the climbing cost of basic city operations.
The mayor's $340.5 million general fund budget — which covers day-to-day operations — would be almost $19 million bigger than this year's, partly to pay for more expensive health care and higher wages.
Hits to property and sales tax revenue complicated the budget task, which had to be done two months after Stothert's election. To balance next year's budget, the mayor will rely on projected increases in restaurant tax revenue and a surplus from 2012.
Although Stothert campaigned on goals of cutting property taxes and repealing the restaurant tax, the new mayor said such large-scale changes must wait. Her goals haven't changed, she said, but finding a way to replace the $27.7 million in estimated restaurant tax revenue was too big a task for just a short time in office.
Stothert said her new priority would be to reduce the city's bulky health care expenses.
“In a five-week period, I think that's quite a bit to tackle, to come out with a no-tax-increase budget,” she told The World-Herald. “So my goal with this budget was no tax increase. My goal in the next three years with other budgets will be to try to achieve what I had promised, and that is a tax reduction.”
Stothert's overall 2014 budget would total just under $793 million, a drop of $193,000, or less than one-tenth of 1 percent, from this year's.
The general fund budget covers day-to-day operations. The overall budget includes that fund plus major capital expenses such as the sewer system overhaul and the city's debt payments.
Despite fears that spending cuts would be coming from the Mayor's Office, Stothert found money to implement some of her priorities and to avoid cuts to library hours and branches. While the Omaha Fire Union threatens a lawsuit over planned staffing cuts, the Fire Department is set to receive an $8.2 million hike in funding.
Stothert is proposing funds for new police radios and cruisers, money for a police recruit class, and more money to demolish condemned properties and resurface streets.
Stothert said her general fund budget resolves a $20 million gap between her initial spending targets and department requests.
The Planning, Parks and Finance Departments would get more funding. The Mayor's Office, Human Resources and Law Departments would get less.
Stothert said the proposed general fund increase of $18.8 million looks bigger than it actually is. It amounts to 5.8 percent but actual spending will really be about 3.3 percent higher than 2013, she said.
The Mayor's Office said it changed the accounting process for $4.3 million in funding related to the Elkhorn Fire District and has $3.7 million from a new tobacco tax helping to fund a planned cancer research center.
Next year's budget requires support from a revenue source the mayor said she'd like to eliminate: the restaurant tax.
The city estimates restaurant tax revenue will increase from $25.6 million this year. Stothert and finance officials say that projected 8 percent increase helps offset stagnant sales and property tax revenue.
Property tax revenue, the city's largest source of revenue, will fall slightly because of decreases in property valuations. Sales tax revenues are increasing after the recession, but finance officials expect to turn more of that revenue over to the state for business incentives.
The budget also continues to pay the growing costs of a $2 billion sewer overhaul. In 2014, the city will issue about $150 million in bonds for the huge project, said Al Herink, the city's interim finance director.
In the near future, Stothert said, the city must slim down its health care costs.
Health care expenses next year are projected to consume roughly $47.6 million of the general fund — an increase of 7.3 percent, finance officials said. The city provides health insurance to about 5,600 employees and retirees.
To cut costs, Stothert said, she'll push the police and fire unions to adopt a single health care plan to be shared by all city employees. That will be her top priority when the city re-opens fire and police contract negotiations, she said.
“That has to be done with negotiations,” she said. “But I think the unions need to realize, when they look at these rising health care costs, that they're going to have to give.
“That's a big way to reduce spending, and we must do it.”
Stothert said she would scrutinize city departments and spending as she settles into office.
“You got to consider, I've been at this five weeks,” she said. “This (budget) will have my fingerprints on it, but the next true budget that will be all my budget will be the 2015 budget.”