The City of Lockport will spend $1 million more on operations next year but it won’t charge property owners a nickel more for it.

In fact, at this point, the Common Council is positioned to give a nickel back on the 2009 tax rate.

Aldermen continued vetting next year’s proposed budget Thursday and decided to gamble that health insurance premium increases won’t be as steep as Budget Director Richard Mullaney predicted.

Whacking $200,000 from the budget line showing the expected cost of insurance took the projected tax rate down 5 cents, to $15.64 from this year’s $15.69 per $1,000 of assessed value.

Mullaney projected the health tab, the single biggest line item in the budget, could cost the city up to $4.1 million next year. That’s a 26 percent increase over the actual 2007 bill, based on insurance broker Flex Care’s estimate of a 20 percent rate increase in ’09, plus consideration of the fact that more people are insured by the city.

Since 2007, the city has added several jobs outright and filled vacancies created by retirement. When employees retire they’re still entitled to city-paid coverage until death — and so are their replacements.

Fourth Ward Alderman Patrick Schrader insisted the Council revisit the health line. Before Thursday, the projected tax rate stood at $15.95, a 26-cents-per thousand increase.

“I’m not voting for that,” he said. “We have to face the voters.”

Every $100,000 in spending cuts in the budget creates a 1 percent cut in the tax rate, so Schrader did the math. By projecting a 20 percent increase in health costs, rather than 26 percent, the Council could knock back the line by $200,000 — and turn a 1.66 percent tax rate increase into a 0.31 percent rate cut.

Sums in the budget are often educated guesses, not fixed numbers, but they’re important because they drive the tax rate. Once the expected revenue lines are added up — fees, fines, sales and mortgage tax, state aid/grants, fund balance and other one-shot sources — the sum is subtracted from the amount of projected spending. The remainder, close to half the annual budget, is raised from property tax.

The Council is gambling with the health insurance line on a couple of levels.

n First, firm projected rates of next year’s premium costs aren’t known yet, so guessing percent of rate increase is always a bit of a crapshoot.

n Second, the city’s bottom line is now tied up in stalled contract negotiations with five municipal labor unions. Mayor Michael Tucker’s strategy has been to offer pay raises in exchange for the unions’ agreement to cost-saving changes in health insurance packaging; the savings theoretically would pay for the raises.

The unions’ contracts expired at the end of 2007. It’s understood they’ll now be looking for retroactive pay raises covering 2008, plus raises for 2009. This year has gone by with no health cost savings to help absorb the shock, Mullaney observed.

It means there’s more pressure on Tucker to get labor’s agreement on health changes — and secure sufficient savings from the deal. By knocking back the health line, the Council is gambling he’ll succeed.

If he doesn’t, and the Council has to write a 2010 budget that pushes the tax rate up significantly, “the voters will come after all of us,” Third Ward Alderman Flora McKenzie said.

The proposed general fund budget for 2009 stands now at $22.79 million, projecting $1.2 million more spending next year than this year. Almost $1 million of the raise is covered by the health line cut and moving $750,000 of fund balance into the ’09 revenue column. The city did not use any fund balance in this year’s budget.

Fund balance — basically, money raised in previous years and not spent — is about $2.9 million now. It’s the highest balance seen by the city since the 1980s, Tucker said. Municipalities are supposed to hold between 10 percent and 15 percent of their annual budget amounts in reserve in case of financial emergencies.

The Council is expected to return to budget vetting next week. Schrader said he’s still looking over some smaller budget lines to see if the tax rate can be whittled down any more.

The Council also has not yet made final decisions about budgeting money to hire a fourth city attorney and raise the pay of two, hire outside help to aid citywide reassessment or pay for stage rentals in next year’s Molson Canal Concert Series. The city covered the $64,000 rental tab this year without a budget line.

Contact reporter Joyce Miles at 439-9222, ext. 6245.