The city of Lampasas' proposed 2008-09 budget includes pay raises of 3 percent to 6 percent for city employees, one additional police officer position, and higher energy and health insurance costs for the city than in 2007-08.

The Lampasas City Council on Aug. 11 set a proposed tax rate of 39 cents per $100 property evaluation -- up from the current rate of 37.72 cents per $100 -- and on Friday at noon will hold a second public hearing about the proposed levy.

The first readings of tax rate and budget ordinances are set for Sept. 8, with the City Council's second votes to come Sept. 22. Although the tax rate has not been approved officially, the council's Aug. 11 vote set the maximum tax the city can assess.

Stoldt said Lampasas' total tax rate will remain lower than many neighboring cities, including Cop- peras Cove and Brownwood, which set its tax rate at 74 cents per $100 for 2007-08. Belton assesses 65 cents per $100, Harker Heights levies 68 cents per $100, and Hamilton's current tax rate is set at 48 cents per $100.

"I know Lampasas has, compared to most other cities, a very affordable tax rate," Stoldt said. "It really is not uncommon for cities to have a 50-cent tax rate."

Because of rising consumer prices for food and energy, however, city staff tried to design the budget without significant electric rate increases, Stoldt said.

The Lower Colorado River Authority has announced that in October it will increase the rate it charges municipalities for power, but this will raise only the city's generation charge -- assessed to customers to pay LCRA. Lampasas' proposed budget does not include increases in the distribution energy charge, which provides revenue for the city.

"If there is a rate increase [for city utility customers], it is only because the cost of supplying power to the city has increased," the city manager said.

Beginning in January, however, customers will pay an extra 25 cents per month on the base water fee and 10 cents per extra 1,000 gallons used.

The additional charges will increase city water revenue by $58,000.

City staff began budget talks with a $2.1 million deficit in the general fund, compared to a $1.8 million deficit when the 2007-08 budget planning process began.

"It made for a difficult year," Stoldt said.

He offered City Council members two options for balancing the budget: one involving transfers of reserve funds and the other without transfers.

Stoldt has recommended using about $1 million in reserves to bal- ance the city's budget. Under the proposed budget, about $500,000 in reserves will be used to balance the general fund, and $400,000 will provide for the city's portion to build an animal control facility in cooperation with the county.

Without transferring reserve funds, the city would not have been able to continue providing employees with their current level of health benefits, Stoldt said.

Instead, the City Council preferred a proposed budget in which the city absorbs a 15 percent increase in insurance costs, allowing city employees to keep their level of benefits with a higher co-payment.

Transfers from reserves will save Lampasas about $70,000 in payments the city would have faced if it had had to finance the purchase of a street sweeper, a chip spreader and two police cars.

The proposed budget also includes $14,000 less in electric fund transfers than last year's budget.

"That has always been council's goal -- let's try to rely less on the electric fund to balance the general fund," Stoldt said.

The proposed budget offers a 6 percent raise for all commissioned public safety personnel making less than $50,000 a year. All other city employees who make less than $50,000 are eligible for 5 percent raises. City personnel who make more than $50,000 are eligible for 4 percent raises, and part-time employees will receive 3 percent raises if the proposed budget passes.

The proposed pay increase for police and fire department personnel is designed to help Lampasas attract and retain qualified applicants, Stoldt said.

"The idea was to concentrate that 6 percent on the positions we need to fill," he said.

The police department has experienced significant turnover this year, said the city manager, as one officer resigned to work for the county, and several others left for higher salaries in other cities.

Both Round Rock and Georgetown offer starting pay of at least $40,000, while Lampasas offers about $32,000, Stoldt said. Other cities, including Georgetown and Austin, pay several thousand dollars in signing bonuses, he added.

"Competition for police officers in other departments has just gone insane since [Sept. 11, 2001]," Stoldt said.

The Lampasas Police Department has three openings for officers, and Stoldt said the city did not receive any good applications in the first round for two of those slots. Another officer is considering resignation, the city manager said.

As a result, city staff and City Council members support the proposed public safety pay increases to help Lampasas retain qualified personnel, Stoldt said.

In addition, the proposed budget includes a motorcycle police officer -- the city's first -- to work traffic and serve warrants. Lampasas has $1 million in outstanding warrants, Stoldt said, and if the officer serves one warrant an hour, the employee will generate enough revenue for the city to offset the salary addition to the budget.

The general fund now has a $40,000 surplus, and Stoldt will offer the City Council a list of possible ways to use it. The council could move surplus funds back into reserves, or it could vote to spend some of the funds on items such as street paving in Oak Hill Cemetery, street and drainage work elsewhere in the city, information technology or city employee travel and training.

"We'll just kind of go back and see what we want to add back in or if we want to decrease the amount we take out of reserves," Stoldt said.