After debating tiered pay raises and capital expenditures, the Lampasas City Council on Monday voted 5-2 in favor of the first reading of an ordinance adopting the 2008-09 budget.

Mayor Judy Hetherly, Mayor Pro Tem John Cole and council members Wanda Bierschwale, Les Gerhardt and Robert McCauley voted to approve the budget and transfer $40,552 back into reserves. Councilmen Jerry Grayson and Evan Stubbs voted against the budget.

Grayson and Stubbs said they disagreed with the council's plan to increase pay by differing percentages for certain employee categories.

Part-time employees will receive 3 percent raises, and city employees currently earning more than $50,000 will receive 4 percent raises. Workers with salaries lower than $50,000 will get a 5 percent pay increase, and commissioned police officers and firefighters earning less than $50,000 will get 6 percent raises.

"I think we're setting a bad precedent for treating some departments differently than others," Stubbs said. "I'd like to pay the whole city 6 percent [extra] or 5 percent."

City Manager Michael Stoldt said he has never tried a tiered scale for pay raises in any city where he has worked. Stoldt said he favored higher raises only for public safety officers because Lampasas has lost several officers to nearby cities with higher pay.

"This is a decision I would make for any department where we have trouble hiring employees and keeping them," Stoldt said. "This has nothing to do with their job description. This has nothing to do with what is more dangerous or more important. This is purely related to market conditions."

Stubbs said instead of giving public safety officers higher raises than other city workers, he would prefer to increase the base pay for fire and police employees.

Stoldt said the fire chief and police chief were concerned that an increase in base pay alone would give new employees higher salaries than officers who had been with the city a year or more.

Grayson asked if the city could do a salary study to determine how police and fire wages compare to those in neighboring cities of similar size.

Stoldt said he hopes to compile salary comparisons, using figures provided by the Texas Municipal League, by midway through the upcoming fiscal year.

In addition to his concerns about the pay scale, Grayson said he opposed the use of $1 million in reserves to balance the budget and fund capital expenditures, including a street sweeper and chip spreader.

"Unless we absolutely need it, let's put it off," he said of the street sweeper. "I thought I heard [Public Works Director] Randy [Clark] say the one we have will last another year. We spent money to fix it up."

Clark told the council the city could try to last another year with the existing street sweeper, but the equipment needs to be replaced.

Mrs. Bierschwale, who made the motion to approve the budget, said city officials already have agreed to delay for one year the purchase of a fire truck, which she said will cost more than $300,000. If Lampasas does not buy a chip spreader and street sweeper in the upcoming budget year, it might have to purchase a fire truck and the two pieces of equipment in 2009-10, she said.

Ms. Hetherly noted that the reserve transfer will save Lampasas about $100,000 it otherwise would have spent to finance the capital expenditures.

The city is projected to have $9.4 million in fund balance at the end of the 2008-09 fiscal year, Stoldt said. Reserves of $5 million are recommended for municipalities Lampasas' size, the city manager added.

"We will still have $3.4 million above and beyond that minimum reserve" with the $1 million transfer factored in, Stoldt said. "We are a very financially stable city."

In two related items, the City Council voted unanimously to set the 2008-09 tax rate at 39 cents per $100 valuation and to ratify the tax rate increase reflected in the budget.

In other business, the council voted unanimously to approve the submission of an application for a $250,000 Texas Community Development Block Grant for utility improvements in low- and moderate income areas.

Plans for use of the grant funds include replacing and improving water and sewer lines, adding fire protection, increasing pressures and improving wastewater service in an area bounded by Loop 257 to the north, College Street to the west, Cloud Street to the south and Old Georgetown Road to the east.

The grant requires the city to match $50,000.

In another unanimous vote, the council OK'd a change in Atmos Energy Corp. tariffs. Beginning Oct. 1, the residential customer charge will be reduced from $10.69 per month to $7 per month. Based on usage, however, the typical residential energy bill will increase by 81 cents per month, and the average small commercial bill will increase by $2.93 a month.

"The overall result of this is that those who use less gas will not see as much of an increase as those who use more gas," Stoldt said.

In another item, the City Council voted 7-0 to approve the payment of $6,910 to Kleinfelder Central Inc. for drilling and testing services at the city sports park site on Farm-to-Market 580 West.

The council also:

• approved the first reading of an ordinance amending the city's rules in reference to the sale of mixed beverages in restaurants, and beer and wine sales for off-premises consumption.

• voted 7-0 to approve a 3.8 percent increase in the contract amount paid annually to Operations Management International Inc. for maintenance of the city's water and wastewater system.

• accepted the Lampasas County Appraisal District's 2009 appraisal and collections budget.

• awarded a bid of $9,100 to MW Hail Construction Inc. for repairs to the west wall of the Lampasas Police Department building.

• voted to hold a second public hearing about the 2008-09 budget during the Sept. 22 City Council meeting.

• OK'd a police and fire escort for a homecoming parade Oct. 15, beginning at 5:30 p.m.