An explosion in medical insurance costs for city workers would be paid for from Peekskill’s fund balance account under the proposed 2024 budget from City Manager Matt Alexander.

Even with that offset, Alexander is advising that the Common Council vote to exceed New York state’s 2 percent annual tax cap increase and raise taxes on city property owners by 3.53 percent. The average single-family house assessed at $9,570 would see an increase of $72.64 in city taxes over the current year, according to the proposed budget.

One-third of overall property tax costs are typically from the city while two-thirds come from school taxes. The school district passes its budget each year in May.

To break the cap, the Common Council will have to hold a public hearing, pass a resolution and approve the budget with five votes out of the seven-member council. The budget must be approved by Dec. 1. Alexander presented his tentative budget to the council at its Committee of the Whole meeting on Oct. 2.

Personnel costs, including benefits, account for approximately two-thirds of expenses in the general fund. The city is projecting that medical insurance costs next year will increase by 28 percente, to $9 million, compared to $6.8 million in 2023. The increase is driven by a 15 percent premium rise, added coverage for new hires for already budgeted unfilled positions, and high rate increases for retirees.

Another major driver of personnel costs is the mandatory contributions to the State Retirement Fund. The cost of these benefits, which had flattened in recent years, are projected to greatly increase in 2024 over 2023’s budget due to historic increases in benefit expenses. In total, these increases in the cost of retirement benefits add an additional $2.7 million to the tentative budget for 2024.

The proposed city general fund budget for 2024 is $50,972,233, an increase over last year’s $50,554,858 adopted budget of $417,375. New expenses include wage increases of $656,000, as well as anticipated increases in costs of fuel and supplies.

The city has about 229 full-time and 22 part-time, year-round staff, for a total of 251, which, while up from last year’s 235, is still down from 268 in 2012.

In addition, Peekskill routinely hires about 180-220 part-time temporary staff over the course of the year, mostly in Recreation, Youth Bureau, and Public Works. Most full-time staff are unionized, except for management-confidential staff (department heads and certain administrative staff), and all full-time staff receive fringe benefits.

Police department still has five vacancies

The Police Department has five vacant funded officer positions, worth $496,000, as in recent years. Three police officers are needed to rotate into the shift coverage for the city. This would reduce overtime costs, which are projected to peak up toward $800,000 this year. The proposed budget removes a 2023 budgeted but unfilled detective position.

Following the 2008 Great Recession, the city opted to defer pension payments to the NYS Comptroller from 2012 to 2015. Over the last several years, the total principal amount owed has been reduced to $799,775. The payment due on this deferred obligation in 2024 is $249,337. The last payment on this obligation will be made in 2028.

The tentative budget includes salary increases for staff as per union contract agreements, with a matching 2 percent increase for non-unionized staff. The cost of living 2 percent increase equates to about $425,000 in 2024. Contractual annual salary increases tied to longevity (“steps”) total $292,000 in the 2024 tentative budget. Not filling budgeted positions last year saved $1.5 million.

Reducing medical insurance costs

Alexander, who prior to being city manager was Peekskill’s comptroller, is proposing that the city switch its medical insurance from the NYSHIP Empire Plan to the Excelsior Plan. In 2023, premiums would have been reduced by $2 million net after the city made $500,000 in co-pays for employees under Excelsior.

The city is now negotiating with its four bargaining units to change plans, Alexander said in his tentative budget. The city estimates that 2024 savings would be as much as $1 million if all four bargaining units accepted the plan.

Taking $2.125 million from the city’s unassigned fund balance to lower the proposed 2024 tax increase would leave that fund with approximately $5.8 million. The fund balance in 2021 was $8.9 million.

In his budget statement the city manager suggested that the Common Council consider continuing the annual 3.5 percent rate increase through 2027.

“Absent these [proposed tax cap] reforms, and facing escalating personnel costs, without extraordinary growth in other sources of non-tax revenues, the City may need to continue to exceed the tax cap in coming years in order to continue to sustain essential services,” Alexander wrote.

You can view the city manager’s proposed 2024 budget here.