LEBANON — City officials say increased staffing and rising health care costs are major factors in a 7% increase in Lebanon’s proposed 2020 operating budget.

City Manager Shaun Mulholland expects the municipal tax rate to increase by 3% in 2020 if the City Council approves his budget as proposed.

Mulholland has presented a $36.8 million operating budget for next year, a $2.4 million increase over current spending levels.

The budget also would add eight staffers to Lebanon’s employment roster, bringing it to 183 full-time and 12 part-time positions.

Three of those posts would assist the Department of Public Works, which is understaffed and will not be filling an open assistant director position, Mulholland said in an interview Tuesday.

“Project management is lacking,” he said. “City projects don’t have sufficient supervision without those (positions).”

Lebanon’s Finance Department would get four new staffers, and the city manager’s office would hire a “digital media officer” as well. Those jobs previously were contracted out and are now becoming municipal positions, Mulholland said.

Overall, including capital projects, Mulholland is proposing a $60.6 million budget for 2020, a $10.4 million decrease from Lebanon’s current $71.1 million spending plan.

Much of that decrease comes from infrastructure projects, which are usually bonded and paid over multiple years, Mulholland said.

“Health insurance is up 8.2%, dental is up 3.9%. Those are the big cost drivers,” Mulholland said.

Employee benefits — which include wages, health care and retirement contributions — are expected to rise by nearly $1.8 million, or 8%, next year.

Of that, wages account for the largest of those increases, with a $1.6 million, or 11%, jump from the current city budget.

Non-union employees would see a 1.6% cost of living adjustment under the spending plan, which maintains funding for two police officers and firefighters originally hired using federal grants.

“I think city staff worked very hard this year to keep the increase to 3%,” Lebanon Mayor Tim McNamara said, referring to the proposed rise in taxes. “We’re trying to do the best we can to keep budget increases as minimal as we can.”

The impact from the proposed spending plan would be an estimated 34-cent increase in the tax rate to $11.59 per $1,000 of a property’s assessed value.

That would amount to a 2020 municipal tax bill of $2,900 for a single-family home valued at $250,000, an increase of $85.

City officials hope to save almost $12 million in capital improvement spending, which represents nearly 20% of the overall budget.

Mulholland said those cuts coincide with the upcoming completion of Lebanon’s combined sewer overflow, or CSO, projects. The $75 million effort to separate sewer and stormwater in 15 miles of Lebanon’s sewer system should be completed next year, he said.

Instead, he hopes to spend an additional $3.3 million on the ongoing city hall renovation project, $1 million on efforts to repair the rail tunnel running under the downtown mall and $2.1 million on sewer upgrades.

The “significant reduction” in capital improvement projects is just one effort Mulholland and his staff are making to reduce costs, McNamara said. Over the past year, city officials have increased charges at Lebanon Municipal Airport and the landfill to help make those two operations less reliant on tax dollars.

“We’re really trying to get that down as we move forward,” he said.

Lebanon is expecting to make $7.6 million in debt payments next year, a 2.5% decrease. However, the city is expecting that number to jump to $10.6 million by 2021.

“Large debt service increases expected in 2021-2024 are of special concern,” Mulholland wrote in his budget message.

Mulholland said payments on the city’s CSO projects are largely to blame for the increase.

The City Council is scheduled to hold several work sessions over the next week to refine the budget proposal, which it would then vote on after a public hearing on Dec. 18.

“We’re scrutinizing everything,” McNamara said.

Tim Camerato can be reached at tcamerato@vnews.com or 603-727-3223.