Troy employees likely will receive a 2.5 percent cost of living raise in the upcoming year.

Troy Mayor Jimmy Lunsford told council members on Tuesday that his proposed FYE12 budget includes a 2.5 percent cost of living raise for employees, as well as 2.5 percent anniversary step raises.

The impact of the salary increases will be about $720,000, said City Clerk Alton Starling.

The mayor gave an overview of his $60 million budget to council members during the work session prior to Tuesday’s meeting. The council will meet at 11:30 a.m. Friday to review and approve the budget.

Lunsford described the revenue forecasts in the budget as conservative. No new revenue sources are planned for the general fund. “There is no budgeted increase in sales tax projections for 2011-2012, but we have seen sales tax revenues increase every month on the same month in the prior year, and I believe this trend will continue,” he said.

License fees, which increased 10 percent during the past fiscal year, are budgeted level with collections. However, Lunsford said the city would benefit from increases in garbage collection revenues with the addition of service to Hunter’s Mountain Mobile Estates.

In a key move, Lunsford said he plans to recommend the city continue to levy the 1-cent sales tax for the Healthcare Authority. The revenue generated from this – approximately $2.7 million – is used to fund operations at Troy Regional Medical Center. “But I also will recommend that we begin looking at alternative funding sources for the hospital so that next year we can eliminate this tax,” he said. “I’m telling you now it will not be a long-term solution to the health care funding issue.”

Level funding is proposed for all currently funded agencies, and Lunsford said the only personnel addition included in the budget is a code enforcement position in the planning and zoning departments.

In other business on Tuesday, the council:

• Awarded the bid for the sewer improvement project to Blankenship Contracting for $1.792 million. “This is nearly $1 million under budget,” Lunsford said. The council also voted to reject bids for the drilling of the deep water well near the Sportsplex and advertise again.

• Approved the terms of service with Alabama Power, which provides electricity for the city’s utilities department. The proposal will save the city nearly $200,000 during calendar year 2012.

• Gave Lunsford the authority to resolve the Senior Foundation Loan issue. “Basically, back in the 1990s, the Senior Center needed to have some work done and, at the time, was expecting a large donation to come down the road,” Lunsford said. “We borrowed the money to fund the needed construction … it’s going to be my recommendation that we pay off the loan balance.”

• Awarded the bid for right of way clearing to Asplundh. The contract is based on a per-hour fee for crews to provide tree-trimming services for utility purposes and allows up to $150,000 during the fiscal year.

• Approved the redistricting plan presented during a prior meeting and a public hearing on Monday

• Awarded the bid for meals for city jail inmates to Taste and See.

• Approved the insurance agreement with Sanbuck.

• Awarded two restaurant retail liquor licenses: one to Benjamin W. Dees for Buffalo Junction and another to Robert Thomas Robinson for 315 Exchange, which will be housed in the old depot building in downtown.

• Approved the removal of dilapidated buildings 1558 North Three Notch St. and gave the city authority to assess property owners for the removal of dilapidated buildings at 719 Jones Street.

• Held a public hearing on the cottage housing ordinance and then approved amending to the zoning plan to allow cottage housing in R3 zoned districts.

• Held the first reading on two ordinances, which would allow the rezoning of a parcel of the Oak Park Subdivision from RR to A1 to allow apartments and would apply the definition of “single family residence” to RR and patio home districts.