On December 7, the City Council approved the 2005 city budget of $139 million. Over the past three years, because of a weak economy, we've been forced to make some tough decisions. As a result of these decisions, we've been able to balance the budget while maintaining excellent city services and also maintaining an AA credit rating.
One major reason for the city's ability to pass a balanced budget for 2005 was the substantial upturn experienced the last several months from new retail sales tax revenues. In large part, that's a result of the opening of Shoppes at Grand Prairie. It appears these are genuine increases in the sales tax base-not merely a shift from other retail sales in the area.
In future years, we'll continue to address a number of issues important to the city's future. We have a process for negotiations with our police and fire unions, which are the two largest groups of employees in the city. These negotiations are covered under a state statute called "interest arbitration." This requires an arbitrator to make a final determination if we bargain to impasse, which is the norm.
The city also has a substantial health care benefit program for employees and retirees. Compared to other plans, this is a very expensive plan. We've had a health care committee for the last several years-comprised of members from the city unions, city management, and city council-who've worked diligently to contain the growth in health care costs. Nonetheless, health care costs are projected at $14 million for 2005 and are expected to continue to grow at double-digit rates.
We also have very expensive pension programs, projected at $11 million for 2005. These will be increased next year by a state mandate. This mandate will increase the pensions for widows of firefighters and will cost the city an additional $600,000 to $700,000 per year.
Another unfunded mandate from the state was the increase in the homestead exemption, which gives homeowners a reduction in their property taxes. While this is a benefit to everyone who's a homeowner, it also results in a reduction in revenue for the city and other units of government. In 2005, we believe this will cost the city $600,000 to $700,000 and cost other units of government that are more dependant on property taxes-such as District 150-several million dollars.
In future years, we need to do planning and budgeting on a longer-term basis. We need to invest in training, equipment, and new processes to provide excellent services more efficiently. This will enhance the city's financial strength and allow us to weather unexpected downturns in the economy. Working with the city council, city staff, and our citizens, we also need to work for a growing economy that creates jobs and a better economic future for all Peorians. IBI