The Hartselle City Council is considering giving a 3-percent cost-of-living adjustment to all city employees for the 2013-2014 fiscal year.

During a budget hearing Tuesday, council members asked City Clerk/Controller Rita Lee and Human Resources Director Melee Laney to prepare a $10.485 million general fund budget with the pay increase while the city is absorbing a 5 percent increase in health insurance premiums.

However, the city is proposing other cuts to afford the raise despite not seeing an increase tax revenue for the new year, which begins Oct. 1. Employees who are deserving of merit raises would not move up the pay scale. Also, the city is planning to trim its overtime budget in half.

Councilman Tom Chappell said it was important to do something for all of the city’s 112 employees, 20 of which are maxed out on the city’s pay scale.

“Our employees do a heck of a good job for the city,” Chappell said. “If we give our employees a cost-of-living adjustment but pass along the health insurance cost, they’re probably going to have a negative effect on their take-home pay. Our employees are smarter than that.”

Councilman Kenny Thompson first proposed a pay increase and eliminating merit raises. The city would the cost of the insurance costs.

Early estimates said that the city would finish the fiscal year with about $10,000. The city is projecting $10.496 million in revenue for the 2013-2014 budget, which is the projected revenue for 2012-2013.

“That’s based only on what we know at this time,” Mayor Don Hall told the council. “There’s still a lot we don’t know right now.”

Laney said she estimated the health insurance costs at 5 percent based on information she has received from the insurance company. She said those numbers will be confirmed after a meeting on Thursday.

The majority of the city’s $10.485 million budget is based on salaries. The highest department budget is the police department with $2.592 million for 25 percent of the total budget followed by public works with $1.408 million for 13.3 percent of the total budget.

The fire department’s expenses are projected to be $1.257 million while parks and recreation is anticipated to spend $1.049 million. Administration accounts for $908,331.45 for 8.6 percent of the total budget.

The city is also paying $700,000 in debt service out of the general fund to help pay for a bond for Hartselle City Schools, which was used for school construction including the new Hartselle High School. Lee said other debt service payments will come out of the city’s 1 percent sales tax account.