NORMAL -- The City Council will consider a proposed 2009 tax levy Monday that would be 9.16 percent higher than this year in an attempt to cover all required retirement costs.

Because the proposed levy exceeds 5 percent, law requires a public hearing before the council formally adopts a tax levy. The hearing will take place Dec. 7.

Council members agreed Nov. 2 to increase property taxes to bring in an additional $350,000 to fully fund employees' pension costs. The cost of the Illinois Municipal Retirement Fund, Social Security and police and fire pensions are dictated by the state.

City Manager Mark Peterson said the general fund has subsidized those costs in recent years in an attempt by the council to keep the tax levy and rate low.

"The flexibility of the general fund has evaporated," Peterson said, because of declining revenue.

Some of the main sources of revenue for the $48.7 million general fund are state income tax and sales tax, both of which are significantly down.

As a result, the town has had to dip into the general fund's reserves. Council members prefer to keep that reserve fund at 10 percent of the general fund (about $5 million). Without changes, the reserve fund will dip to negative figures by the end of fiscal year 2010-11, said Finance Director Ron Hill.

The City Council has looked at making cuts and for other revenue sources, including increasing the property tax levy, to stop that plunge.

The proposed 2009 tax levy would be $9,364,000, a $786,000 increase over this year. Assuming a 5 percent increase in the town's total assessed valuation, the change would raise the tax rate from its current $1.0936 per $100 assessed valuation to $1.1368.

That rate includes the levy for the library. If assessed valuation increases more than 5 percent, the rate would be less.

Assistant Finance Director Andrew Huhn said the new rate would increase the tax bill for the owner of a $200,000 house by $28.70 a year.