Moab city employees will get a 3 percent raise next fiscal year, if the City Council next month approves the tentative budget.

The increase is considered a cost of living adjustment, said City Manager Donna Metzler. Some employees also will receive additional salary increases based on merit.

It’s not all good news, though.

The city’s health insurance provider raised premiums by 20 percent, Metzler said. The city adjusted its health care offerings to knock the increase down to 8 percent for the city, but as a result city employees will pay a portion of their health insurance premiums starting July 1.

Previously, the city had paid 100 percent of its employees’ premiums.

Employees also will have a higher deductible.

To help offset that, the city will contribute $2,000 a year to each employee’s health savings plan or health reimbursement account and will match employee contributions to those accounts, up to $3,500.

A public hearing on the proposed budget is planned for Tuesday, May 22, at 7:15 p.m. in the Moab City Council Chambers, 217 E. Center St.

Aside from the pricier health insurance, budget news for the 2012-2013 fiscal year is good, Metzler said.

The total budget for the general fund, the city’s main account from which most operating expenses are paid, is approximately $7.69 million. That’s an increase of 4.7 percent from this fiscal year, thanks to an estimated 4.5 percent increase in sales tax revenue, which provides most of the city’s income.

Though the projected sales tax revenue is higher, the city hasn’t raised those tax rates in 10 years, Metzler said. Rather, there is more revenue because merchants have increased prices on their products and customers are buying more.

The general fund pays for expenses related to the day-to-day operation of the city including law enforcement, animal control, highways and public improvements, public buildings, parks, the recreation and aquatic center, administration and planning.

Moab is the only city in Utah that does not collect property tax.

Residents will see a slight increase in water rates starting July 1, though. Because of increasing costs, the city has budgeted a 2 percent increase in water rates, Metzler said.

Major projects next fiscal year include expansion of Rotary Park, improvements at Lions Park, landscaping and other improvements along 500 West, improvements to Powerhouse Lane, new sewer lines in the Williams Way and West Center Street area, an upgrade to the Wastewater Treatment Plant and the installation of water and sewer lines along Highway 191.

Each February, the City Council gets updates from each city department before setting priorities for the following year’s budget.

With those priorities in mind, city department heads put together their budgets and submit them to Metzler by March 1.

The City Council is scheduled to give final approval to the budget on June 12.