Maintaining local streets and finding ways to decrease health insurance claims are the two biggest challenges the city of Seymour faces this year.

That was the main focus of Mayor Craig Luedeman’s annual State of the City address Monday night.

“Those two pieces of our budget are taking up sizable amounts of taxpayers’ money,” Luedeman said. “We have got to find a way, whether it’s borrowing money or finding grants, to handle this.”

When Luedeman took office in 2007, the city was spending just under $1 million a year on insurance for its employees. Last year, that cost hit $2.2 million.

Since the city is allowed to increase its budget by only 2 to 2.5 percent because of property tax caps, Luedeman said it’s impossible to keep up with the inflationary costs of insurance.

“We are going to have to look at some drastic measures in the future, whether it’s asking if we should continue to provide insurance to our retirees or do we continue to allow spouses to be on our insurance plan,” he said. “It’s just getting out of control.”

The city is on track to spend $2.6 million for health insurance this year, he added.

“There is no way we can come up with that extra increase,” he said. “If it approaches $3 million, we’re going to have to lay off people or something.”

One way Luedeman would like to see the city attack the problem is by offering incentives to employees for reaching and maintaining health goals, such as losing weight or lowering their blood pressure or cholesterol.

“We’re going to have to get healthier somehow, some way,” he said.

As for road funding, Luedeman said, the city doesn’t have enough money to keep pace with maintaining its current infrastructure.

Currently the city spends $100,000 to $200,000 a year to fix roads, which amounts to paving about three blocks, Luedeman said. According to a state engineering report completed last year, it needs to increase that amount to $1.1 million to $1.2 million annually.

“We are doing just 10 percent of what we need to do just to keep up with maintaining our roads,” he said.

Right now, Luedeman said, he doesn’t know where the city will find the additional money needed for road repairs and maintenance.

“We’ve hit up INDOT to be a pilot program for road funding to help get us closer to where we need to be,” he said.

Luedeman also brought up the need for major sewer repairs that will be needed in the future to address the city’s aging sewer system and the need to begin raising money to build a network of pedestrian and bike trails throughout the city.

Although he often uses the State of the City address to announce new projects and ideas, Luedeman had no surprises this year for city council members, department heads and residents who attended Monday’s meeting.

“It’s probably my worst one yet in terms of anything new,” he said.

He did bring up the likelihood that a new fire station will need to be built within the next five years to replace the aging Fire Station 1 on East Street. The station serves as the department’s headquarters.

The fire station has had a lot of major repairs and continues to see increased maintenance costs, Luedeman said.

Labeling 2015 as the year of growth, Luedeman said he expects to see several areas of major activity taking place, including at the parks and downtown.

“We want to see the final phase of the skate park finished and better utilization and possible expansion of our parks,” he said. “You’re also going to see a lot of downtown activity. We have been meeting with different developers to persuade them to come into Seymour. Whether it be restaurants, retail or apartments, you name it, we’ve pushed it.”

Another project Luedeman hopes to see started and finished this year is the widening and improvement of West Second Street. Construction is set to begin this summer, he said.

Other projects to be discussed in 2015 include the southwest sewer project and a south extension of Burkart Boulevard that would connect U.S. 50 to Freeman Field on the south side of the city. Along with the new road, officials are in discussions about creating an overpass to cross the railroad tracks south of town near Silgan Plastics.

“That’s about a $30 million project,” Luedeman said.

The extension would help direct semitrailer truck traffic away from State Road 11 and the hospital. The overpass would give traffic another way to get around a proposed increase in train traffic, Luedeman said.