Officials planned a 4 percent decrease in sales tax revenue for the next fiscal year budget beginning July 1. The city is already facing a 4 percent drop in revenue during the current fiscal year. Total projected sales tax revenue is $2.46 million, a decrease from the previous year's budget. Sales tax revenue makes up more than half of the city's revenue. "If the economy starts to turn around and the decline in sales tax gets better, then we will have a pleasant surprise," said Terri Thorn, director of operations/finance officer. At Tuesday night's meeting, aldermen adopted the 2009-10 budget. Officials anticipate spending $9.5 million, while having revenues totaling $8.3 million. Cash reserves are expected to be used to offset the $1.2 million deficit. City officials are anticipating sales tax to generate $2.46 million in revenue next year, a drop of around $129,000 from the current year's actual receipts. In addition, no increase is anticipated for real estate and personal property tax revenues projected at $462,984. The total revenue also includes funds from grants ($894,344) and tourism tax ($110,000). Mayor Greg Costello acknowledged the tough economy made it difficult for the board when it came down to examining requests from department heads. When the board examined capital expenditure projects last month, most of the requests were approved. The board estimates spending $2.1 million next year on improvements. The two biggest capital expenditure projects are a railroad walking bridge ($406,905) and booster pump ($285,000). The two costliest projects the board decided to hold off on include a sewer line extension ($129,000) and a parking lot on the west end of city hall ($30,000). "You have to make sure more than ever you're spending your funds efficiently and wisely," Costello said. "Bottom line, we are the stewards of the citizens' tax dollars. We're trying not make huge cuts." Thorn said in her time with the city, it has always been the intent of the board to be conservative. She pointed out the city anticipated decreased revenues when amending the 2008-09 budget due to the economic downturn. "This budget was the first experience that we've had with not being able to fund every capital improvement that was requested," she said. "Because sales tax revenues are down, we had to be much more diligent in looking at, for example, operating expenses. "The department heads did a great job bringing their budgets in," she added. "The challenge to them was to bring their operating budget in at the same amount as last year and they did that." The budget also calls for a 2 percent increase in water and sewer rates for an estimated $2.29 million. The city also is facing an 8 percent increase in utility expenses and 11.6 percent bump in health insurance premiums. This year's budget also includes a 2 percent pay raise for employees. Last year, employees received a 3 percent bump. However, Thorn said the conservative approach throughout the budget, including payroll, should help the city avoid any layoffs or reduced hours for employees. She noted each time an employee leaves, the city examines the necessity of the position and how the workload could be handled by current staff. "If there is a way we can reallocate duties and spread it out among people, we will choose to do that," Thorn said. "We do not want to cut hours or lay off employees. We're trying to be very creative in how we manage this period of time." The budget includes the addition of two new departments - municipal court and special events. The city plans on running its own municipal court and is currently in the process of hiring a judge. Funding for special events was separated from the recreation department in an effort to track funds easier, Thorn said. No money has been allocated to either department in the new approved budget, though it shows a combined $111,785 in expenses compared to $80,975 in revenues, all anticipated to come from the city-sponsored special events.