East Ridge is poised to end its 2011 fiscal year like it did last year, with a deficit surpassing $600,000.
And the city could face another if it doesn't generate more revenue or cut services next year, City Manager Tim Gobble said during a special meeting Tuesday afternoon.
Gobble, who took on the city manager post in late April, said this year's deficit chiefly results from rising costs and flagging revenue, and not from loose spending.
"I think the staff has done a good job on holding the line. Overall we're down in spending. We're just still coming out of a recession - these are difficult times," Gobble said, citing rising costs in health care, fuel and utilities.
Documents also indicate East Ridge saw a decline in sales tax revenue this year.
The budget worksheet Gobble presented for the 2011-12 fiscal year is just a "bare bones" platform formulated by city directors, and does not include raises or increases besides projected hikes in insurance, utilities and fuel costs.
The city also owes $8.8 million, according to budget worksheets.
Though Gobble said the amount of debt is manageable, he strongly discouraged the city from borrowing any more money.
During the meeting, Gobble outlined a series of revenue options, including a property tax increase ranging between 10 and 30 cents.
The current property tax rate is $1.12 per $100 of assessed value. A 15 cent increase would net the city $510,000 in new revenue, Gobble explained. It also would mean the owner of a $75,000 home would have to pay $28.13 more per year. A 30 cent increase would cost that homeowner $56.25 more per year.
Other revenue options Gobble proposed were a hotel/motel tax, a sanitation fee increase and a recreation fee increase.
Unless the new budget is balanced, the city could see its third straight year in the red with a six-figure deficit.
After last year's $678,387 deficit was revealed, former city manager William Whitson was forced to resign after council members claimed he wasn't upfront with them about the city's financial trouble, according to newspaper archives.
East Ridge resident Frances Pope said that though it's frustrating to see a repeated deficit, the way this year's was approached is a positive step forward.
"The previous [deficit] was not revealed until after year's end, and nothing had been discussed about running a deficit. This time, the new city manager comes in, looks at the figure, and says, 'This is where we stand.' It was much more straightforward," Pope said.
Gobble maintained that confronting the looming deficit is likely going to mean sacrificing services.
"[Council members] are in a tough spot," he said. "They've got difficult decisions. But I think they will make the right decisions."
The new fiscal year begins July 1, and Gobble said he hoped to see a vote on first reading on the budget June 9 and on second reading June 23.
The council will hold a budget workshop June 2 at 6 p.m. at City Hall. The public is welcome, but Gobble was not certain whether they would be able to give formal input at this stage.