Gainesville's budget may include a surplus from the current fiscal year, but city staff members are keeping an eye on how the economy will affect fiscal year 2012, which starts July 1.

"The city's revenue portfolio, though varied, still shows a decline in some of our traditionally strong areas; however, past trends and historical data are allowing us to better predict any decline," City Manager Kip Padgett wrote in the FY 2012 budget narrative.

Padgett, chief financial officer Melody Marlowe and financial analyst Matt Hamby prepared a balanced budget of $26.6 million, an increase of 3.7 percent. Most departments held the line except for Administrative Services, which will go up $121,542, or 4.8 percent, and Communications and Tourism, which will increase by $30,360, or 8.3 percent.

"Administrative Services increased due to two main factors: recognition of increased work load for Municipal Court, which is offset by increased revenue, and needed improvements to the city's technological infrastructure," Padgett said.

"Then there is recognition of a full year of operation for the new Communications and Tourism Office and its actual needs for tourism and Main Street activities."

Padgett told Gainesville City Council members to also keep an eye on the Community Service Center, Parks and Recreation, Public Utilities Department and Chattahoochee Golf Course.

"The Community Service Center is mainly dependent on the general fund for the required match to the various grants it receives," he said. "Some grants have seen a decline due to cutbacks and the state and federal levels. Due to the need to keep the transfer at FY 2011 levels, it is anticipated some services cuts or modifications may be necessary."

Parks and Recreation will depend on budget reserves to balance its budget as property taxes decline. Most capital needs will be delayed for future years.

"At some point, they need to identify other revenue sources and look at their needs," Padgett added. "We can't continue to depend on reserves."

Public utilities costs went up by 6.7 percent due to an increase in power, chemical and fuel costs required to operate the water and wastewater plants.

"Those costs really skyrocketed," Padgett said.

"Chemical costs started going up last year, but this year it's going to continue to go up and will be compounded."

The golf course, though an enterprise fund, is still dependent on the general fund to cover debt incurred during course renovations in 2007.

"In reviewing expenditures over revenues, it is worth noting the golf course can be self-supporting," he said.

"However, by adding debt service to the equation, it requires money from the general fund. It is the intent to keep any transfer below $200,000."

Padgett also pointed to the $5 million surplus, which came from unexpected franchise fees and insurance premium taxes.

The surplus from the fiscal 2011 budget year will be used in the fiscal 2012 budget to fund several new police cars and the city's commitment to the grant that brought in new firefighters. The remainder will go toward road projects and increasing the city's management reserve from four weeks to six weeks of operation.

"The important part to note is that the surplus is not recurring, so we will put it toward one-time capital needs," he said. "We can't give raises or anything."

Looking to the fiscal year 2013 budget, Padgett told council members to watch attempts by the Georgia General Assembly to reduce the franchise fees or insurance tax that led to the surplus.

"That would affect us by $5 million, and though we have a great and diverse revenue stream, that could be equivalent to something large like the police department," he said.

Padgett also warned against the reliance on the fund balance from previous years to balance the budget.

"It is not advisable to continue this practice started some years ago," he said. "Although the economy has made it challenging, reliance on prior year's fund balance has been reduced in excess of 60 percent."

Council members are pleased with what they see for the next budget year.

"Do you see my fingers?" council member Myrtle Figueras said while quietly clapping her hands. "Everyone has done a really good job, a humongous job."

Despite a few changes due to the economy, the budget numbers escaped relatively unscathed, Mayor Pro Tem Danny Dunagan added.

"During these times, to be as strong as we are and stay as strong as we are is really something else," he said.

"Our hats are off to the staff for keeping expenses low."