Flat sales tax and real estate excise tax revenues will probably mean fewer public works projects in Anacortes next year, but surpluses in various funds also mean that no cuts are expected in other areas, said Mayor Dean Maxwell.

“Overall, at this point in time we’re in good shape,” he said.

The mayor said he has seen tough years when he started budgets that had to immediately make up $2.5 million.

“Not this time,” he said.

Tight budgeting during good times has allowed the balances in several funds to creep above the 5 percent reserve maintained in each.

“It’s important to me that we make hay when the sun’s shining,” Maxwell said, adding that the city also must respond appropriately to a downturn.

He said he told city department heads that extra reserves are meant for a rainy day — and “It’s a rainy day.”

“I don’t think any of us saw the price of gas doubling in a year,” he said.

The mayor is about halfway through with preparing the 2009 budget, a process that is in many ways ongoing.

“The public walks in here 50 times a day and makes requests, and we try to prioritize,” he said. “I don’t think you could call here without getting a return call and an explanation.”

There is never a shortage of proposals.

“We get lobbied throughout the year. I like to think we’re responsive,” Maxwell said.

Planning starts with revenue estimates. For next year, Finance Director Steve Hoglund said, those numbers are looking tight.

“The budget process for 2009 is a challenge as assumptions we are budgeting with are some lower revenue streams,” he said.

Hoglund said sales tax, real estate excise tax and building revenues, including permit fees and general facility charges, are down.

“No cuts are anticipated to be necessary, but we probably won’t be able to sustain the level of public works projects we typically perform in a year, and some of that work will likely be deferred, unless we can find replacement grant funding,” he said.

“We’ve seen a pretty substantial decline in real estate excise tax,” Maxwell said. “Real estate excise tax for the big capital projects is where I worry, so I watch real closely.”

The city will have to pull back one project, and maybe another.

“We’ll see how the economy goes,” he said.

Final decisions can wait in case things warm up.

“We’re kind of flexible,” he said.

Maxwell said the 2009 budget will be based on conservative assumptions.

“We’ve been really prudent with our revenue projections. We’re going to assume sales tax won’t pick up after the first of the year,” he said.

Rising costs are always a factor. Electricity has gone up about 9 percent this year and natural gas is up about 13 percent, the mayor said.

“I don’t think gas is going to be $6 a gallon. But it’s a huge contingency,” he said.

Health care costs continue to rise and inflation is 4.5 to 5 percent, the mayor said.

A good share of the city’s general fund revenue comes from property taxes — and the city can only collect 1 percent more in property taxes each year — plus property tax on new construction. This year’s 1 percent increase came to about $37,500. Other sources of general fund revenue include sales tax, utility tax and assorted permits.

The general fund is in the $10 million to $12 million range, but has little flexibility when it comes to adopting new programs.

“I can raise utility fees. I can’t raise the general fund. It’s our most critical fund; $20,000 in the general fund is a lot of money, especially when it can add books to the library,” he said.

Maxwell said he fields requests from dozens of people and organizations.

“We try to respond within our budgets, and it’s each and every day. No one’s ever been bashful about asking,” he said.

He said the city’s time and money are allocated based on the community’s best interests.

“It’s just like your home. You don’t know what’s going to happen tomorrow, if you’re going to have to replace the furnace,” he said.

The annual budget planning process officially starts with capital facilities planning and a public comment period in the spring. That plan prioritizes future public works projects. Not all the projects listed in the plan will be funded, but the city can’t seek grants for a project unless it is in the plan.

Next, City Council members are invited to give input on budget priorities, based on comments they have received.

“We give the council a chance to get in front of the formal budget process in June,” Maxwell said. “Once in a while a council member will ask if we can direct money a certain way.”

At this time of the year, Maxwell meets with department heads to draft preliminary budgets. He said he has met with three or four so far and will meet with the rest this week.

“They come to me with their requests. I put together the budget based on what we project for revenue,” he said.

Department heads bring the mayor more public input from such places as forest, museum and library advisory boards.

“There’s so much public process you can get tangled in it,” Maxwell said.

After the mayor has met with department heads, a preliminary city budget will be drafted and shared with the City Council.

“We will have a public meeting when we will ask for public comments after we put it together,” he said.

Because public input is ongoing, there is no specific meeting in which the public is invited to submit projects.

“That’s not how it works here,” he said.

Except for decisions about how 2 percent tourism promotion funds will be spent, the budget has little leeway. He said local government is expected to focus on five or six basic services.

“Most communities don’t offer a museum. We go above and beyond what’s normally supported by a city. We also maintain the cemetery,” he said.

All these services must come from the general fund.

“The library and museum are in competition with the police and fire departments,” Maxwell said.

He said there’s a big difference between how a city is run and how the federal government is run.

“They can print money,” he said. “Since we’re not the federal government and we don’t have a cash machine downstairs, we prefer partnerships.”

He cites such successful joint projects as Kiwanis Meadows, the Rotary dog park, Kiwanis Meadows, Volunteer Park and the Chamber of Commerce arch.

“I think the best programs here are partnerships. When people want us to run their programs for them is when they don’t work as well,” he said.

He said sometimes people get angry because he has to say no to a proposal that will take staff time or city money needed for other things. Above all, he said he will keep the city in the black.

“I will not put a budget out of this office that’s not a balanced budget,” he said.