DAPHNE, Ala. — The city of Daphne will fall $2 million short of its projected 2010 fiscal budget of $21.3 million as the city council at its work session Monday discussed options on how to make up the difference.

Next year’s projected general fund is $19.2 million, a decrease of $2.3 million from last year’s total.

“That doesn’t leave a lot to operate on and the departments have made cuts,” Mayor Fred Small said.

He added that the budget was originally $3.6 million in the red; Small trimmed it by $1.5 million primarily by slashing budgeted overtime hours for city employees.

The council expects to take around $1 million from the general fund.

The remainder may come from a variety of places, including generating revenue streams.

Small said the expected transition to weekly trash pickup in October, coupled with Team Green taking over county-wide recycling responsiblities, could save the city $300,000.

Scaling back trash and recycling services would limit spending on utilizing and maintaining city trucks.

Small said he expects to eventually lay off six employees from the trash and recycling operation.

The council will also consider reducing full-time employees by 96 hours per year, which would save the city $481,000, as well as not filling current vacant positions.

Small noted possible logistics problems with proposed furloughs, citing the need for employees to use overtime hours to compensate productivity.

Councilman Bailey Yelding noted the Civic Center’s director position is vacant and is not budgeted to be filled.

“We need a Civic Center director — a city of 20,000 people,” he said.

Small suggested conducting future work sessions to continue discussions about essential personnel. He added that he’d like a position created that would oversee both the Daphne Recreation Department and the Daphne Civic Center.

Other solutions debated include: no-pay holidays; freezing all merit increases with special exceptions; and freezing step-raises.

Small noted that eight of the annual paid holidays fall between November and January.

“That could put a burden on some of the lower-paid people because of Christmas,” he said.

“Raises and merit increases should go before we let people go,” Councilman August Palumbo said, adding that merit increases should be immediately frozen.

The council does not vote at its work sessions; the next business meeting is Monday.

Other revenue streams include reassessing the city’s gas tax. Small said the city may consider a quarter or half-cent increase.

To raise funds, impact fees — one-time charges on new developments, applied to offset public-service costs — may be instituted, as well as increasing recreational charges for residents living outside city limits. However, Palumbo said implementing impact fees is a long-term solution and would take two years to noticeably impact the budget.

Seventy percent of the city’s budget — or $13.5 million — covers personnel costs; 15 percent pays for debt services. The remainder covers departmental operating supplies and services such as vehicle fuel and maintenance.

Asked by Palumbo if a rule of thumb exists regarding expected payroll proportion, Councilman Ron Scott said that payroll should never exceed sales tax revenues; he added that the city is past this point.

The budget projects the city will collect $9 million in sales tax revenues in 2010, $4.5 million short of its payroll.

Councilwoman Cathy Barnette said that budgeted building permits were drastically cut and sought an explanation.

Small said the city received a slight increase recently but has since “flattened out.

“We’re kind of looking to be conservative this year,” he said. “From everything we read, we expect this trend to continue to 2011.”

Councilman Greg Burnam noted that the city’s sales tax revenues have come in around $100,000 short for each month in 2008.

Barnette said she would like to see a decrease in the budgeted amount for executive training and travel.

Small said that cuts are possible but enough must be kept budgeted to pay for fire department employees currently training.

Barnette said that funds for certain items, currently taken out of the budget, deemed necessary by council could be appropriated as needed.

Palumbo noted that the “appropriations as needed” method draws from city reserves.

“It may be better to just put those funds in place,” he said.

He added that a timeline for budget adoption is necessary.  The city will continue to lose money if — as it did last year — it adopts the 2009 operating budget on Oct. 1 to use until the council is ready to adopt this year’s fiscal budget.

Scott, who sits on the Finance Committee, said the city has around $10 million in reserves, adding that $4 million could be considered  a “rainy-day fund.”

However, City Councilman Derek Boulware expressed concern that the reserves should remain in place to help Daphne recover in case of a natural disaster.

“If the city of Daphne were involved in a catastrophic disaster, yes, there’s a part where FEMA comes in,” Boulware said.

To handle emergencies, he said, a city “starts dipping into is reserves. We have to have this reserve in place in case of that catastophic event.”

Small said each department made two rounds of cuts; he then made a third wave, finding the city to still be more than $2 million short.

In other business, the council said it has reviewed applications for the vacant Human Resources director position and asked department heads to submit their top three candidates by today to the city clerk.

Council will decide on an interview date at Monday’s business meeting.